How can CPG firms leverage Artificial Intelligence to realize value? Read five new rules for the consumer market in the age of AI.

2. New Rules of Engagement in the
Age of Voice-Powered Ecosystems
O C T O B E R , 2 0 1 7

3. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 3
A G E N D A
1 Intro: CPG’s Changing Landscape
2 AI-Powered Shopping
 The Future of Effortless Shopping
 The Operating System of the Home
3 The Impact of AI on CPG
 Five New Imperatives
4 About the Authors

4. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 4
“ It’s probably hard to overstate how big of an
impact (AI) is going to have on society over the
next 20 years. It has been a dream since the
early days of science fiction to have a computer
that you can talk to in a natural way and actually
ask it to have a conversation with you and ask it
to do things for you. And that is coming true.
B Y J E F F B E Z O S , C H I E F E X E C U T I V E O F F I C E R , A M A Z O N

5. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 5
The rising prevalence of AI
in everyday life is a matter
of expectation and
evolution.
Consumer expectations:
• Zero friction
• Easy anytime access across all devices and
locations
• Predictive Personalization
• Relevant content, offers, and product
suggestions
Evolving technology:
• Gesture-based UI
• Connected home
• Voice-activated interfaces

6. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 6
CPG’s Changing
Landscape: The Beginning
of an AI-Powered World
O P P O R T U N I T I E S F O R I N N O V A T I O N
AI and the services that are built on it—such as voice AI and the connected home—are an opportunity to create
new business value and meet customers’ needs…or risk being disrupted by competitors
that do.
Google Home
Smart Mirror
Alexa
Apple Watch

7. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 7
A virtuous cycle centered around the
consumer access point.
What is the Ecosystem Business Model?
A network-effects-powered gravitational force generated by a combination
of supply, demand, and the means of transaction.
The power of ecosystem companies stems from owning the relationship
with the consumer (as Amazon does, for example) and subsequently
redefining the terms of competition. For CPG brands, this virtuous cycle
manifests itself in 4 ways:
1. Provide superior customer experience (CX) to attract consumers
through convenience, selection, network effects, UI, etc.
2. This data is leveraged in the CX, which again attracts more consumers.
3. More consumers means plugging more data and insights into what
makes a superior CX.
4. More consumers means more suppliers are drawn,or forced, into the
ecosystem — thereby also serving to improve the CX.

8. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 8
A I - P O W E R E D S H O P P I N G
A Future of Effortless Shopping and Automation

9. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 9
“ Products will flow to the household like
a utility, as electricity and water do. For
many products, the shopper will be a
bot, leaving customers with the sole
task of consumption.
B Y N I R A J D A W A R , P R O F E S S O R O F M A R K E T I N G , I V E Y B U S I N E S S
S C H O O L

10. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 10
A future of effortless shopping and
automation
We have already reached a point where consumers can simply announce
their need for a product and a home-based, virtual assistant will add the
item to a shopping list.
Looking to the future, predictive modeling and advanced analytics will be
able to anticipate the needs of the customer and proactively purchase
products with the required frequency and quantity.
With market conditions prompting unrelated companies to battle for the
same customer, success will go to those who leverage the pillars of:
• Consumer relationships
• Data-driven personalization
• AI-powered interactions

11. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 11
CPG brands must quickly embrace
differentiating strategies and disrupt newly
established terms of competition.
T H E O P E R A T I N G S Y S T E M O F T H E H O M E
• Google, Apple, Amazon, Samsung and others are racing to own this competitive
edge
• The winner will be uniquely placed at the center of consumer access to products
and services
• This will forever transform the relationships between retailers, consumers, and
CPG brands.
What about everyone else?
For those that don’t own an ecosystem, where does success lie? Should they:
 Try to find a position on the “Smiling Curve” between high-volume, commoditized
products and premium, differentiated offerings?
 Become a relevant player within different ecosystems?

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T H E I M P A C T O F A I O N C P G
Five New Imperatives

13. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 13
Defining the new rules of CPG
Voice conversational user interfaces (UI) are at the heart of the massive
adoption of personal assistants, and will give power to our AI-enabled
assistants to manage requests, automate preferences, and determine the
flow of products in the home.
In order to meet these evolving customer needs, CPG companies must
expect:
1. Shoppers and consumers will be different species.
2. The classic marketing mix will be organized around the consumer
experience.
3. Machines will facilitate constant auction trading for CPGs.
4. Products becoming services—becoming platforms—powered by user
data.
5. CPG companies becoming responsive networks of value.

14. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 14
1. Shoppers vs.
Consumers
S H O P P E R S A N D C O N S U M E R S W I L L B E D I F F E R E N T S P E C I E S
Soon, devices in the connected home – and their bespoke operating systems – will do the shopping.
 In doing so, they become less of a passive filter and more of an active household manager
 The consumer’s role will only be to say “yes” or “no”
This doesn’t demand only new CPG marketing strategies, but also reimagined operational structures.

15. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 15
2. Classic Marketing Mix S O O N T O B E O R G A N I Z E D A R O U N D T H E C O N S U M E R E X P E R I E N C E
Artificial shoppers will respond to hard data, not classic shopping journeys or emotional brand narratives.
Consumers will become less tolerant of interruption and products that overpromise/underdeliver.
Rather, it will be the usefulness of services and quality of product experiences that will drive brand affinity and
justify higher price points.

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3. Constant Auction
Trading
M A C H I N E S W I L L F A C I L I T A T E C O N S T A N T A U C T I O N T R A D I N G F O R C P G S
AI-powered purchase cycles lead to ultra-high-speed marketplaces. This dynamic becomes similar to an auction
market; for example:
 How stock markets are being transformed by AI-powered, high-frequency trading
 Amazon’s Marketplace Web Service API by which suppliers respond automatically to price changes in order to
remain competitive
This puts unprecedented pressure on pricing and margins. In response, CPG companies will need to understand:
 Complex mixes of data points, preferences, social graphs, and product meta tags
 How to influence algorithms rather than the human brain
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4. Products -> Services ->
Consumer Platforms
B R A N D S M U S T C R E A T E A C O M P L E T E C O N S U M E R S O L U T I O N
In order to give consumers a reason to stay with them, CPG companies must learn two things from ecosystem
companies:
 How to become an integral, irreplaceable part of consumers’ lives
 How to solve the direct-to-consumer relationship equation
The key will be offering a value proposition that stems from putting consumer data at the heart of the experience
by:
 Creating services that do something helpful and add value expectations in the category
 Merging connected products or additional digital layers with classic, physical products
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5. Responsive Networks
of Value
C O M P E T I N G I N F U N D A M E N T A L L Y D I F F E R E N T M A R K E T C O N D I T I O N S
CPG brands must evolve their value networks to compete in fundamentally different market conditions. To do so,
they must:
• Leverage and evolve their biggest strengths – be it cost leadership, operational efficiency, or manufacturing
expertise
• Add new, core competencies such as agility and responsiveness
• Build capabilities such as automation and big data processing
• Establish key strategic partnerships and joint offerings around consumer wants and needs
• Introduce elements into incumbent systems
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19. C O P Y R I G H T S A P I E N T R A Z O R F I S H | C O N F I D E N T I A L 19
About the Authors: Pascoe Craig and Ramiro Amaral
P A S C O E C R A I G
Senior Account Director
SapientRazorfish London
pcraig@sapient.com
Pascoe has worked with clients across a range of
sectors including automotive, technology, education, and
media. He is currently focused on the rapidly changing
CPG sector, working with global clients to reimagine the
role they play in the lives of connected consumers, along
with digital and data’s abilities to drive future value
across marketing, CX, and new business models. In a
previous life, he worked in organizational transformation
and communications in the public sector, supporting
large-scale modernization programs in social and care
services.
R A M I R O A M A R A L
Strategy Director
SapientRazorfish London
ramaral@sapient.com
Throughout his career, Ramiro has championed a
customer-centric approach to brand and business
strategy across industries highly impacted by digital
transformation and new customer expectations (e.g.,
automotive, retail, CPG, telecom and technology). He’s
now focused on driving future thinking to business
transformation strategies, helping clients to understand
and anticipate the main changes that redefine the rules of
competition, and to envisage the best ways of shaping
powerful propositions and innovations with the customer
experience at heart.

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SapientRazorfish is a new breed of transformation partner designed to help
companies reimagine their businesses for the connected world.
SapientRazorfish partners with consumer product organizations to strategize,
design and build differentiated, flexible, and compliant digital experiences
that inspire customers to reimagine their personal stories. With more than
12,000 people and 70 offices around the globe, our capabilities span growth
and business model strategy, newtproduct and service innovation, customer
experience, enterprise digital transformation, IT modernization, omni-channel
commerce, precision marketing, change management, digital operations,
digital innovation, data strategy and advanced analytics.
For more recommendations and analysis of CPG's
changing landscape, download the full whitepaper at
https://www.razorfish.com/NewRules
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