Consumers, retailers and science
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Sales organizations of consumer products companies have traditionally focused on satisfying retailers, but in the digital era, it’s consumers who rule. Consequently, consumer products companies and retailers are caught up in a tug-of-war over who “owns” the consumer. However, empowered consumers aren’t about to let anyone control them. According to this IBM Center for Applied Insights study – involving 356 senior sales executives at consumer products companies spanning 10 product categories – the most successful firms realize the best way of winning consumers’ business is to serve them as discrete individuals. This involves their sales organizations putting the focus on consumers, not just their retail customers, collaborating more extensively with suppliers and colleagues in other functions, and having enough analytical horsepower to make better sales decisions.
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Consumers, retailers and science
- 1. © 2013 IBM Corporation Consumers, retailers and science The 2013 IBM DemandTec global CPG marketing and trade study May 2013
- 2. © 2013 IBM Corporation CPG companies should concentrate on the one thing that can help them become more competitive and more profitable: the consumer Manufacturers and retailers have long vied for the upper hand Now the big retailers are getting even bigger and more powerful So CPG companies should focus on the one thing that can inform their product development, improve their operations, increase their competitiveness, enhance their relations with retailers and boost their profits: the consumer 2 Increasing power of food retailers Sources: Consumers International, “The relationship between supermarkets and suppliers” (July 2012); Niraj Dawar and Jason Stornelli, “Rebuilding the Relationship Between Manufacturers and Retailers”, MIT Sloan Management Review (Winter 2013), http://sloanreview.mit.edu/article/rebuilding-the-relationship-between-manufacturers-and-retailers/ US 10, 70% Canada 5, 75% UK 4, 76% Australia 2, 71% Country a, b% For a country; ‘a’ represents number of major supermarkets and ‘b’ represents combined percent share of food market held by the major supermarkets
- 3. © 2013 IBM Corporation CPG companies aspire to “own” a bigger share of the consumer relationship, but retailers have no intention of relinquishing control 3 CPG respondents claiming to “own” the consumer relationship CPG respondents expecting to “own” the consumer relationship within the next 2-3 years Retail respondents claiming to “own” the consumer relationship Retail respondents expecting to “own” the consumer relationship within the next 2-3 years CPG view on ownership of consumer relationship Retailer view on ownership of consumer relationship “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 4. © 2013 IBM Corporation And empowered consumers don’t want to be “owned” by anyone. So CPG companies need to understand consumers as individuals, but only a third of them have the analytical muscle to do this 4 Use analytics all the time Use analytics sometimes Use analytics infrequently/never Maturity in using analytics “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 5. © 2013 IBM Corporation To hold their own in the tug-of-war for the consumer, most CPG companies must also broaden their consumer focus 5 Responsibility for consumer strategy, advocacy and metrics sits in a single function in all but a quarter of CPG companies Who “owns” the consumer strategy, advocacy, metrics, etc. in the enterprise “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 6. © 2013 IBM Corporation We identified an elite group of CPG companies that lead the way on both fronts: consumer orientation and consumer analytics 6 Leaders have sales organizations that actively focus on the consumer and rely heavily on analytics to inform their decisions “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies Market segmentation for CPG companies Low High Low Useofanalytics Consumer focus High 16% 15% Leaders 41% 28%
- 7. © 2013 IBM Corporation Why does being a “Leader” matter? Because the “Leaders” deliver a better financial performance 7 “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies Leaders Others 60% Higher Stock Price CAGR Leaders Others Average stock price: cumulative annual growth rate (2009-2012) 16% 10%
- 8. © 2013 IBM Corporation And this small cadre of CPG companies has much more clout with retailers 8 Needing retailer’s approval to execute their plans 2.8xless Retailers pushing analytics back onto them and treating them as an outsourced market insight group 1.4xless Extended length of their annual planning processes 1.4xless Challenge for CPG companies Concern for challenge - “Leaders” compared to “Others” Concern for challenges from retailers “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 9. © 2013 IBM Corporation So what, precisely, are consumer-savvy, tech-smart Leaders doing differently? Most CPG companies have the right components . . . 9
- 10. © 2013 IBM Corporation . . . But only the Leaders actively collaborate internally and connect the pieces 10
- 11. © 2013 IBM Corporation In fact, they significantly differentiate themselves on three dimensions 11
- 12. © 2013 IBM Corporation12 Consumer Focus Collaboration (external and internal) Leaders Others 1. Consumer Focus 2. Collaboration 3. Analytics
