The CPG industry is obsessed with “moments of truth”—critical interactions between people and brands with enormous impacts on brands’ performance.
First (naturally) came the First Moment of Truth (FMOT), which P&G coined in 2005 to refer to the seconds-long span when a shopper notices and selects an item on a physical shelf. As the industry awakened to the power of attracting and converting shoppers in shopping environments, P&G and the industry invested enormously in-store, and shopper marketing flourished.
P&G’s Second Moment of Truth (SMOT) was the product usage occasion—delighting or disappointing the shopper.
Then, in 2011, Google introduced the Zero Moment of Truth (ZMOT), drawing attention to the impact that desktop and mobile product research were having on shoppers’ decisions before they ever set foot in a store.
Marketers studied the “path to purchase” to follow the shopper’s increasingly non-linear trajectory through awareness, consideration, and purchase.
As online retailers (especially Amazon) emerged as premier destinations for product research, brands invested to win at the digital shelf, where the ZMOT and FMOT converged.
At the digital shelf, someone might discover (ZMOT) and buy (FMOT) without ever entering a store. And if her experience with the product (SMOT) surpassed expectations, she might leave a positive review—feeding the next person’s ZMOT in a virtuous cycle.
It’s been around 5 years since the ZMOT cemented itself in the toolkit of modern CPG marketers, and over a decade since the FMOT and SMOT preceded it.
With time, the “moment of truth” mindset has proven powerful.
IRI data projects that eCommerce will account for “about 50 percent of the growth in the next few years.” Deloitte Digital estimates that 31% of US food & beverage sales; 39% of health & wellness sales; and 52% of baby & toddler sales are digitally-influenced. Marketers that invested to engage shoppers at the ZMOT and FMOT are positioned to win.
Today, there are new moments of truth emerging. And the brands that understand and capitalize on them may enjoy sustainable competitive advantage.
Force Multiplying Moments
Retailers and brands have been innovating in ways that transform the nature of transaction itself.
Amazon launched Prime in 2005. Today, Consumer Investment Research Partners estimates there are 54 million US Prime members, each spending an average of $1,100 per year (nearly 2x the $600 for non-Prime members). Walmart is piloting its own ShippingPass, and leading UK online grocers including Ocado, Tesco, and ASDA offer delivery passes.
In 2007, Amazon launched Subscribe & Save, enabling automatic replenishment of popular consumable items.
According to 1010data, a panel operator, Amazon’s Subscribe & Save accounted for around 20% of the growth in US CPG eCommerce sales in 2015.
And Profitero’s FastMovers data shows more than half of best-selling Grocery and Health and Personal Care products at Amazon are eligible for Subscribe & Save.
Among “full-basket” online grocers like Peapod or Ocado, the “favorites” list of previously purchased or popular products has become critical. IGD ShopperVista data for November 2015 – January 2016 shows that 60% of UK online grocery shoppers rely on Favorites, and 38% use it as their first approach to finding items—nearly double the 20% that primarily use search.
Amazon released the Echo in 2014, its always-on connected speaker that lets Prime members ask the Alexa voice assistant to reorder Prime-eligible products from their order history.
The Echo was followed quickly by the Dash button, a physical, branded “buy button” for everyday essentials, and the Amazon Dash Replenishment Service, an API that integrates with products like printers and water filtration systems to automatically reorder when supplies are running low.
Milestones in the “Moment of Truth” Mindset
Taken collectively, these developments represent a potentially transformational shift in the way consumable products are bought in the future.
Recursive Moments of Truth (RMOT)
Rather than replace traditional moments of truth, these new Recursive Moments of Truth (RMOT) raise them to an exponential power—locking households in to specific retailers, categories, brands, and products.
A RMOT consolidates what historically were many successive decisions into a single decision.
“Which razor club should I join?” for example, consolidates what may have been three or four annual moments of truth into a single Recursive Moment of Truth.
Like the original FMOT, decisions to join a delivery pass, subscribe to a replenishment program, or reorder from a favorites list can be made in a matter of seconds.
But as shoppers annuitize their consumption by making upfront commitments to repurchase, RMOTs act as a force multiplier on individual decisions about where to shop and what to buy.
As RMOTs proliferate:
- The stakes of competition are raised from items and baskets to subscriptions and replenishment systems with dramatically higher lifetime values.
- Perceived switching and substitution costs increase—making it even harder for new entrants and challengers to break through.
- Regimen compliance may improve in categories like beauty, oral care, and nutritional supplements.
- Trade promotion budgets migrate to the most measurable programs.
- Traditional impulse merchandising effectiveness may diminish as shoppers enter “maintenance mode”…
- …But larger on-hand household quantities could shift “impulse” from FMOT to SMOT.
To observers, adoption of new programs and technologies like these seems to happen gradually—then suddenly. New initiatives often look gimmicky or fly under the mainstream radar as innovators quietly test and learn.
But as the models are refined and eventually scaled, the lock-in effect yields sustainable advantage for retailers and brands that optimize around them.
Winning Along the Path to Repurchase
P&G appointed Dina Howell as Director, First Moment of Truth when it pioneered the FMOT concept.
CPG brands today may not rush to appoint Directors of RMOT (or Programmatic Commerce, another buzzword du jour).
But whatever they’re called, these new moments of truth are among the most important frontiers for brands to explore over the coming years.
Analysis of the path to purchase must broaden to include the “path to repurchase”—the marketing, merchandising, product, service, and supply chain considerations that will position retailers and brands to win at RMOTs.
Enablers of Recursive Moments of Truth
In these relatively early days, many questions remain:
- Programmability. How much choice and control will shoppers give up to retailers and brands? How can brands most effectively influence shoppers at RMOTs?
- Unit economics. What are the customer acquisition costs (CAC) and lifetime value (LTV) of “renewable” customers? When and at what levels should brands directly fund experimental programs like Dash buttons? How should retailers and brands sustainably share the funding of subscription discounts?
- Upper limits. What are the thresholds of membership and subscription fatigue? What drives churn, and how can it be managed?
- Product development. How must products and their packaging evolve to enable frictionless reordering or auto-replenishment?
- Rights management. What degree of proprietary lock-in will consumers tolerate from retailers and brands? How will brands manage the inevitable appearance of unauthorized substitutes for their own proprietary replenishable items?
- Online/offline convergence. How can online RMOTs be leveraged offline? How can brands create RMOTs in-store and offline?
- Supply chain. What flow of merchandise from manufacturer to household or office is optimal for goods on auto-replenishment?
With a focus on RMOTs, innovators may finally put the forces of inertia to work for them.