Global customer and channel management: What
the best CPG companies do
To
excel in customer and channel management, consumer-goods companies must
emphasize different capabilities in different markets. Which ones matter most,
and where?
Consumer-packaged-goods (CPG) manufacturers
everywhere are facing rapidly changing market realities. Consolidation among
retailers and wholesalers is concentrating buying power in the hands of fewer
entities. In many countries, discounters are luring consumers away from
supermarkets and hypermarkets. Online players are steadily taking share. And
many retailers are building sophisticated capabilities in big data and advanced
analytics. In most categories, smaller and nimbler CPG competitors are growing
quickly, buoyed by rising consumer demand for organic products, local or
regional goods, and healthier options, as well as easier access to shoppers via
e-commerce.
Amid these challenges, large CPG companies can’t simply
manage their customers and channels the way they always have. Commercial
excellence requires new skills and more-advanced capabilities—but in which
specific areas? Which customer- and channel-management practices truly matter
to a CPG company’s performance today? To find out, we surveyed more than 250
companies across Asia, Europe, Latin America, the Middle East, and North
America. The survey results brought to light a set of must-have capabilities,
with nuances depending on a company’s geographic scope.
Regional champions
versus global giants
We examined what “winners” in customer and channel
management do differently from “others”—winners being companies that achieved
higher sales growth than the categories they play in, while also outperforming
peers on one or more customer- and channel-management metrics. We found that,
in every region, winners outgrow their categories by two to 16 percentage
points, even as they maintain lower sales costs. In Europe, for instance,
winners grow on average eight percentage points faster than others, and their EBITDA margins
are at least nine percentage points higher. In China, the sales-growth gap
between winners and others is even larger: 16 percentage points.
Like in our previous survey, we found that regional
champions are still outperforming global giants in
most geographies, albeit by narrower margins .
Global
best practices
Our analysis of the latest survey results indicates that
winners’ approaches to customer and channel management have become more
disciplined and systematic since our last survey. For instance, many companies
have either established a new center of excellence in customer management or
strengthened their existing one. Typically, this global customer-management
function oversees the development and rollout of tools and techniques, the
selection of solution providers (and, in some cases, of the solutions
themselves), and the dissemination of best practices across the organization.
Such a function can also give smaller markets access to data and solutions that
might otherwise be too costly to purchase on an individual-market basis.
Winning
consumer-goods companies pursue a set of global customer-management
imperatives: namely, they allocate resources to high-growth channels, form
“power partnerships” with their most important customers, hone their
revenue-growth-management (RGM) capabilities, use big data and advanced analytics
to generate detailed insights, constantly refine their route-to-market models,
and make assertive omnichannel investments. The relative importance of these
imperatives varies; some are more crucial for developed markets, others for
developing markets.
Of course, not every market follows this pattern precisely.
In China,
for instance, omnichannel retail is a much bigger factor than it is in other
emerging markets. And in developing markets
with a high share of modern trade—such as the United Arab Emirates—power
partnerships might play a more critical role in driving growth.
In general, winning companies everywhere prioritize the
following imperatives:
Build an ‘insights factory.’
Winners put big data and advanced
analytics to work in every aspect of customer management. By
developing an insights factory—a centralized set of analytical models, tools,
and processes—winning companies can automate data collection and integrate data
from a variety of sources (such as data gathered in the field by the sales
force, shared by wholesalers, or purchased from external agencies). The
insights factory can also conduct standardized analyses and generate
market-specific customer and shopper insights.
Maximize returns through RGM, powered by advanced
analytics.
Companies are increasingly making decisions about
pricing, promotions, trade spending, and assortment—the four main elements of
RGM—in an integrated way. Leading CPG manufacturers have launched global RGM
programs (or “net-revenue management” programs, as some companies call them)
and developed cutting-edge analytical approaches to RGM. For example, they’ve
deployed advanced tools and solutions for trade-promotion management and
optimization. They’ve integrated pricing and promotions, putting a single team in
charge of both, rather than treating them as separate capabilities that reside
in different parts of the organization. In addition, winning companies use big
data analytics to make pricing decisions. They create more accurate
price-volume-profit models to assess the impact of price changes or the
effectiveness of hundreds of individual promotions. And they’re applying these
programs not just to modern trade but also, increasingly, to the traditional
trade—for instance, by collecting data from the field more efficiently through
software-supported processes.
Winning in developed
markets
In markets where modern retailers dominate and
e-commerce is growing rapidly—markets such as Europe and North America—leading
CPG players focus on power partnerships and omnichannel management.
Overinvest in power partnerships with high-priority
customers.
