Industry Intelligence

Over the next three years, 83 percent of food, beverage and consumer product manufacturers plan to boost their investments in shopper marketing, a new report issued today by the Grocery Manufacturers Association (GMA) and global management consulting firm Booz & Co. has found. A majority of companies (55 percent) refer to shopper marketing as their No. 1 investment and will up spending by more than 5 percent annually.

A related report from GMA, management consulting firm McKinsey & Co. and The Nielsen Company found net sales for category-leading consumer product manufacturers increasing almost 3 percent more than the average growth for their respective categories, while those companies invested 8 percent less in sales operations than the category average. This report distilled the results of the 2010 Customer and Channel Management Survey, which has been conducted since 1978.

The first report, “Shopper Marketing 4.0 Building Scalable Playbooks that Drive Results,” additionally discovered that 62 percent of consumers check for deals digitally before at least half of their shopping trips. This finding points up the need to highlight the most effective shopper marketing strategies for engaging shoppers along the entire path to purchase, not only in the store.

“Shopper marketing presents boundless possibilities for reaching consumers in new and innovative ways,” noted Brian Lynch, director of sales and sales promotion at Washington-based GMA. “This study gives retailers and manufacturers an unprecedented resource that will assist them in the development of customized shopper marketing programs that yield measurable results.”

Additional findings include:

• When looking to increase brand awareness and consideration, platforms such as sponsored results and thematic content on manufacturer and retailer websites are most effective.
• In-store displays, deal platforms such as coupons and circulars, and personalized e-mails work best when boosting product trial and purchase is the objective.
• The most effective vehicles for building brand loyalty are digital: newsletters, word-of-mouth programs in social media, and virtual displays linked to search results
• Mobile vehicles are earlier in their lifecycle and display considerable promise across different objectives: barcode scanners for awareness, price comparison for action, and mobile commerce apps for loyalty

“Imposing order on the vehicle proliferation in shopper marketing is an important task, but shopper marketers shouldn’t lose sight of the crucial role that capabilities play in getting the most leverage from the vehicles at their disposal,” said Matt Egol, partner in Booz & Co.’s consumer, media and digital practice. “Even the most creative and insightful playbook cannot deliver ROI and brand health if the shopper marketing organization cannot successfully execute it.”

Offering findings and recommendations based on a survey of more than 2,000 shoppers; a survey of industry executives from manufacturers, retailers and shopper marketing agencies; and interviews with industry executives and analysis, the report is available online at www.gmaonline.org/publications and www.booz.com.

Meanwhile, the report based on the most recent Customer and Channel Management Survey “provides valuable insights that will help consumer packaged goods (CPG) companies develop and manage high-performance sales organizations, thereby enabling them to serve retail customers and ultimately consumers more effectively,” explained GMA’s Lynch. “The strategies uncovered through this study also highlight an important theme that is reflected throughout the industry: Winning companies remain committed to the continuous improvement of their innovation and collaboration capabilities.”

The 2010 survey concentrated on four major strands of customer and channel management: sales strategy, pricing and trade investment, customer collaboration, and complexity management. Winning practices were spotlighted in each of these areas independently employing a unique approach linking CPG companies’ self-reported customer and channel management practices with in-market results and financial performance.

“In terms of sales strategy, top-performing companies realized growth faster than their category peers by investing in their go-to-market models, aligning resources with high-growth channels, and upgrading sales leadership teams and strategic collaboration,” noted Kris Licht, a partner in New York-based McKinsey's consumer/packaged goods practice. “Looking ahead, more than half of winning companies said they will look to solidify gains by boosting field sales and merchandising resources.”

The analysis further found that in cases of strategic collaboration, high-performing manufacturers are searching far and wide for retail partnerships, but are ultimately selective, opting to work with those that offer the greatest potential to deliver returns. When they do take part in joint initiatives with retailers, the majority of leading CPG companies focus on growing the overall category, recognizing that a higher tide lifts all boats.

Complexity management is another facet of customer and channel collaboration probed in the study. Manufacturers’ efforts to meet retailers’ varying price-point, size and packaging needs have led to large, complicated product portfolios that must be carefully managed.

“It is no surprise that 96 percent of survey respondents acknowledge the challenges posed by vast SKU assortments and overall complexity in the marketplace,” observed Stuart Taylor, VP of custom analytics for Schaumburg, Ill.-based Nielsen. “There is known concentration at the top, with 25 percent of SKUs generating 80 percent of CPG sales, but the remaining 20 percent is not insignificant. The top performers are addressing these challenges by being disciplined about conducting their own SKU optimization exercises on a regular basis. And, while there are no firm rules, we find the top performers also limit the number of retailer-specific SKUs they produce to less than 10 percent of total SKUs.”

The 2010 Customer and Channel Management Survey ran in the spring of 2010. Almost 220 CPG executives from a record number of more than 50 companies with nearly $160 billion in U.S. sales took part. The full report can be found at www.gmaonline.org/publications, www.nielsen.com and www.mckinsey.com/cpg.