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Home / Business / Amazon Alexa is the biggest brand challenge since the internet

Amazon Alexa is the biggest brand challenge since the internet

  Amazons Alexa laughs at the users and crawls them

The Americans turn to Alexa to fill their pantries and store their medicines.

This is a challenge for brands – perhaps the biggest in two decades.

As intelligent speakers stand out, companies like General Mills ( GIS ) Hershey ( HSY ) and Procter & Gamble ( PG ) race to understand the technology and highlight its products.

"A new Wild West has opened," said Z. John Zhang, marketing professor at the Wharton School of Business. "Alexa is the gatekeeper."

The confusion recalls the dawn of the Internet as new competitors surfaced online, forcing established brands to adapt their strategies, he said.

Related: Amazon sports Alexa-filled homes of the future

Smart spokespersons today generate $ 2 billion in annual revenue, a tiny fraction of all purchases. According to the consulting firm OC & C Strategy Consultants, this will be estimated at $ 40 billion in four years.

Amazon leads the field with 20 million Alexa-enabled echo devices in about 1

0% of US households, the company found. Smart Speakers have become so mainstream that CEO Jeff Bezos played Alexa in a Super Bowl ad this year. Google Home, Apple HomePod and Microsoft Cortana are also growing.

Especially for food and household companies, it is an urgent puzzle to solve it, because they are already under pressure. Niche competitors are growing. Retailers cut prices to compete with Amazon. And the raw material costs are rising.

2018 was a bloodbath for consumer staples. The sector is the worst performer of the S & P 500 this year. General Mills and P & G have dropped by 28% and 20%, respectively. Hershey ( HSY ) lost 18%.

From Supermarkets to Voices

For decades, people in the supermarket or at large retailers bought housewares, and manufacturers had a plan to boost brand awareness.

They spent billions on logos, packaging and advertising. Producers like P & G paid top dollar to put their products on the best shelves at eye level, and for banners around the store.

Related: The battle for razor, diaper and shampoo prices

Online shopping caused another headache. Amazon opened the door for small businesses to sell on its marketplace and gave customers limitless options to scroll through. But companies can still pay for sponsored ads to get to the front page of Amazon and Google Search.

Now, Alexa and other smart spokespeople are backfiring and serving as a "traffic cop" who conducts purchases, Zhang said.

The Power of Amazon's Choice

When you shop at Alexa, you can order a specific brand, such as Colgate Toothpaste or Head & Shoulders Shampoo, or you can make a generic one Product. It makes a big difference.

By default, if you say, "Alexa, get me some paper towels," Language Assistant will use a suggestion based on your recent Amazon purchases. But if you have never ordered paper towels, Alexa will recommend one or two Amazon Prime products through an algorithm.

Related: Amazon Unveils Colorful Echo Dot for Kids

According to a study by L2, a business analytics company, it's likely a product with an Amazon's Choice logo , Amazon has power and its top recommendations rarely change over time.

Amazon does not release the algorithm for the Amazon Choice label. But a spokesman says that product ratings, price and shipping speed are taken into account.

Alexa is another way for Amazon to lead its customers to its own line of private label products such as Amazon Basics, Wickedly Prime and Presto.

Related: Now Amazon wants to feed your dog

Amazon's Choice for Batteries is Amazon Basics. So, if you say, "Alexa, order me batteries," you're more likely to get Amazon batteries than Duracell or Energizer. For paper towels, Amazon's Choice is Presto, not Bounty or Scott.

The term is a threat to brands because they can not pay for it.

Amazon's purchase of Whole Foods last year gives it even more leverage.

"What you bought at Whole Foods will soon be what Alexa recommends," said Keith Anderson, senior vice president of strategy and insights at e-commerce analytics company Profitero.

How To Win

To succeed in the era of voice, companies need to work closely with Amazon and redesign their advertising strategies to foster brand loyalty. You need to teach you to specify a brand instead of making a broad request.

For example, General Mills wants customers to say, "Alexa, order me Cheerios," rather than "order me cereal."

Related: Inflation and acid yogurt sales decline General Mills

Experts say companies should focus on optimizing voice search. They need to make sure that their product descriptions are relevant and easy to categorize, and in line with how people request these products on smart speakers.

"When you look for Tide, you come up with about 10 to 15 different products and sizes, which is a minefield for a voice search," said OC & C Associate Partner John Franklin.

He said companies should also limit their product range so buyers are not confused with dozens of sizes and variations. And they should keep brand names short and memorable. Catchy names and slogans will outweigh the colorful packaging in the age of Alexa.

It's too soon to predict winners and losers. But brands that have become synonymous with their products – such as Q-Tips, Scotch Tape, Kleenex, and Febreze – are likely to benefit, said Brett Leary, senior vice president of advertising agency Digitas.

Customer Training

As Alexa repeats earlier purchases, it is more important than ever that brands get into the shopping basket through marketing and advertising campaigns.

So, get ready to watch ads online and on TV that connect brands to Alexa and get you to vote for products, possibly for a discount.

General Mills, the owner of Betty Crocker, developed an "Ask Betty" app for Alexa with recipes and cooking tips last year.

P & G believes that its high profile brands such as Tide, Bounty and Gillette are at the forefront of consumer spending and will position the company for switching to language buying, said spokesman Damon Jones. P & G has developed about a dozen Alexa skills, including the Tide app, which includes step-by-step instructions for removing stains.

But there is only so much P & G. Amazon still dominates the most.

"There is no direct way for us to influence that," Jones said. "There are no traditional" advertising opportunities "."

CNNMoney (New York) First published May 10, 2018: 11:21 ET

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