Information Resources, Inc. (IRI,) a leading Retail and CPG analyst group, recently published its 2009 CPG Year in Review report. The report makes some unique insights,but most importantly addresses the permanent changes retailers are going to see in consumer behavior. The McKinsey Quarterly published a study of retailers in December 2009 which also echoes this prediction in consumer behavior. McKinsey states, “Many companies with strong premium brands are anticipating a rapid rebound in consumer behavior—a return to normality, as after previous recessions. They are likely to be disappointed.”The reason being is that consumers have tried lower cost items and been satisfied. Or, if not 100% pleased, they now feel that it is not worth the extra expense to buy the higher-priced item even if they do prefer it.

IRI calls the cost-saving strategies employed by many consumers as “draconian” insofar as people have gone far out of their ways to save money on things like food and beauty products. This has resulted in an increase in the purchase of do-it-yourself home goods and has also included increases in self-subsistence projects such as gardens. IRI predicts that some of these more extreme measures will eventually be scaled back, but that a commitment to frugality and value products will remain. 

So what does this mean for Retailers and CPG manufacturers?

First of all, private label goods have cemented their position as desirable goods that actively sought after by a wide range of customers. With cost saving and frugality still being important, consumers will most likely continue to embrace private label goods indefinitely - despite some gradual return to higher-priced premium goods.

Second, many CPG categories saw price increases in 2009which are expected to continue through 2010. IRI remains somewhat doubtful that consumers will not rebel against these increases as companies turn to innovation to capture market share through creating appealing value-priced goods. According to the Wall Street Journal, there appears to be a chance of nominal rebound in premium brands as producers implement pricing and promotiona strategies such as selling larger quantities for the same price or creating a better product whose value outweighs the price. Still, retailers have a harder job than ever of convincing consumers why they should consider purchasing the higher priced item. Marketing effectiveness therefore remains of paramount concern in addition to product innovation.

Ultimately, technology providers for Retail and CPG need to understand that many of the market shifts caused by the recession will have long lasting – if not permanent – effects as consumers continue to embrace cost savings measures despite improved Retail and CPG earnings and projections for 2010. Competition will remain fierce for increasingly demanding and informed consumers who have learned to do more with less. Technology providers therefore have a unique opportunity to capitalize on organizations' needs to better understand their consumers and maintain reduced operating costs so that they can be successful under these new conditions.

The Retail Industry was one of the hardest hit in wake of the recession as consumers sought new ways to save... ultimately reducing the total amounts of products purchased and the price consumers were willing to pay.After drastic price-slashing in late 2008, retailers revamped their strategies to focus on leaner inventories and increased customer interaction with the goal of meeting value-driven consumer demands and returning to profitability. As a result, earnings were much better in 2009 although still significantly less than pre-recessionary levels.

Gartner focuses its prediction on the growing popularity of m-commerce (mobile commerce.) Consumers have actively embraced using mobile devices primarily for research purposes before buying or locating products. Making direct purchases on mobile – which many retailers are considering an integral component of new cross-channel sales strategies - has not yet been adopted by most consumers. As a result, Gartner predicts that “By2010, over 40% of Tier 1 retailers will pursue m-commerce. However, only 20%will be successful in effectively integrating these initiatives to enable cross-channel shopping.” Gartner notes that in order for retailers to be successful that they need to retain focus on customer preferences and cross-channel shopping experiences while trying to drive revenue through m-commerce. 

In Worldwide Retail Industry 2010 Top 10 Predictions, IDC Retail Insights cites some slow recovery efforts in the industry as retailers have implemented huge cost saving initiatives through reducing inventory levels,closing less profitable stores, halting expansion efforts, and more fully relying on IT investments to help them adjust to changing market conditions.Throughout 2010 IDC predicts that all sectors of Retail will increase external IT spending from 2009 levels with drug stores leading with a 4.5% increase and automotive dealers and gasoline service stations experiencing the least with 1.1% growth. Most of the trends IDC predicts for 2010 center around improved customer demand planning and experiences in addition to expanding the functions of IT to improve these experiences and maintain cost reductions.

