Mass to Micro: Consumer Market Shifts

Perspectives

Mass to micro

Meeting unprecedented consumer market shifts

In the 1980s, back-to-school shopping typically meant a day-long hunt through a limited number of stores, often ending in settling for what was left. Today, an abundant preference-driven consumer landscape presents an explosion of choices in brands, products, channels, formats, experiences, configurations, and service models.

Moving away from a mass approach

Post-World War II, the consumer industry, from retail to automotive, evolved to meet a specific set of “more”-focused requirements: more consumers, more consumer spending, growing GDP, and expanding geographic markets. That era’s consumers, largely middle class had relatively uniform preferences, central to a bell curve of shared demographics and cultural norms. Competition in the industry hinged on scarcity, so requirements were focused on distribution, product availability, and scale, catering to a relatively homogenous market with few choices.1

THE FOUNDATIONAL REQUIREMENTS THAT ONCE DROVE THE INDUSTRY ARE NO LONGER ADEQUATE TO MEET FUTURE DEMANDS.

Consequently, the industry was built on economies of scale, mass production, mass distribution, and mass marketing. This approach worked within these market dynamics, but now, as we look to the future, the requirements on the horizon appear to be very different than those for which the industry and traditional organizations were built.

Today’s diverse consumer profiles and a fragmented tech-driven market are driving many in the industry to transition from a supply-focused to a demand-driven model. This pivot marks an important transition from mass-market approaches to strategies that can prioritize relevance for specific consumer groups. For many consumer industry organizations, they refer to this as striving to provide her with “what she wants, when and where she wants it.” We refer to this shift as an industry moving from mass to micro. While at first read, this may sound like micro-targeted marketing, how a consumer company builds highly relevant offerings and becomes more consumer-centric moves well beyond personalized marketing. 

The shift from mass to micro can affect the heart of the business, crossing the value chain, including functions like real estate, merchandising, experience design, menu management, new product development and customization, pricing, inventory, maintenance, and more. Our research indicates that this is merely the beginning, with unprecedented changes looming and forces accelerating the industry toward a more consumer-centric, fragmented, complex, and demand-driven future.2

The six forces

Over the past two decades, the consumer-facing industries have acclimated to an environment where change seems to be constant. Confidence that your organization has learned to navigate this environment may be comforting, but the next 10 years could potentially eclipse the changes of the past in terms of scope, speed, and intensity. Through our client experience, we’ve identified six major forces3 that are expected to drive consumer market shifts in the coming years. Through this work, it has become clear that the industry may face unprecedented degrees of economic, demographic, technological, political, and cultural change—and it is poised to happen simultaneously.

The result could be a highly complex mosaic of consumers, increased competition, and a level of technology-enabled complexity that could likely redefine the industry for years to come. 

Examples of unprecedented change:

  • Generation Alpha will be the first generation in US history in which the white demographic is not the majority. The youngest generation born today is roughly 48% white —making it the most diverse generation ever.4
  • The racial makeup of the five largest US markets by GDP—accounting for nearly 50% of US GDP (Florida, Texas, California, Illinois, and New York) is looking vastly different, with the Gen Alpha population of 32% non-Hispanic white people (down from a cross-market average of 78% of baby boomers ).5
  • The largest and most concentrated wealth accumulation to ever occur happened in the last 10 years. This massive wealth accrual, primarily among baby boomers, is making the wealth gap much more pronounced along generational lines. Between 1989 and 2019, the median household wealth of families headed by 65 to 75-year-olds grew by 54%, while wealth in families headed by 25 to 35-year-olds declined by 11%.6
  • For the first time in US history, the population will include more people age 65 and older than under 18.7
  • Women, for the first time in history, are projected to control more wealth than men (from 49% in 2019 to 65% by 2040).8
  • The fertility rate in the United States is now below the replacement rate, implying a future with potentially “less” and not “more.”9

These shifts no longer are represented by a standard bell curve, but instead demonstrate dramatic diversity in the needs, wants, sizes, tastes, and desires of the new consumer. Gone are the days of the “average” consumer. Today we are witnessing a new battle for consumers that is happening at a more granular level.