- 13. © 2013 IBM Corporation Leaders have sales teams that are more likely to listen to consumers and use that input to shape their sales strategy and decision-making 13 “We are interacting more with consumers in many ways to understand their appetite. We will be focusing more on gathering consumer data to determine the changing trends of their buying habits.” (Australia, LE) “Sales carries the voice of the consumer to the company.” (US, LE) Sales organization is very highly focused on the consumer “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 14. © 2013 IBM Corporation Leaders also make much more effort to balance the needs of consumers with those of retailers – and start with consumers in mind “It is a collaborative effort and everyone has a voice but it has a balanced view because the consumer would like it for free and the customer wants to make a good profit as well as our company.” (Canada, LE) Factors critical to overall Sales success “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 15. © 2013 IBM Corporation Lastly, Leaders invest more resources in focusing on the consumer and use consumer-centric measures to gauge their success 15 Use of dedicated resources and measures for building consumer centric capabilities “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 16. © 2013 IBM Corporation16 Consumer Focus Collaboration (external and internal) Leaders Others 1. Consumer Focus 2. Collaboration 3. Analytics
- 17. © 2013 IBM Corporation Leaders collaborate much more. They collaborate externally with retailers – on everything from data analysis to product development 17 Consumer-focused collaboration with retailers Areas of collaboration with retailers “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 18. © 2013 IBM Corporation And they collaborate internally, across functions, with much closer links between Sales, Marketing and IT 18 “We are going to need more technology as part of future sales planning and strategy. IT will give us an opportunity to do our work more smoothly and quickly.” (Australia, LE) Collaboration between Sales and ITSales and Marketing functions jointly own the consumer relationship and the retailer relationship “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 19. © 2013 IBM Corporation19 Consumer Focus Collaboration (external and internal) Leaders Others 1. Consumer Focus 2. Collaboration 3. Analytics
- 20. © 2013 IBM Corporation Leaders not only have access to more data . . . 20 Access to data types “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 21. © 2013 IBM Corporation … they’re also more sophisticated in their use of analytics 21 Decision making is predominantly based on data and sophisticated analytics in the Sales organization Have staff dedicated to managing data and analytics “We are using structured shopper data, adding value to category analytics and using consumer centric data across different channels and functions. This helps us develop new products and innovations.” (Australia, LE) “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 22. © 2013 IBM Corporation And they rely much more heavily on analytics to inform their sales activities 22 Use of analytics to inform sales activities “Better mining consumer insights and better use of analytics to model future promotions and product introductions.” (US, LE) “Consumers, retailers and science" − the 2013 IBM DemandTec global CPG Marketing and trade study based on input from 356 decision makers in the sales organization of the CPG companies
- 23. © 2013 IBM Corporation23 Prescription
- 24. © 2013 IBM Corporation24 Contacts and additional resources Jon Busman is the Senior Market Segment Manager for Price, Promotion and Product Mix solutions for consumer packaged goods with 15 years’ experience in the consumer products industry across marketing, sales, category management and assortment. Jon is currently responsible for thought leadership, product strategy, industry relations, messaging and sales enablement for the IBM suite of consumer products offerings. Prior to working for IBM, Jon held management roles at The Nielsen Company. Jon may be reached at jbusman@us.ibm.com or on Twitter @namsub. Shubham Jain is a consultant with the IBM Center for Applied Insights. In his current role, Shubham focuses on the research, development and deployment of evidence-based thought leadership on emerging business and technology trends. He is particularly knowledgeable about “mobile money” and has worked extensively on the “ROI of Smart” program to help banking, telecom, chemicals and petroleum, and travel and transportation companies apply the principles of a Smarter Planet. Shubham can be reached at shujain3@in.ibm.com or on Twitter @shubjain. [LINK] to whitepaper
Editor's Notes
- CPG study Q11a. From your perspective, who exactly “owns” (for example, has more visibility of consumer behaviors and data ) the consumer? Q11c. And how do you expect this distribution to look in 2-3 years in terms of ownership (for example, has visibility of consumer behaviors and data)? Please distribute 100 points again Retail study Q10a. From your perspective, who exactly “owns” the customer ? Please allocate 100 points across the following (retailer/ manufacturer/ other entity) – you can use zero to indicate no ownership or 100 for complete ownership…your total must add up to 100. Q10b. And how do you expect this distribution to look in 2-3 years? Who will “own” the customer
- Q6a) Please rate the “maturity” of your approach to using analytics where ‘7’ is ‘we use analytics all the time’ and ‘1’ is ‘we do not use analytics at this time’.
- Q3b) Who “owns” the consumer strategy, advocacy, metrics, etc within your enterprise ? Sales Marketing A dedicated consumer group Shared Other, Please specify: _______________________
- Q8a_1 and Q6e Q8a. Please rate each of the following statements in terms of being critical to your overall Sales success where ‘7’ is ‘extremely critical’ and ‘1’ is ‘not at all critical’. 1. Understanding the voice of the consumer; focusing on what the consumer has to say to guide and inform Sales decisions, strategy and approach. Q6e) Please select one of the following statements that best describes your Sales organization. (READ; SELECT ONE) Our decision making is more ad-hoc and based on past experiences. Our decision making is primarily ad-hoc but some analysis of data in conducted. Our decision making is split evenly between ad-hoc and analytics. Our decision making is primarily made based on data and analytics, but some decisions are still made on an ad-hoc manner. Our decision making is predominately made based on data and sophisticated analytics
- The calculations are based on the publicly available data of various companies in the sample and does not include any private/or independent companies from the sample.
