The sales practices of Europe’s leading consumer-goods companies
Our
survey of more than 100 sales executives reveals best practices in customer and
channel management.
Most consumer-packaged-goods (CPG) manufacturers in Europe today have to
maintain a tricky balance. On the one hand, they must continue to nurture
long-standing but constantly evolving relationships with major retailers, which
account for the bulk of their current business. On the other hand, they need to
pursue new (or newly important) channels such as convenience stores and
e-commerce, which have completely different characteristics and requirements
but offer the most promising growth opportunities in an otherwise stagnant
market.
In this increasingly complex retail
landscape, a handful of CPG companies have achieved above-average growth while
also outperforming peers on other financial metrics. What do these companies do
particularly well? As part of our multiyear global survey, conducted in
partnership with Nielsen, we asked more than 100 sales executives across Europe
about their customer- and channel-management practices.1Survey
respondents represented 43 country organizations in 18 CPG companies. By
analyzing survey responses and Nielsen data, we identified a set of
“winners”—CPG companies that posted higher sales and EBITDA growth than
competitors—and found that winners excel in part by keeping a sharp focus on
retailer collaboration, revenue-growth management, and omnichannel initiatives.
Build
collaborative relationships with key accounts
Winning CPG companies grew sales at a rate
of 6 percentage points above the category, even as they trimmed their selling
costs more aggressively than their peers. This is particularly remarkable at a
time when most CPG product categories are experiencing flat or falling prices
and little to no growth in Europe.
The survey results show that winners
invest in the highest-growth channels—in particular, discounters and
convenience-store chains, as well as e-commerce—and collaborate with important
customers in these channels. For instance, winning CPG companies work closely
with key retailers to gain a deep understanding of shoppers, improve outlet
coverage, and create customer-specific assortments and marketing programs.
Winners are twice as likely to collaborate with retailers on assortment
optimization; half of the winners (compared with only 8 percent of others)
create tailored pack sizes. Winners are three times more likely to develop a
joint space strategy and to refine planograms with retailers.
Furthermore, as retailers have invested
more in big data and analytics, winning CPG manufacturers have done the same.
They’re thus able to enter into mutually beneficial data-sharing agreements
with retailers and are better equipped to address longer-term strategic issues
and codevelop targets with retailers . Two-thirds of the winners (but less than
half of others) report having the analytical capabilities to make the most of
their data.
Use
advanced tools and analytics to excel in revenue-growth management
Revenue-growth management has become an
important building block in winning companies’ sales approaches. Winners are
more likely to use a broad mix of revenue-management tactics, such as raising
list prices, changing promotion intensity, or adjusting trade funding. By using
sophisticated pricing tools and advanced analytics, they can make faster,
better decisions than competitors. Indeed, close to 90 percent of the winners
maintained price increases over the past two years, and most of them did so
without having to adjust their trade spending.
Winners also increased net sales faster
than trade investments; some even managed to increase net sales while reducing
trade investments. Many winners attribute their success in this area to their
performance-based approach: specifically, they enter into performance-based
agreements with retailers based on predefined activities (such as assortment
expansion or new-product listings) and outcomes (such as volume or share
growth). Most winners don’t simply roll trade-investment levels forward from
one year to the next. Instead, they develop a clear and detailed understanding
of their trade investments, allowing them to better manage funds across
customers and channels. Winners achieve this transparency by investing in
advanced IT tools and solutions for trade-investment management and
optimization, and by having people on staff dedicated exclusively to
revenue-growth management.
Make
bold omnichannel investments
Omnichannel and online retail are at
different maturity levels across the major European markets, with the United
Kingdom and France the most developed. In the UK market, online food sales
account for 4.0 percent of total food sales; in France, the number is 1.5
percent; and in Germany, a mere 0.5 percent.
E-commerce’s share may seem negligible at
present, but it is poised to make big gains in the coming years. Winners have
invested ahead of the curve, and as a result the online channel generates a
higher share of their total sales (4 percentage points more than nonwinning
companies). Their online-sales growth rate is 19 percentage points above the
category. This healthy growth is largely the result of having a clear online
strategy with a long-term horizon, bolstered by strong top-management support.
Winners tend to focus their sales efforts more on multichannel retailers than
on pure-play online companies.
By being early entrants into the
e-commerce space, winning CPG companies have gained valuable insights into how
to activate online shoppers, curate an online assortment, and manage channel
conflict. For example, half of the winners—but only 20 percent of the
others—develop assortments tailored for e-commerce. Winners use the online
channel for both sales and marketing, with 75 percent of winners (and 20
percent of others) saying they’ve increased their online advertising and
marketing spend.
CPG manufacturers can’t afford to ignore best practices
in customer and channel management. It may be daunting for a low-performing
company to close the gap between its own practices and those of the winners; an
overhaul of processes, systems, and mind-sets may be necessary. But in Europe’s
low-growth market, the greater risk is to simply continue doing business as
usual.
By Simon Land, Stefan Rickert, and René Schmutzler
http://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-sales-practices-of-europes-leading-consumer-goods-companies?cid=other-eml-alt-mip-mck-oth-1611
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