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The rapid advancement of artificial intelligence (AI) marks a pivotal shift in the consumer industry, bringing new strategic and operational dimensions. In fact, Stanford University identified AI as advancing faster than Moore’s Law.10 When viewed through an economic lens, the levels of efficiency identified in early studies are staggering, with efficiencies ranging between 20% and 60%.1112 Such efficiency could drive down the marginal costs of activities that include content creation, copywriting, coding, and comprehension, while simultaneously improving outcomes. These ultimately could lower the cost of managing complexity. These and future AI advancements could further accelerate the shift from mass to micro. Traditional consumer companies should therefore view AI not just as an efficiency tool but also as a growth catalyst, opening doors to innovative business models in an increasingly fragmented market landscape.

AI is also likely to accelerate changes in evolving consumer spending habits, with a noticeable shift toward services, experiences, health and well-being, and digital goods and services. Technology advances could accelerate these categories. Such a reallocation of consumer spending could pose new challenges for established categories. These markets, in particular, inherently offer greater customization and personalization, which align closely with individual preferences in ways that traditional markets do not.

In the evolving consumer landscape, AI is more than a technological leap; it’s a vital part of the strategic toolkit for consumer companies. AI helps equip businesses to explore new market segments and helps meet evolving consumer needs with precision and agility. The interplay between AI’s potential and diversifying consumer preferences will likely be key in defining the consumer industry’s future.

The traditional mass approach, known for its economies of scale and efficiency, contrasts with micro-operational strategies that add unwanted complexity, which, in the name of efficiency, can raise operating costs and capital needs. However, technological advancements and innovative technology uses are unlocking a new approach, decreasing marginal costs, and yielding breakthroughs. The solution lies in employing advanced algorithms, computing power, detailed computer-driven decision-making, and extensive automation in execution.

This modern hands-off approach—often seen in tech companies—centers on the acute identification of predictive signals that cater to specific consumer demands, preferences, and needs. In this model, consumer data assumes an important role, becoming a cornerstone in processes designed to manage and respond to predictive signals. This methodology revolves around two core principles: the ability to predict with granular precision and the capability to automate responses effectively.

In today’s fast-changing business environment, where micro-operations and precise execution are increasingly becoming the standard, companies should work to adjust their strategies to improve competitiveness. Success often hinges on creating operations that are efficient and automated, as well as sustainable. This shift to micro-operations involves organizations moving from broad, large-scale decision decision-making to a detailed approach that embeds granular customer insights into each facet of the value chain. Ultimately, this shift is about becoming truly customer-centric, creating customer-centric operations, and doing so at a dramatically more granular level.

REVAMP OPERATIONAL MODELS TO BE MORE RESPONSIVE AND DETAIL-ORIENTED, ENSURING EXECUTION IS AS GRANULAR AS THE DECISION-MAKING PROCESS. 

The question businesses face today is not “why” to make this shift but “when” to do so. It’s important to recognize, however, that this transition represents a significant investment. Adding layers of complexity without simultaneously enhancing efficiency can spiral into diminishing returns on investment—a scenario detrimental to stakeholders. To navigate changes effectively, businesses should consider adopting the following strategies.

  • Broadening demand signal detection: Actively seek out and interpret a wide array of consumer demand signals, helping ensure a broad understanding of market needs.
  • Algorithmic analysis: Utilize sophisticated algorithms to reveal hidden predictive patterns within extensive, real-time data sets. This goes beyond gathering conventional insights and legacy decision-making processes.
  • Technological integration: Embrace the potential of AI and capitalize on data-driven operations and automation. These tools will likely be essential in guiding short-term adaptations and long-term transformations.
  • Operational agility: Revamp operational models to be more responsive and detail-oriented, helping ensure execution is as granular as the decision-making process.
  • Team development: Formulate teams that synergize human-centric skills with the analytical power of AI, creating a balanced and dynamic workforce.
  • Reimagining core systems: Transform core business systems into intelligent, integrated decision engines, and move away from traditional, passive transactional frameworks.

WE CANNOT OVERSTATE THIS FUNDAMENTAL CHANGE IN ECONOMICS OF
OPERATIONS, DRIVEN BY AI, DRAMATICALLY LOWERING MARGINAL COSTS.