- Q1b) Please select 3 of the following challenges that you regard as the MOST significant ones currently impacting your company ’s Sales approach? Commodity price increases Integrating Channels and functions in an omni-channel world Difficult to streamline the supply chain Data and associated analysis is becoming exponentially greater Cost of trade/promotions Integrating data across different channels and functions Technology optimization – need to make better use of technology solutions and services Lack partnership/collaboration with retailers Maintaining retailer loyalty Obtaining retailer approval to execute plans/strategies Retailers are focused on reducing prices Increasing focus on price optimization Retailers often push analytics back onto our company Retailers limit access to consumer data and insights Shifts in the global marketplace impact supply and demand The length of annual planning processes Not using analytics effectively to generate insights that support decision-making
- Q3.a._4) Please select one of the following statements that most accurately describes your organization. Our sales organization is not focused on the consumer at all. Our sales organization is somewhat focused on the consumer. For example, data and insights regarding consumers are incorporated into key business decisions and activities less than half the time. Our sales organization is highly focused on the consumer. For example, data and insights regarding consumers are typically incorporated into key business decisions and activities more than half the time. Our sales organization is very highly focused on the consumer. Data and insights regarding consumers are incorporated into all decisions and activities.
- Q8a _2,3) Please rate each of the following statements in terms of being critical to your overall Sales success where ‘7’ is ‘extremely critical’ and ‘1’ is ‘not at all critical’. 2. There is an alignment with the consumer, decisions are driven from the bottom-up, not completely by customer ’s (retailer’s) top-down needs 3. Finding and maintaining a balance between the needs of consumers and customers (retailer).
- Q5a_2,4,5,6. Thinking about consumer-centric capabilities and their place within your company, for each of the following, please indicate if it is something you are currently doing, starting to pilot or test, you plan to do it in the next 18 months, you plan to do it, but not in the next 18 months, or you have no plans to do it. 4. Consumer-centric capabilities are measured using a dedicated set of metrics. These metrics drive investment and decision making 5. There is a dedicated budget for building, measuring and improving consumer-centric capabilities 2. There is a dedicated team or an individual for managing consumer-centric capabilities within the Sales function 6. Business leaders have skills and are trained in understanding consumer needs. There is a dedicated pipeline for future consumer-centric leaders
- Q8a_5) Please rate each of the following statements in terms of being critical to your overall Sales success where ‘7’ is ‘extremely critical’ and ‘1’ is ‘not at all critical’. 5.Instilling more consumer focused collaboration between CPGs and customers (retailers). Q6i_6, 9, 5, 3) Please rate the level of collaboration between yourself and your customers (retailers) with regards to the following areas using a 1-7 scale where ‘7’ is ‘collaborate a great deal’ and ‘1’ is ‘no collaboration’ at all. Promotional activity strategy Product development strategy Development of consumer insights Data analysis
- Q5a_1) Thinking about consumer-centric capabilities and their place within your company, for each of the following, please indicate if it is something you are currently doing, starting to pilot or test, you plan to do it in the next 18 months, you plan to do it, but not in the next 18 months, or you have no plans to do it. 1. Blending/collaboration of Sales and Marketing functions where both have shared customer and consumer ownership Q9c_7,8) For each of the following, please indicate if it is something your company ’s Technology/IT function is currently doing, starting to pilot or test, plans to do it in the next 18 months, plans to do it, but not in the next 18 months, or has no plans to do it. 7. CIO has robust and collaborative relationships with other stakeholders in Sales and Marketing functions 8. Tech/IT function collaborates with Sales function on investment decisions for technology including determining the ROI and making justifications for future technology investments
- Q6h) Which of the following types of customer/customer data do you have access to? Point of Sale (POS) Data Purchase History Syndicated data (Nielsen) Panel Data Loyalty Program Data Other ______________________
- Q6e) Please select one of the following statements that best describes your Sales organization. Our decision making is more ad-hoc and based on past experiences. Our decision making is primarily ad-hoc but some analysis of data in conducted. Our decision making is split evenly between ad-hoc and analytics. Our decision making is primarily made based on data and analytics, but some decisions are still made on an ad-hoc manner. Our decision making is predominately made based on data and sophisticated analytics Q14b) Do you have staff dedicated to managing data and analytics? Yes No
- Q6b_2,3,4)Please rate each of the following statements in terms of how critical it is to your company implementing a successful Sales approach where ‘7 is ‘Extremely critical’ and ‘1’ is ‘not at all critical’. 2.Category analytics – for example, turning data from multiple sources like point of sale data and online transaction data into actionable insights to improve new product launches/product innovation and promotions; merchandising mix and availability at a store; and product placement at retail 3. Using analytics to shape pricing and promotion decisions; understand consumer reactions to them 4.Using different analytics like pricing or predictive analytics to inform decisions about Distribution, Shelving, Merchandising, and Pricing (DSMP) Q6f_1,4) Which of the following best describes how you are currently using analytics? (READ; SELECT ALL THAT APPLY) Understand historical and current consumer environment Plan future actions Predict future outcomes Optimize decision making based on business rules logic