Other IDC Retail Insights’ predictions for 2010 include:

• Growth strategies will focus on “same shopper sales” and first-time buyers
  
• Retailerswill fully utilize agile supply chains to improve responses to customers,suppliers, and regulations
  
  • Optimizing retail PLM will be integral to supporting agile supply chain goals
    
• Retailers will embrace mobile interaction with customers
• Retailerswill invest in IT programs to support their newly established business models,but reduce traditional IT costs that do not provide that necessary support
• Retailers will try to improve brand performance while cultivating customer loyalty

The Manufacturing Industry has embraced a “lean philosophy” as a result of the economy and modernization efforts. IT is essential to fulfilling this function as operational efficiency becomes a primary objective for manufacturers. The economic downturn also caused many manufactures to drastically reduce inventory levels as demand levels decreased. Group VP of Research for IDC, Bob Parker, thinks that this has caused a permanent change in manufacturing business models resulting in “the intelligent economy” as manufacturers become more adept at rapidly adjusting to market conditions. He predicts that IT investments will support these initiatives.

Gartner predicts that investing in operational technologies will be far more beneficial than “traditional IT and ERP” with a “10-time better return on their investment by year-end 2011.” The support for this prediction lies in the great efficiencies manufacturers can achieve by placing OT at the center for this strategy because they “almost always add value, promote lean practices, and can have a transformative impact on the business.” The ultimate reason is that many of the existing IT and ERP systems have met full functionality and will produce greater efficiencies thanare already in place. Therefore, Gartner asserts that merely investing in additional IT and ERP systems will not tangibly add enough value to warrant the cost of their implementation unlike OT systems. Gartner recommends that manufacturers need to tailor all their IT investments to support “operational needs in a value-adding way or in ways that drastically reduce cost to provide the required, but non-value-adding, services.”

In Worldwide Manufacturing 2010 Top 10 Predictions, IDC Manufacturing Insights agrees that manufacturers must become more “intelligent” in order to succeed. Manufacturing Insights predicts that manufacturing worldwide will grow in 2010 with IT spending increases across virtually all sectors as manufactures begin to more successfully incorporate technology into their business strategies.

Someof the other manufacturing predictions by IDC include:

• Transforming business models to accommodate the needs of increasingly demanding customers
• Implementing variable cost structures that can better make technology a focal point for business strategies
• Changing supply chain structures to incorporate a "variable-cost-driven value network"
  • This change will be supported by “dynamic optimization” for capability investment
• Better alignment of innovation with strategy
• Manufacturers will better use Enterprise PLM Applications
• Manufacturers will become more metric-focused by using complete business intelligence to make decisions instead of sustainability reporting

The Energy Industry – including the utilities and oil and gas sectors – is predicted to experience great volatility beginning in 2010 as new environmental regulations go into effect.With the continued debate of the Cap-and-Trade Bill and the ARRA grants issued to energy companies committed to creating and implementing sustainable energy initiatives energy companies, technology providers, government regulators, and consumers must all be prepared for upcoming changes in the industry.

Gartner’s overarching prediction is that energy costs will sky-rocket due to the costs of creating sustainable energy and updating the energy grids to smart grids. The smart grid upgrades are necessary to better regulate energy distribution and incorporate alternative and sustainable energy sources. Most traditional energy grids do not have the capability to do this. Gartner also predicts that with cap-and-trade or other means of carbon taxation consumers will face higher electricity costs. Ultimately, Gartner predicts that electricity prices will increase by an average of 30% by 2014 for OECD countries that currently rely heavily on fossil fuels. Gartner recommends that IT companies targeting the Energy Industry should position toward advanced metering infrastructures that enable price transparency and greater consumer efficiency.

