How to Avoid Tobacco Bypass

By 
Anton Bakker, President & CEO, Outsite Networks

I don’t want to give you a heart attack. That said, my stories about digital disruption often lead retailers to clutch their chests in fear of the future.

Instead of paralyzing you with dread, I hope to inspire action. I want to get your heart racing in a different way, one in which your adrenaline kicks in and you move to best position your business for what’s to come.

The reason I use the heart metaphor is twofold. First, the heart is a symbol of affinity, which is precisely what we’re talking about: customer loyalty. Second, you can think of the digital disruptor here as “retail bypass surgery.”

It’s a manufacturer’s necessity to develop direct-to-consumer communication via mobile phones, digital coupons and other online methods that risk diminishing brick-and-mortar retailer value from the equation.

It’s a move that has happened with fuel and many major-oil, cents-off-per-gallon rewards programs, and will most likely hit other consumer packaged goods (CPGs) like beverages. But today, it’s becoming more evident with tobacco.

Mind the Gap

In 1998, the tobacco companies and the federal government forged the Master Settlement Agreement (MSA), basically requiring a stricter level of accountability. As an unintended byproduct of those tougher reporting requirements, the MSA forced wholesalers and distributors to give better data all along the supply chain.

At the same time, new advertising restrictions forced those same tobacco companies to get creative about gathering information on their consumers. They’d use direct mail, age-verifying websites—everything they could to gather data on who was buying their product.

On one end, wholesaler data was getting richer, and on the other end, consumer data was expanding exponentially. The gap was at retail. To close the loop, manufacturers needed transaction data from the point-of-sale (POS) at the store level. In the past two years, manufacturers have been writing into contracts stipulations for that data. Retailers that had the ability to transfer POS data back to manufacturers would get compensation.

What ignited the firestorm was mobile, which became the enabler. With it, manufacturers now had the ability to communicate directly with the customer, potentially as the customer was physically inside the store. That was pivotal.

Today, with all the data they’ve amassed, tobacco manufacturers can identify the person holding a particular mobile phone, know his or her transaction history and, with that information, offer relevant reward points, discounts or coupons that will entice that person to be more loyal to the brand.

Let’s step away from the brand discussion and put it in perspective. You have to look at the world through the lens of what I call a “Go Economy,” as in Amazon Go, Go Puff, Uber, Airbnb or any other disruptive technology. Department stores are feeling it. Taxicabs are feeling it. Hotels are feeling it.

The Go Economy can’t be stopped. It’s about convenience, value and transparency.

So here’s where I get back to brands. Everyone’s trying to get people to want their brand, whether it’s tied to quality, nostalgia or, in the case of c-stores, cold beverages, cigarettes or a quick, hot meal. For a CPG company, it’s immensely important to engage in a relevant conversation directly with the consumer. They can now give the trade dollars or marketing funds that would have gone to retailers directly to loyal, paying customers via coupons or discounts. It’s not scattershot like an ad in a coupon booklet. It’s a more focused, targeted way to spend that money.

Stay Relevant

So where does that leave the retailer?

You still have power. You have customers coming into your stores, buying CPG-branded products. Your POS data can help manufacturers better identify your customers and what they buy, but you have to be willing and technically able to give them that data. Believe me, if you don’t, manufacturers will find a way to do it without you.

In the old days, all you had to do was be relevant to your customer. Today, you also have to be relevant to your vendor. If your tobacco manufacturer needs your transaction data, give it to them. If the  manufacturer needs access to customers for transaction-relevant communication, give them that channel through your app, notifications, text messages and emails. If that supplier has the intelligence to support relevant communication, you can be relevant to each other.


Anton Bakker is president of Outsite Networks, Norfolk, Va. Reach him at [email protected].