Kasey Lobaugh, Consumer Industry Chief Futurist

Mass to micro in the market

The shift from mass to micro is already visible across the market:

  • A national restaurant chain adopting location-specific pricing for localized market demands.
  • A large apparel company using predictive signals to design and deploy market-specific store formats.
  • Soft drink companies offering a dramatically increased product ranges to meet niche consumer preferences.
  • A vitamin company producing custom vitamins to meet users’ specific gut-biome needs.
  • A hotel company developing a loyalty program with individualized offers and services.
  • A social media platform that serves up personalized marketing and recommendations.
  • A food and beverage company customizing a recipe for local tastes.
  • A grocery retailer offering curbside pickup, front-door delivery, and in-garage delivery.
  • A mass retailer deploying precision-level inventory based on predictive signals.
  • A large protein-based food manufacturer developing a brand of ecologically friendly poultry for a specific, targeted consumer.
  • An automotive company offering software-enabled, subscription-based vehicle customization for enhanced personalization.
  • A large bank developing a personalized private-banking suite of services.

This growing trend of mass to micro appears to the consumer as optionality. This change goes beyond simple personalization; it’s about deeply integrating customer-centric relevance into the core business philosophy and across all operations. The key to this shift lies in embedding precision, specificity, and responsiveness to consumer needs throughout the organization—not just in messaging and offerings. A key, though, is creating breakthroughs and building optionality while addressing margin costs of added complexity.

 

The mass to micro future

The consumer industry’s evolution from a mass-market approach to a more nuanced micro-focus necessitates a fundamental shift in the way businesses make decisions. Future operations likely will require a transformation from mass, periodic, manual, and reactive decision-making to a more dynamic model that is continuous, automated, and predictive. This shift signifies a departure from traditional, hypothesis-led strategies, ushering in an era of data-driven, real-time adaptability.

Embracing this change is more than a strategic choice; it is also likely an important move for sustained relevance and growth in the rapidly changing consumer landscape. The journey toward a micro-focused approach requires a broad reevaluation of operational processes, leveraging technological advancements and insights from vast data pools. This evolution marks a paradigm shift that is increasingly in line with the industry’s future trajectory: moving those organizations that adapt to the forefront of consumer engagement and market innovation.

This path, while challenging, offers a significant opportunity for businesses to refine their agility, develop innovative strategies, and excel in their market offerings. The leaders in this new era will likely be those who can effectively integrate continuous, automated decision-making with agile, real-time execution. By doing so, they can navigate the complexities of today’s market and potentially set new benchmarks for success in an ever-evolving consumer industry.

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1. Kasey Lobaugh et al., Buying into better: The future of the consumer industry, Deloitte, 2023.
2. Ibid.
3. Six forces shaping consumer markets and consumer industry | Deloitte US
4. The Annie E. Casey Foundation (AECF), “What is Generation Alpha?,” AECF Blog, updated January 19, 2024.
5. Kids Count Data Center, “Population by birth cohort generation and race and ethnicity in United States (2017–2022),” AECF, last updated July 2023.
6. Cheyenne DeVon, “Here’s Americans’ net worth at every age—for people under 35, it’s up 142%,” CNBC, October 28, 2023.
7. Jonathan Vespa, Lauren Medina, and David M. Armstrong, “Demographic turning points for the United States: Population projections for 2020 to 2060,” Current Population Reports, P25-1144, US Census Bureau (Washington, DC, 2020).
8. Elizabeth Dennis, “Women, wealth and investing—a story of evolution,” Morgan Stanley, June 28, 2022.
9. Vespa et al., “Demographic turning points for the United States: Population projections for 2020 to 2060.”
10. Cliff Saran, “Stanford University finds that AI is outpacing Moore’s Law,” Computer Weekly, December 12, 2019.
11. Meredith Somers, “How generative AI can boost highly skilled workers’ productivity,” MIT Sloan Management, October 19, 2023;
12. Ethan Mollick, “Secret cyborgs: The present disruption in three papers,” One Useful Thing Substack, March 8, 2023.

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