Alexa is Brand Agnostic

What happens if brands no longer influence the moment of truth?

Alexa is Brand Agnostic

By Lee Peterson

Alexa, order a 12-pack of toilet paper, a case of bottled water, and a bag of tortilla chips.

Welcome to the new moment of truth. There is no shelf. There is no cart. There is no register. There isn’t even a laptop or mobile phone. There is only a talking cylinder on a kitchen table. Artificial intelligence has enabled every household to become a store shelf. And in this new, demand-based moment of truth, something is often being left unsaid: Charmin, Dasani, and Tostitos. Or Scotts, Evian, and Santitas. Or even Cottonelle, Fiji, and Mission.

It doesn’t really matter what brand—Scotts or Charmin, Fiji or Dasani. One brand is largely replaceable by another. Alexa is ushering in a future when brand parity reaches its inevitable conclusion. If you’re the brand manager of a CPG product, this existential threat should shake you to your brand-loving, MBA-trained core.

The in-store marketing model that’s ruled the consumer products industry for more than a century is being replaced by a talking cylinder. This slender, chattering tube has become more than a store. It has become a legitimate channel, while at the same time, operating as a default competitor of the entire retail industry. And it is not going away. Analysts expect sales to reach $20 billion by 2020 via the artificial intelligence talking assistant Alexa. The Echo speaker now operates in more than 11 million homes. Although this still represents less than 10% of U.S. households, at such a fast penetration rate—Echo was first widely released in June 2015—in less than a decade half of all households could have AI devices.

The uncomfortable truth is brands have a new target customer: Alexa. Yet this fictional-tech persona doesn’t really exist in the real world as a customer. She is not a flesh-and-blood shopper. She represents no demographic, no socio-economic strata, no generational divide. She is both the competition and the channel, friend and foe, Boomer and millennial.

This is the paradox of artificial intelligence and the generation of smartphone, shopping assistants, from Siri to chatbots. They are upending the traditional path to purchase, but they are all brand agnostic. Those ephemeral intangibles long considered the essence of a brand don’t matter. Price and delivery time are more likely to drive preference and selection in this new AI-driven store.

In this brave new, brand-free channel, Alexa influences how, when and what shoppers buy. The Amazon effect, once naively viewed as a threat to retailers only, is a direct threat to CPG brands, too. But therein lies the paradox: Brand is arguably more important than ever in this Alexa-everywhere store, yet brand is least recognizable here. You might even argue Alexa doesn’t believe in brands at all. She’s brand agnostic in the same way media buyers once boasted about being channel agnostic. Alexa believes in same-day delivery, and getting the best price, and not much else.

This has created unprecedented challenges for CPG brand stewards. Beefing up slotting fees won’t make this threat go away. There are no endcaps here. No packaging. No in-store signage. No fancy floor graphics to put your beloved brand top of mind before a dozen other competing SKUs. There is only the abyss of the talking algorithm sheathed in the metal grid of a hidden speaker.

Can a brand mean anything to an algorithm? Harder still, if there is no longer an actual physical place where a brand might exist and come to life to consumers, how do brands connect with shoppers? How does a brand build preference and equity in a physical space it can no longer control?
For years, brands focused on dominating the store environment, investing millions into eye-catching packaging experiments, and other in-store marketing efforts—an endless search for any edge during the final moment of purchase. The quest to dominate a category, from paper goods to snack foods, soft drinks or oral health, made sense. It was all about owning the aisle. But the aisle is effectively gone with Alexa. The primary format for this longstanding battle among brands becoming obsolete. To dominate a product category during this place-less moment of purchase, what must brands do?

Past dominance of a consumer category in a thousand big-box stores doesn’t guarantee dominance. Upping a brand’s slotting fees won’t work. A similar crisis confronted brands more than a decade ago. Lifestyle brands like Nike and Coach became retailers themselves, rather than leave their fate to retailers alone. They went direct to the consumer. Of course, a toilet paper store or a soda pop store is an absurd notion. But adopting the mentality of a retailer is not.

The moment of truth will increasingly happen outside the walls of a traditional retail store. And the one thing brands have done everything possible to avoid is now a necessity. There is no other choice: Brands must find a way to go direct to the consumer, either through their own portals or through radically improved formats operated by their existing retail partners.

This is a new moment of truth for brands, too.

Lee Peterson
Lee Peterson
Executive Vice President, Thought Leadership, Marketing
WD Partners
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