In North American Utility Industry 2010 Top 10 Predictions, IDC Energy Insights agrees that utility prices will accelerate in 2010, but that the industry as a whole will see a massive recovery from 2009. IDC predicts that as the global economy rebounds and the industry sector receives an infusion of grant money for energy projects that the Energy Industry will have a strong 2010.Some of the other predictions include:

• North American intelligent grid ICT spending will reach $18 billion by 2013
• The first wave of electric vehicles will emerge along with the necessary car charging infrastructure
• Smart cities will emerge and test the basis for the intelligent economy
• IT spending in the Utilities Sector will greatly increase
• Renewable energy capacities – with wind power being the leading source – will exceed the number of natural gas plants built

For Oil & Gas, new project development remains a primary concern as “easy oil” sources are exhausted. As a result, Oil & Gas companies have to embrace new technologies – primarily digital energy investments – to assist them in better locating, extracting, and processing oil and gas sources. Climate change legislation may also have a large impact on the sector causing Oil & Gas companies to create strategies for the increased sustainability standards expected from the legislation. Overall, IDC predicts a much stronger year for the Oil & Gas sector as the economy becomes more favorable to increased demand.  

IDC Energy Insight’s Worldwide Oil and Gas Industry 2010 Top 10 Predictions also cite the following:

• An increase and improvement in the use of technology with IT budgets recovering for 2010:

o   Exploration and production information management will need to be more accessible and collaborative with improved data quality

o   Real-time information and surveillance for enhanced oil recovery projects

o   The need for IT support for energy traders will increase

o   Enterprise-wide adoption of BI

o   Improved Supply Chains will require enterprise-wide IT systems

Many analysts have already published or are in the processof sharing their predictions for the upcoming year. While predictions varysomewhat the underlying theme to all is how companies and industries areresponding to last year’s economic instability and promoting recovery efforts –with many recommendations on how to do so.

There are varying accounts of the condition of IT budgets,with IDC Insights predicting that global IT spending will see a 2-4% increase returning IT budgets aggregately to 2008 levels. However, Gartner is not as optimistic and thinks that many organizations will be forced to maintain IToperations at the decreased budget levels of 2009. As a result, the challengesand strategic directives cited by both differ. Gartner remains dedicated toinnovation across most if not all industries which allows them to both find creative solutions to business challenges under budget restraints and build a solid foundation for future growth once budgets finally increase. IDC Insights emphasizes recovery and more importantly transformation via increased cloud computing,mobile device integration, and a shifting focus from large enterprises to small and medium size organizations. It also notes that technology marketing budgetswill finally unfreeze creating additional opportunities within each sector to maximizerecovery and growth efforts. 

Each of the following industries will be addressed in greater depth in future entries throughout the year, but here are some basic summaries of theprimary trends that Gartner and IDC Insights note are facing the Banking, Healthcare(Provider), and Federal Government Industries.

Banking

• Garter predicts that banks remain resistant to official innovation budgets and plans that will ultimately hinder their ability to grow.
• IDC emphasizes the need for banks to strengthen relationships with customers andpartners and to employ customer-centricity measures and in a time where revenuemeans everything and unsatisfied customers have a myriad of options outside of their current banks.
• IDC also notes that banks will continue to bolster their public images in attempt to regain public trust
• IDC cites banks’ commitments to using new technologies and markets to differentiate themselves in risk management initiatives
  

Healthcare

• Electronic HealthRecords (EHR) remain a primary concern for the industry, yet Gartner predicts slow implementation of EHR in small physician practices with only 15% adopting them by 2015.
• IDC cites business intelligence as the primary IT investment for Healthcare Providers for the year including upgrading existing BI for improved real-time functionality.
• IDC differs from Gartner on EHR adoption by predicting that in addition to a natural increase in EHR adoption, that the ARRA grants and potential penalties for those who refuse will cause 25% of Americans to have EHRs in 2010 with 60% having EHRs by 2016.
  • It is important to note that Garnter places its emphasis on small physician practices (3-5 physicians) because approximately 60% of American practices are small. IDC looks at aggregate adoption which may account for some of the difference in estimated EHR adoption percentages. However, the important thing to note is that generally IDC predicts fairly successful EHR adoption while Gartner remains generally pessimistic.
    

