AI in CPG: A Personalization Paradigm

Back in my UC Berkeley days (the late 1990s), “The Big Three” dominated the US auto industry.  GM, Ford, and Chrysler were the three companies that remained standing as the 20th century came to a close.  One hundred years earlier, in the early 1900s, the industry was bustling, with over 2,000 companies trying to find their place in a market constantly evolving through the industrial revolution. The key to their success was gaining scale and investing heavily in high-volume manufacturing.  A new car maker would have to build a massive manufacturing capacity without proof that consumers would buy the cars they built.  

One hundred years later, the playing field has been shaken up. Today, Tesla, the company that did not even exist in the ‘90s, has become the most valuable car maker in the world (in fact, worth more than the following five automakers combined).  The automotive industry experienced a paradigm shift with the advent of electric vehicles (EVs) that transformed not only vehicle production, but also the industry's landscape - what was once a sector dominated by a handful of corporate giants with manufacturing, supply chain, and route-to-market exclusivity has become a dynamic arena where innovative startups successfully challenge incumbents.  The auto industry is in no way unique - technology innovation has a steady record of creating unprecedented opportunities for companies willing to embrace innovation thoughtfully.

I am writing about the auto industry because the consumer goods/services sector has dramatically consolidated over the past 100 years.  Most boutique brands (fashion brands, hotels, or even coffee shops) are gone or “rolled up” into a sizeable brand-holding portfolio.  The remaining companies carved out their spaces and erected barriers for other firms to enter.  These barriers range from dedicated distribution (shelf space in retail stores), volume-discounted advertising, and production sourcing.

However, the AI wave of technology innovation is poised to shake up this market, leveling the playing field and enabling agile new companies to compete with industry behemoths.  In this article, we will examine three key parallels that reveal how AI is set to disrupt consumer industries in a manner reminiscent of EVs' impact on the automotive world: (a) the shift from volume/scale-driven competition to consumer relevance and personalization company-consumer relationship; (b) the rebalancing of the routes-to-market (where DTC, partnerships, and digital commerce become increasingly important), and (c) the obsolescence of long-standing barriers to entry.

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Scale-driven competition vs consumer relevance

Have you ever been in a room where everyone screams, and no one listens?  If I were to describe my experience as a consumer today, this is precisely the analogy I would use.  As a consumer, I became numb to the consistent and continuous flow of marketing messages that companies bombard me with.  Companies try to compensate with volume and ingenuity by forcing me to ingest their messages instead of looking for ways to understand what I need or want and help me make a purchase that I will be happy with.  You can probably relate - I pass by my recycling bin on my way from the mailbox because most of what I receive is junk. I have special email addresses that I give out to limit the promotional messages that hit the email box that I use, I have ad banner suppression on my browsers and cookie clearing routine every time I shut down my browser, I pay to watch commercial-free streaming… and this is a hassle!

What I do value is a bit of knowledgeable advice and informed guidance… from our kitchen designer about the appliances that I should purchase, the type of lighting that would fit the specifics of our new kitchen design, from our gardener about the fruit trees that would do well in our backyard; from a person at the butcher shop counter about the best cut of meat to smoke in our Traeger for the family event that is coming up.  But this type of feedback is increasingly rare; what is even more rare is an opportunity to ask the person who helped you with sound advice before more questions… and it would be almost a miracle if that person remembers you from before (and was able to carry on the conversation that you had … 6 months prior).  Can you imagine the success of a company (or brand) delivering such a level of service that would have kept me as a repeat buyer?

The problem is that given that all else is equal, most companies feel dependent on maintaining the volume of their voice relative to other voices in the room.  Companies are slow to realize that technologies that will cause the paradigm shift in this area already exist, and the first wave of companies adopting them will reinvent the dynamics of brand-consumer relationships and capture the market while earning extraordinary profits.

Umego.ai exemplifies this new paradigm. Instead of competing on marketing spend, companies can fuse AI with human capital to connect with consumers based on individual preferences, behaviors, and needs. This shift is as revolutionary for the consumer goods market as EVs were for the auto industry. AI enables brands to cut through the noise and form genuine customer relationships, delivering personalized experiences that foster loyalty, trust, care, and empathy. To be clear, AI alone will not be transformational. Synthetic relationships are never as valuable as authentic ones. The AI must be leveraged with a re-investment in human capital - leveraging knowledgeable and passionate employees as subject matter experts and helpful advisors. Their job is to make someone's day better by bringing the right idea, product, service, and offer at an appropriate time. AI will help them decipher what action to take and what outcome to expect, which will be transformational.

Umego has developed a proprietary AI-driven customer intelligence platform that will be personalized to the individual brand and its customers, all of which intersect with the brand’s products and services. They will transform LLMs into brand-specific language models (BLMs) that will predict outcomes, forecast opportunities, and measure success at levels “unknown since the death of the corner store.”

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The rebalancing of the routes-to-market

The Internet boom of the early 2000s has already disrupted the retail industry, with ecommerce and direct-to-consumer distribution taking a sizable share of the purchasing volume.  The tumultuous COVID years have established video conferencing as an acceptable in-person meeting substitute.  These are the two critical prerequisites for enabling direct-to-consumer engagements to reacquire the personal touch.  The remaining challenge is the “scalability” of a human being (a representative of a brand) to “keep a tab” on multiple conversations with individual consumers without confusing different conversation streams.  This is where AI can do wonders, acting as a note-taker (extracting and archiving essential pieces of information from each conversation), an executive assistant (keeping a calendar of all important dates that each consumer), and a concierge (finding the best matches between the wishes a consumer expressed and the ability of a company to accommodate those wishes).

The obsolescence of long-standing barriers to entry

In the capital-intensive auto industry, the most significant barrier to entry is the production scale—since Ford’s Model T; it was common knowledge that volume-produced cars would outcompete (on quality-and-price measures) any custom car maker. But this came to a screeching halt when EV cars came about, bringing down the production complexity, which, in turn, enabled new companies to enter and disrupt the market.

In the consumer goods/service sector, this scale advantage centers more on establishing “mindshare” in consumers’ perception of choices and locking in the equivalent “shelf space” in the retail distribution channels.  Over the past few decades, these barriers have shown signs of strain, with consumers showing less and less brand loyalty.  This presents a tremendous opportunity for companies to take a fresh look at how they create value for their customers and zero in on that by adopting a personalized approach to selling, leveraging their people and new technology.

As AI reshapes the landscape, brands that harness its potential will find themselves well-positioned to succeed—much like EV startups have in the automotive world. Umego is at the forefront of this transformation, offering companies the tools to compete on relevance rather than volume, build deeper consumer connections, and thrive in the AI-driven future of consumer goods.