What does 2023 look like for your industry? Here’s a round-up from our sector heads.
Businesses have dealt with an incredible amount of change since 2020.
And this won’t slow down in 2023.
Inflation, constrained budgets, unpredictable demand, a real risk of recession, and a whole lot of uncertainty – the challenges are multifold.
Whatever your industry, there’s no choice but to adapt. Yet opportunity may lie in the disruptions ahead. Our global sector heads share their views on the trends for 2023 and pinpoint how each industry can unlock the biggest game changer: growth.
Rather watch and listen? Click here to watch our short video series from our global sector heads.
Consumer
- The challenge: Cost increases and recessionary behavior
- The opportunity: Commercial excellence
- Three words for 2023: Protect your profits
Inflation, cost increases, and recessionary consumer behavior: the consumer sector is under pressure to increase prices. But with consumer confidence at an all-time low, many companies will struggle to see how this is even possible.
How can you ask shoppers to pay more, when they’re already buying less or seeking cheaper alternatives? How can you succeed with even further price increases, when you’ve already had to dial things up in 2022?
These are difficult questions to answer – but the alternative is a year of tightly squeezed profits and stagnated growth. That’s why the focus in 2023 should be on stabilizing profitability and driving growth through all levers of commercial excellence.
Where should the focus for commercial excellence sit in 2023?
- Prepare for smart price increases: Tap into a wide range of willingness to pay through price differentiation. Don't move away from critical price points. Instead unlock data to identify pricing leeway, while maintaining added value in products and services through ongoing innovation.
- Build trusted partnerships with consumers and retail customers: Unlock the power of innovative loyalty models to secure your shopper base. Also work on your revenue management capabilities in a proactive and holistic way, investing in trusted partnerships with retailers while ensuring transparent cost and profitability control.
- Enhance ROI and drive sales: Keep a close eye on marketing budgets and promotional activities, understanding their true impact on profits.
The year of consumer-first
To really drive growth, put consumers at the heart of your decisions. Personalized experiences go a long way. Those that offer a superior experience in terms of brand, consumer engagement, and consumer journey will thrive.
Consumer-first may be strengthening your own D2C channels. It could be offering an edge of sustainability or focusing communication on self-care and health-related aspects. Or it could be innovative loyalty elements, such as subscriptions, gamification, and personalized promotions.
New technologies are also creating opportunities. Many emotional brands are exploring how to use the metaverse and NFTs to better engage with consumers, enter new segments, and open up new areas of monetization. Big data management and advanced analytics will be key for managing the portfolio and pricing across seasons and points of sale. And AI-based technology will help companies to better plan demand, predict consumer behavior, and optimize their prices and offerings.
Financial Services
- The challenge: Unclear interest income
- The opportunity: Becoming a trusted partner for clients
- Three words for 2023: Invest in digital
We are in times of extraordinarily high inflation, and central banks in both Europe and North America have responded by increasing interest rates in jumbo steps.
On the one hand, this offers opportunities to earn healthy interest margins again. However, many banks now need to manage the transition from more than a decade of very low or even negative rates in record time.
Meanwhile, the likelihood of a recession leads to higher risk in the lending portfolio as well as increased pressure on lending volumes. Banks must carefully evaluate how much they lend and to whom – while interest margins will increase, the downward trend in mortgage and home lending will continue, and loan affordability will become difficult for more and more people.
The bottom line: even with higher rates, the outlook on interest income is unclear.
Profitable growth in dynamic times
Banks still need to secure stable non-interest income, such as from investments, advisory, and payments. They must develop strategies to acquire and secure deposits, develop new deposit products, and dynamically optimize deposit rates as competition and central bank rates change. Smart lending, especially in the area of sustainability, will be another important opportunity.
How can banks support clients in 2023?
Most importantly, it will be the banks which put themselves in their client’s shoes that will truly thrive.
Think about how you can prove yourself as a real partner when times get rough. How can you help your clients manage their financial lives, make better financial decisions, and navigate difficult capital markets?
And remember: Customers today expect a hyper-personalized, digital experience that’s simple and fuss-free.
The year of digital growth capabilities
You may have already invested in technology and optimizing operational processes over the last few years. The next stage in 2023 is to invest in “digital growth capabilities”.
This could be a “help me save” app to grow deposits and help customers during difficult times. It could be digitally enabled investment advice to help clients navigate volatility. You may want to focus on digital sales efficiency, with efforts to deepen customer relationships and improve cross-selling. Or it could be a stronger focus on pricing and managing revenue leakage to protect income.
Healthcare
- The challenge: Cost increases, supply shortages, and constrained budgets
- The opportunity: Collaborative approaches
- Three words for 2023: Deliver better health
The healthcare and life sciences sector will find itself juggling multiple challenges in 2023. First, COGS and SG&A costs are increasing due to inflation and supply shortages. At the same time, constrained healthcare provider budgets and regulated reimbursement prices will leave little room to offset cost increases with price adjustments. And third, it will be difficult to obtain adequate funding and market access for innovations due to limited budgets and ability to pay out-of-pocket among patients.
