A Prescription for Resuscitating Growth for CPG Companies

Advances in Data, Insights, Analytics and Technology Enable a Personalized Shopper-Marketing Experience

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Robert Holston
Robert Holston
Despite advances in marketing analytics as well as the speed and precision that new technology affords in driving granular strategy and execution, many consumer package goods companies today continue to adopt a one-size-fits-all approach when developing portfolio, marketing, merchandising, pricing and promotion plans for their products.

While avoiding the complexity associated with granular execution has been the mantra for many companies eager to manage costs, today's performance leaders are embracing complexity and managing it better, faster and with more economic returns than ever before.

The dramatic economic shifts in the past 24 months have made the growth challenge for CPG manufacturers especially daunting. The rapid onset of recession caused shoppers to quickly redefine value, with a heavy skew toward low price. Today, as the economy improves, albeit unevenly, shoppers continue to redefine value. Retailers are clamoring for new innovation and shopper-centric programming, with precision down to clusters. Private-label expansion has stymied mainstream brand growth by enhancing the value proposition beyond price. Manufacturers continue to invest trade-promotion dollars to generate sales only to see a decreasing return on their investments.

Many CPG manufacturers continue to build market-based assortment, pricing and promotion plans to appeal to the market average. These plans typically reflect the desires of the brand, not the shopper. And as a result, only a very narrow band of shoppers actually receives the value proposition that will entice them to buy.

Other manufacturers have recognized the potential sales and share uplift potential of segmentation, but have failed to carry through targeting and segmentation strategies to the city, neighborhood and even household level, or they have not extended these strategies to all areas of the business, creating situations where one or more strategies is localized and focused, while others remain national and general.

The past five years has seen a refocus on the store as fertile ground for brand marketers with the advent of shopper marketing and the ability to leverage new insights and develop much more customized programs for customers. While the clear economic benefits from shopper marketing have been elusive for many, the true value of the past five years of the shopper-marketing craze just might be the mind-set change it has brought to CPG manufacturers in helping them migrate away from mass-market brand and execution.

The short-term costs may be higher in a granular approach, but the long-term ROI and competitive advantage have shown positive signs of abating the short-term economic risks. Advances in data, insights, analytics and technology have made the granular approach significantly more attractive to gain competitive advantage.

If every shopper walks in and feels like the shopping experience was created just for him or her, then manufacturers and retailer have created "the perfect store." CMOs eager to achieve the perfect store should consider the following approach:

Create a shopper-centric segmentation model
Developing a shopper-centric segmentation strategy begins with leveraging the power of store-level data to drive socio-economic and shopper/buyer behavioral segmentation.

Integrate both consumer and shopper understanding.
Marketers must go beyond socio-economic clusters to understand the shopper's mission and the consumer's actual buying behaviors, as well as the brand and package dynamics for each segment.

Conduct economic modeling
In conjunction with modeling performance drivers, managers must also conduct economic modeling to determine in advance how the manufacturer will earn required income and margins. Modeling should also identify the value brought to the retailer.

Plan for scale implementation
When planning the introduction of these new shopper-centric strategies, managers must think big, start small and then scale fast. Investing in the appropriate technology and data-analytics backbone will be key for scale. As multiple sources of data are required from syndicated sources, shopper and consumer insights, and retailer frequent shopper card data, an open data environment will aid in the rapid data integration and accelerate a company's ability to quickly produce actionable, granular insights.

Plan collaboratively
Collaboration with retailers enables both the manufacturer and retailer to gain better insights into the entire shopping experience, from the time the "consumer" researches products, to his evolution into a "shopper" as he enters the store, and finally to the time she reaches out and pays for a product she has selected.

Monitor and evaluate
Today's new technology and analytic platforms enable managers to effectively monitor and analyze the success of new shopper-centric strategies, almost in real time. Technology enables the ability to look at segment performance from multiple perspectives, from the brand manufacturer to the retailer and the shopper.

As today's economy emerges from recession, many questions about shopper behaviors remain. Investing in aggressive but carefully planned shopper-centric segmentation strategies now and enabling these with scale technology and analytics capabilities will significantly increase shopper loyalty and result in long-term sales uplift and improvements in business health.

ABOUT THE AUTHOR
Robert Holston is senior VP, SymphonyIRI Group
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