In developed markets, winning companies are overhauling the
way they manage their key accounts. Many are
questioning the old markers of strategic partnership (such as category
captainship). Within our survey sample of CPG manufacturers operating in the US
market, category-management full-time equivalents declined 28 percent between
2014 and 2016. Companies instead chose to shift resources toward joint business
planning—for instance, by creating new commercial or sales roles with titles
such as “business-development manager” or “sales strategist.” These new roles
are designed to improve collaboration between the marketing and sales teams and
to ensure that insights from consumer and shopper research translate into
increased sales at the front line.
For these roles, analytical skills are crucial. Winning
companies have invested heavily in data, tools, and capability building to keep
their insights and knowledge on par with retailers and to retain their
competitive edge during negotiations. This enables them to transform
transactional relationships into true power partnerships; they can enter into
mutually beneficial data-sharing agreements with retailers and are better
equipped to address longer-term strategic issues.
Invest in omnichannel retail.
In North America, online sales now have a share of
approximately 10 percent. Western Europe is close behind, with 8 percent. These
percentages, although small, are growing by double digits annually.
Winners secure first-mover advantage by shaping how
their categories are sold online. They develop market-specific strategies,
ensuring strong buy-in from their leadership teams on key strategic decisions.
One such decision is how—and how
deeply—to partner with Amazon and other pure-play e-commerce companies;
another is how to do business with multichannel players. In half of winning
companies (versus only 13 percent of others), a central commercial team defines
the online strategy, with input from the local-market teams responsible for
execution. The central team also provides expertise and shares best practices
across the organization. Winners then tailor their assortment, merchandising,
and promotions to the online channel, and they support their online offer with
aggressive digital-marketing campaigns.
In the United States, winning companies currently invest
2.4 times more resources in omnichannel
retail compared with their peers—and they don’t look for an
immediate payoff. They recognize that success in omnichannel retail requires a
medium- to long-term investment horizon.
What matters most in
developing markets
In markets where traditional (or “fragmented”) trade
still accounts for a large fraction of total retail sales—such as Latin America,
the Middle East,
and much of Asia—winning
manufacturers are putting more emphasis on identifying pockets of continued
growth and optimizing their route-to-market models.
Allocate resources to pockets of growth.
Winners follow a clear channel strategy, prioritizing
pockets of growth within both traditional and modern retail channels. They
conduct in-depth analyses of channel trends and seek to develop accurate
forecasts of channel growth, even in data-poor environments—for example, by
mining transactional data from distributors and retailers or by leveraging
social media and other public sources of information. They also strive to
cultivate a detailed and up-to-date understanding of the cost-to-serve levels
in each channel and the factors that can push these costs up or down. In these
endeavors, global customer-management functions can be particularly valuable,
as they can share insights from other markets (for instance, in predicting the
trajectory for modern-trade growth).
Their rigorous analytics help winners to do a thorough
job in tailoring their product portfolio, merchandising, and promotions to
different channel requirements and to adjust their
resource allocations depending on expected channel growth and
cost-to-serve drivers. Winners also make sure to build the capabilities of
their sales organizations, equipping them to remain competitive amid
modern-trade growth and consolidation in fragmented trade.
Tailor route-to-market models to ‘microsegments.’
Winning companies regularly review and adjust their
route-to-market models (for example, direct store delivery or third-party
distribution) in each market to maximize sales per outlet and keep cost to
serve in check. They rely on microsegmentation of the outlets they serve, using
advanced analytics as well as more—and more forward-looking—criteria to make
such decisions. In China and Latin America, winners have cut the number of
distributors they do business with. Having a smaller network of strategic
distribution partners not only reduces complexity but also allows winners to
tailor their execution across microsegments. Sales reps follow clearly defined,
outlet-specific execution standards to reduce out-of-stocks, implement
planograms, and launch promotions. At many winning companies, global
customer-management functions take the lead in creating an approach for
defining standards and success metrics for each outlet.
Global functions also often help select the best vendors
for software and handheld devices in each market, taking into account unique
market situations and field-sales requirements. Winners continuously improve
the functionality of their customer-relationship-management and mobile
technologies to better track compliance, record in-store performance, and
generate shopper insights.
Chief customer officers (CCOs) at global CPG
manufacturers have full—and ever-expanding—agendas. As they seek to determine
their priorities, the framework we’ve outlined in this article can serve as a
starting point. Depending on a company’s footprint and growth ambitions in
developed and developing markets, the CCO can use the framework to decide where
to focus and which specific capabilities to build in which markets. Done right,
the payoff will be commercial excellence that sets the company far above its
competitors.
By
Kari Alldredge, Julie Lowrie, and René Schmutzler
October2017 https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/global-customer-and-channel-management-what-the-best-cpg-companies-do?cid=other-eml-alt-mip-mck-oth-1710
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