An increasing number of consumer packaged goods (CPG) players are integrating artificial intelligence (AI) in fast-moving consumer goods (FMCG) operations to streamline the production, distribution, as well as consumption of their products.
The FMCG market has become more competitive than ever. And this competition is only going to get more intense. Sustaining profitability in such a competitive era is getting increasingly challenging for businesses. And as is often said, businesses that sell experiences rather than just products will get an advantage. Hence, businesses should not just focus on owning in-demand products but also on how to enhance customer service. And when it comes to streamlining workflow and providing enhanced customer services, there is no technology that even comes close to AI. Right from chatbots to in-store robots and from real-time actionable insights to future predictions, AI has the potential to provide an edge over competitors in many ways. AI is a part of the voice of customer technology (VoC) that helps businesses to enhance services and secure customer loyalty. AI in FMCG can assist companies in end-to-end management right from production to consumption.
The Role of Artificial Intelligence in FMCG Operations
AI in the FMCG industry will not take over any jobs completely. It will rather play an assistive role to provide guidance and help businesses make decisions based on fact-based information and insights.
1. Detecting Product Development Patterns
There is an abundance of options available for customers in the market for every product. For instance, if a consumer wants to buy something as simple as a shampoo sachet, there would be more than ten options available to them. To make their products stand out from the rest, businesses have to develop some unique designs. Machine learning (ML) algorithms can monitor and gather data about various products from the internet. By analyzing such data, ML algorithms can suggest an optimal design to businesses for product development. AI systems, when fed with historical data, can also assist businesses in design prototyping. For instance, AI systems can detect patterns in designs because of which products were not able to perform well in the past. They can then help businesses to avoid such design patterns to ensure that the new products won’t face failure in the market.
2. Suggesting Product Placement
AI can go way beyond standard market segmentation by categorizing both distribution retail stores and customers based on location, seasonality, and demographics. Along with such advanced segmentation, AI systems can also suggest locations where specific products are always high in demand. With data about previous years’ sales of various products, AI systems can help businesses select the best location and stores for placing their products. Suppose a lot of toys for newborns have been sold in an area in the past five years. Then AI systems can suggest producing and placing products that would be suitable for 5 year-olds in the stores in that specific area.
3. Improving Customer Engagement
Chatbots are on the top for providing customer services. And every business wants to incorporate them into their daily operations. In fact, 80% of businesses wanted to install chatbots by 2020. When speaking in context with the FMCG sector, chatbots can serve the purpose of answering customers’ and distributors’ queries. One of the biggest advantages of chatbots is that they provide 24/7 service at reduced costs. This reduces turnaround time and offers a live chat service to customers. Live chat and reduced turnaround time provide a greater level of customer satisfaction and convenience. Chatbots can also place their foot into the shoes of salesmen by providing personalized recommendations to customers. They can monitor consumers' social media activities and offer personalized suggestions. For instance, if a lady posts an image of a baby bump on social media, then chatbots can offer recommendations on various baby products with every minute detail. Chatbots can, therefore, not only serve to enhance customer service and engagement but also serve as salesmen.
4. Providing Accurate Demand Prediction Forecasts
AI systems can predict the future based on historical and real-time data. For instance, they can consider historical data such as consumers' behavior patterns during certain seasons of the year. And they can also consider real-time changing weather. By combining both historical and current data, AI systems can provide accurate predictions for product demands. The accurate predictions made by AI can help FMCG businesses to reduce supply chain errors and enhance inventory management. According to a McKinsey report, AI systems can reduce 65% of lost sales due to out-of-stock situations. The report also highlights that AI can reduce 10 to 50% of warehousing costs. Thus AI forecasting can help organizations to increase revenue by enhancing sales and cutting down inventory costs.
5. Optimizing Better Pricing Strategy
The FMCG industry has now more than ever become a price-competitive sector. There are various similar products available at different prices. And these prices might differ because of the quality of ingredients in the product. But, not every customer goes with the quality of ingredients. Best pricing is what consumers look for. Developing an optimal pricing solution is a complex process that requires pricing segmentation based on the demand for products, the current availability of stocks, and market trends. AI systems can assist FMCG companies to develop an optimal pricing strategy. ML algorithms can collect the pricing of various similar products available in the market. They can also collect information about product demand and their availability in the market. And then by analyzing that data, they can develop pricing strategies for specific products. AI systems can also suggest optimal pricing for sales and discounts on different products.
6. Taking Product Marketing To Another Level
There is an abundance of marketing tools available that use AI for marketing. These marketing tools take product marketing to an entirely new level by various benefits over other marketing tools. For instance, AI marketing tools can bring together data such as seasonability, location, and marketing platform to help develop marketing strategies for various platforms. AI systems can also help to build personalized marketing solutions. They can send personalized advertising via emails or push notifications to consumers. ML algorithms can monitor when a person shows interest in a company’s profile digitally. For instance, if a consumer clicks on a Facebook advertisement or views a company’s profile, then AI systems send notifications about similar and relevant products to that customer.
7. Providing Regulatory Assistance
FMCG businesses have to comply with various regulatory laws. For instance, while developing a packaged food product, an FMCG company will have to comply with the FDA’s regulatory terms and norms. AI systems can assist businesses to comply with regulatory requirements. Organizations can feed all the laws and conditions they should meet. And then computer vision can monitor production to alert whenever any law or condition is broken. For instance, computer vision can detect a defective product by matching the size, shape, and color among other parameters with other end products. And if a single parameter is not matched, then AI systems can automatically separate those products from the rest. They can also alert about potential security lapses and detect food safety standards that are needed to be improved.
The potential of AI in FMCG is limitless, and with time, we will see increasingly impressive applications of the technology in the sector. And these potential applications will reduce the burden on businesses and assist them with complex decision-making for greater profitability. AI-based solutions will help FMCG businesses to understand the needs of their target audiences. This will enable them to focus on providing an excellent omnichannel experience, and drive greater efficiency to enable cost savings.