How Technology Is Changing the Game for Consumer Giants

A staid industry eases into seamless payments and the online fray.

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A few signs of the times: The newest soda products are being promoted heavily through social media, online storefronts are being launched in the cloud, and a caramel macchiato can be purchased with the wave of a smartphone. And here's another sign of the times: it's not start-up ventures that are rolling these ideas out. Instead, some of the nation's biggest companies are implementing these initiatives on a massive scale. Consumer products companies have a storied reputation as cautious movers in the marketplace, lest they blunder on the scale of the historically mismanaged introduction of New Coke in the mid-80s. But like everything else these days, technology is changing the equation.

[See America's Most Connected Companies.]

The growing interest in online communication and marketing among corporations that have long relied on traditional advertising strategies is fueled by the meteoric changes wrought by wireless gadgets, the Internet, and evolving customer expectations, experts say. It's also driven by a desire to connect directly with consumers.

"There's quite a bit of chaos out there right now," says Pat Conroy, vice chairman and U.S. consumer products leader for Deloitte. "Some of the more progressive companies are actually looking at it as an opportunity to create some separation between themselves and their competition."

The three industry leaders chosen by U.S. News as America's Most Connected Companies in this sector—General Mills, Pepsi, and Starbucks—exemplify this new spirit of innovation. All three have made major investments to strengthen bonds with customers who are wired to the hilt and spend large portions of their time online.

[See There's Retail Magic in Silicon Dust.]

For Pepsi, that means upping its competition with Coca-Cola with a social media strategy that includes the April launch of a digital dashboard featuring pop-culture news and messages drawn from Facebook and Twitter. The "Pepsi Pulse" site provides the company with a fresh way to interact with the public, strengthen brand loyalty, and gather marketing data.

General Mills turned to cloud computing to debut an online storefront that caters to the fast-growing demographic demanding gluten-free products, and to tap this burgeoning, multi-billion-dollar marketplace. Company executives have said that cloud services played a critical role in enabling them to swiftly and inexpensively launch their direct-to-consumer site, which features 500 products from General Mills and other vendors.

Starbucks, which straddles the consumer-goods and retail categories, sees business potential in the advent of smartphones. The coffee chain has implemented the largest deployment of mobile payment technology in North America, enabling customers to make purchases with wireless phones. Starbucks reports that lines move faster and the company stays tethered to patrons through email, text messages, and a mobile app that includes a store finder.

In the past, "they weren't required to innovate to be successful," Conroy says. "Now, if they want to really continue to protect margin and drive growth, they have to do a much better job." He says consumer-goods companies are increasingly receptive to experimentation because if they "get in early" they can try out ideas that could have significant potential at little cost.

[See Big Financial Firms Embrace Data's Evolution Revolution.]

In some cases, however, companies have been reluctant to dive head-first into this bold new digital world, although experiments—coupons issued to customers via facial recognition, virtual stores popping up in train stations, and intelligent vending machines, to name a few—do exist at some big firms, albeit on a small scale.

Still, for consumer goods executives, the lesson is clear: Even industry leaders can't rest on their reputations and market dominance anymore. They must keep evolving. As a result, the old ways of doing business are being supplanted by a digital-era mantra: Stay ahead of the tech curve or watch competitors race ahead with innovations that should have been on the radar.

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