But what we’ve seen over the past couple of years is that the healthcare industry can deliver high performance, even in the most challenging conditions. In 2023, we expect a better experience for customers and patients as well as opportunities for companies to grow.
What does growth look like in 2023?
Companies can mitigate the challenges in several ways:
- Proactively manage prices where there is leeway, monitoring customer service levels and costs and reviewing supply chain policies
- Use digital marketing and sales channels to drive incremental demand and sales efficiency
- Enhance commercial launch excellence to maximize market success of future portfolios
- And finally, it’s time to really rethink business and monetization models – transitioning from a transactional product supplier to a business partner for healthcare payers and providers.
The year of better health
In 2023 we expect to see more collaborative approaches among suppliers to enhance quality and help manage the cost of care, as well as more efficient ways of engaging with suppliers via digital channels to obtain relevant clinical and commercial information and support.
Beyond treating disease, we now see a growing emphasis on maintaining and improving health, with new and innovative products entering the markets. From vaccines and weight loss therapies to wearables that measure important health data, and supplements and vitamins in the OTC sphere – the list keeps getting longer.
However, this space is innovative and evolving. Demonstrating and capturing value is not straightforward compared to traditional healthcare and involves different funding flows and value creation channels. Companies are still finding their way into these new and evolving markets, while learning how to get the best out of their products and help keep society healthy.
Industrials
- The challenge: Risk of recession in major markets
- The opportunity: Growth strategies
- Three words for 2023: Work with customers
- The challenge: Risk of recession in major markets
- The opportunity: Growth strategies
- Three words for 2023: Work with customers
Several key challenges will dominate the industrials sector in 2023. Many companies are already accustomed to the supply chain disruptions, energy scarcity, COVID-19 minimization efforts, and a challenging political and regulatory environment. Now they must also deal with what comes on top: increasing interest rates, bloating inventories, a need to free up working capital, and significant uncertainty around market demand.
No exaggeration: there’s a real and current risk of recession in major markets.
How can companies overcome the challenges in 2023?
It’s not all doom and gloom. Industrials companies that want to grow organically will have opportunity to do so, be it in terms of volume and margin or through acquisition of weaker competitors.
A must-have measure in a challenging economic environment is to pass increased costs through the supply chain. We often see room for improvement with price increase programs, especially in terms of frequency, segmentation, and implementation speed. Also take a fresh look at your sales force. There is likely an opportunity to both manage costs and improve efficiency.
And don’t forget: work with your customers. Explore ways to draw down inventory levels and review your channel reward and performance systems to reflect end market demand. Increase the frequency and depth of your interactions with customers, focusing more on partnerships, especially when it comes to digital collaboration throughout the value chain.
The year of growth strategy
Industrials companies that thrive in the year ahead will be those that put the relevant growth strategies in place. Here are three key points to remember:
- Revenue growth will remain the biggest contributor to total shareholder return, regardless of the economic cycle
- Right-sizing sales while focusing on higher customer engagement and value will help to re-align business models
- Moving toward alternative revenue models, such as CAPEX to OPEX or subscription revenue models, will help industrial suppliers to retain volume while better aligning pricing with customer demand.
Technology, media, telecom
- The challenge: Finding room for (profitable) growth
- The opportunity: Existing customers
- Three words for 2023: Customer base management
No industry is recession-proof. Technology, media, and telecom companies were some of the last to be hit by the economic downturn, but now the sector is starting to feel the impact. Interest rates and layoffs are increasing, company valuations are declining, and inflation rates are soaring.
One thing all players have in common is that they need to raise their prices: increased wages and higher costs cannot be avoided. You must be able to grow profitably.
So why not use one of the most cost-effective growth levers? Look at your existing customer base.
Acquiring new customers should not be your only source of growth. First, the cost of acquiring new customers often exceeds that of maintaining existing customers. Second, if you are a true innovation leader and make regular improvements to your technology or services, you have good reasons to increase your prices.
What does customer base management like in 2023?
If you haven’t already worked on a price-increase approach or educated customers, you likely have no other option but to execute steep price adjustments. Fortunately, there are things you can do to prepare:
- Carry out risk scorings
- Prepare action plans differentiated by customer segment
- Design packages with less expensive alternatives to maintain the customer base
- Restructure the commercial sales organization to reflect the current environment
- And many more
If you’re used to frequently increasing your prices in line with increased value, there’s no need for a radical change. However, you can now also attempt to grow beyond T&Cs and consider new monetization models, such as ad-funded offers for streaming platforms.
Enhancing the customer experience is another big topic for 2023. We expect to see more usage-based price models, self-service driven products, and freemium models on the horizon.
The year of accelerated innovation
We can expect some consolidation in the market, leading to inorganic growth. This will be an opportunity to combine offers or enrich services with innovations and bring in new talents to better serve customer needs.
Economic changes will also accelerate innovation, allowing players to fill white spaces by acquiring companies that fit to their business.
Click here to watch our short video series from our global sector heads.