Federal Government

• Gartner cites transparency through providing increased public data online as a primary Government IT objective for 2010
  • There is a gap between existing enterprise information management systems/efforts and the ability to incorporate external data despite external data now being a primary focus as social media and other online sources provide direct access to constituent opinions and actions. 
  • With the heighted focus on external data – regardless of its effectiveness – increases Government information risk and the need for increased information security.

• IDC notes four key areas of general Government focus for 2010:
  
  • Investment optimization through improving operations and maximizing IT investments.
    
  • Heightened expectations for Government as citizens looks to Government for guidance, improved services, increased interactions/information exchange, and solutions to challenges such as the economy.
  • Government's increasing "business" role as it assumes greater regulatory and oversight powers in attempt to stabilize and improve the economy.
  • Economic recovery is a primary objective across organizations and functions - especially those receiving stimulus money or additional budgetary funds.

As previously noted, this time of economic uncertainty provides new challenges to companies that are trying to cut costs while maintaining viable marketing campaigns. In response, many are turning to less expensive means of marketing that are typically conducted online (email campaigns, Google AdWords, social media, etc.) And information about how to do so effectively is rampant in the blogosphere, yet I find one often overlooked resource very interesting: free eBooks.

These are not the eBooks that are available for Kindle, but the ones meant to be used online or to be downloaded to your computer… usually with the goal of being spread to many readers. They may or may not be in a traditional book format (most are PDFs), but provide a range of content from the entire published book to case study companions to brief “how to” guides. Since they are typically self-published, there are not strict standards other than providing information in an accessible format.

Although Google is making strides in book digitalization through its Book Search initiative, it has yet to be able to provide many full text books due to copyright restrictions. It does, however, offer authors and publishing houses (regardless of size) an opportunity to enter their books in its search program for free. They can choose whether or not to include the full text, but regardless the title and content will be available for users to search in the program providing exposure that otherwise might be difficult to receive.

Apart from the Google repository there seems to be a special concentration of eBooks available for marketing and social media. Seth Godin and Chris Brogan have been avid proponents for several years – both releasing multiple eBooks via their blogs and websites. Chris also linked the top 20 social media eBooks that he found useful that are worth checking out if you are initiating a social media campaign or want to improve your current one.

With online marketing initiatives and social media becoming increasingly popular eBooks can be a great resource to supplement other research and sources because they are free, easily accessible, and often provide compiled insights that would be otherwise disparate or unavailable. Of course it remains important to screen them if you don’t know the original source, but ultimately they can be great assets. And, if you have some unique insights or expertise they can provide another avenue for you to distribute it too.  

Despite the growing popularity of social media and digital marketing, many people and companies in general remain skeptical about the efficacy and safety of implementing these platforms. Yet, even among its biggest proponents, social media is often cited as a change in information delivery that may not be tangibly profitable due to its free-sharing nature. Of course, there are countless digital advertising opportunities, but those also have been reported to have varied success rates (for both advertisers and the host sites.)

The leading voices in social media understand the benefits of social media, yet don’t fundamentally view social media as being profitable – or even to have measurable results of any kind due to its often anonymous nature. This is a problem – at least for business adoptions of online marketing. Without a way to reasonably measure return on investment, there remains a giant hurdle for companies wanting to diversify their marketing, but unwilling to invest in something that is not likely to post any likely returns.

It's important to consider this when implementing online marketing. When possible, open and response rates of things like email should be closely tracked. That same diligence should also be used in other mediums such as social media and even through employing search engine optimization strategies. Online marketing may be incredibly cost effective compared to direct or telemarketing, but if not of increasing leads or brand recognition then it might be wasted among a target base that is flooded with online marketing messages daily.