Sector spotlight: Consumer
Making it personal: successful consumer businesses for 2021 and beyond
The advent of data and its application to business means firms can offer a better user experience, and in doing so, can improve key consumer metrics.
“There has never been a more exciting time to back consumer businesses with global ambitions,” enthuses Simon McMurtrie, serial Chair and adviser to a number of companies in the space. This is because it’s easier to know your customers nowadays, and this can lead to valuable business opportunities."
Data and digital are driving this shift. Simon says the most highly valued consumer businesses are ones where the businesses own the data, know their customers, innovate with speed, and have a compelling, laser-focused digital strategy. “Consumers have never been more demanding – or more willing – to spend. The technology and digital revolution mean that it’s not only possible to track all aspects of a customer’s journey, but the data that sits at the heart of each customer’s interaction with a brand. This is fundamental to building their loyalty to the business and growing their Lifetime Value (LTV).”
The old world of retail, where a business had no idea of who did or didn’t come into the shop feels “ludicrous” to Simon. “The recent investment by Inflexion in Medik8 is testament to consumers’ limitless ambition to look and feel better, every day – and data sits at the heart of Medik8’s approach. In a world where we are all open to browse and buy at all times, creatively curating where we can find our inspiration, powered by extensive data analysis is the core purpose of the hugely successful GOAT influencer agency,” Simon says, pointing to another recent Inflexion investment.
The key metric in consumer businesses is cost of acquisition to lifetime value (CAC to LTV), and this has come into sharp focus because of today’s enhanced ability to measure marketing activity. “The more you can demonstrate that you’re building the LTV of customers and refreshing the range and availability of your offering, the better it’ll be,” Simon says. He points to Gymshark, whose digital and social marketing effort he calls “supreme”, enabling “stellar” CAC to LTVs and thus valuing the business at over £1 billion.
A mistake that businesses make is to guess how consumers are thinking, according to Simon. “Listen to them to really understand what drives them and join that up with website browsing. The future successful businesses will be able to anticipate what customers will want. We need to be absolutely in tune with their personal experiences.”
Luxury tour operator Scott Dunn has a dedicated team focused on providing individual service to its guests. Simon chairs the Inflexion-backed business and explains that depth of understanding of the guests has resulted in strong bookings in recent weeks, with only a trickle of guest refunds and a highly motivated Scott Dunn team determined to enable guests to enjoy “holidays of a lifetime” after such a traumatic time. “For most Scott Dunn guests, Amber is the colour of the beckoning sun!”
The power of tailoring marketing was clear to Simon even before the digital revolution. His background in traditional offline marketing for a wine merchant meant they would invest in buying lists which would be deemed a success with a 1% response rate for new customers. Simon quickly understood that increased to 10% response rate for existing customers and skyrocketed to 30% by simply offering what a customer had previously shown an affinity for – namely marketing Malbec to customers who had previously bought Malbec. “It’s great but it’s not surprising – we were delivering something very relevant and so they saw it as helpful rather than as junk mail or spam."
Our job as marketers is to be closely in touch with what people want or need, and to know these needs will change over time.
He brings his knowledge to bear at Virgin Experience Days, another Inflexion-backed business he chairs. Having traditionally used all the available channels, including TV since 2019, these are applied cleverly. “It wasn’t random traditional TV advertising but rather very targeted ads enabling us to track website browsing, giving us clarity on which ads brought in the best quality as well as quantity of traffic. We track all of the consumer’s interaction with the website (whether mobile, tablet or laptop/desktop) to understand all of their browsing and purchase interactions, testing a whole slew of changes to the user experience (UX) in order to maximise conversion.” He admits they even amend the offering based on weather forecasts as that impacts on what consumers will fancy doing. After a tough 2020 which saw the firm launch experiences for users at home, the firm has re-emerged strongly and recently acquired the US operations of Cloud 9 Living, rebranding it Virgin Experience Gifts.
Simon concludes by saying there’s never been a more motivating time to be in consumer businesses. He concedes this can be difficult, but willingness to spend means if you can segment your offering and marketing, you can make a lot of money and generate substantial long-term value. “Data is amazing. We’re still at the foothills of proper one-to-one marketing, and there’s a really exciting time ahead of us.
I’m very optimistic about the ability of companies to serve much more relevant content to consumers.
Key steps for success in consumer businesses
Thoughtful data, powered by effective use of digital, is key to successful consumer businesses, with great talent driving it. Here are Simon’s tips for making it work:
“Get your technology fit for purpose and keep on innovating. At VED we’ve implemented RPA (robotic process automation) to transform a number of the customer service routines – saving money and providing a much better experience for customers and empowering staff.
“Understand all internal and external data to enhance the customer experience and to target marketing investment most effectively. Google mobility data has been incredibly helpful to track what consumers are actually doing (as opposed to what governments told them they should be doing!).
“Invest in our people. We’d already taken steps with support from Inflexion to recruit strong management teams for each of Scott Dunn and Virgin Experience Days, but we’ve made sure, especially during the pandemic, that we communicate and engage very actively with all of our people to ensure that they feel thoroughly involved. Getting the engagement right and constantly refreshing how we develop our people is fundamental to success.”