One of my tenants for good parenting is to understand that your child is likely moving at a much faster pace of emotion and intelligence than you did; and the continual challenge is to be out front of the issues and trends at least enough to be prepared to guide, counsel and nurture them as they move through each stage of life. We played with cap guns and toy soldiers – kids now play with HALO and wield Link’s sword in an all-to-realistic fantasy world of “Legend of Zelda.” Nothing is left to the imagination; and digital animation has created an entire generation of people who firmly believe that there are dinosaurs on the small islands off the coast of Costa Rica.
The Gen X’ers and Millennials have dragged the rest of us (sometimes kicking and screaming) into the digital age. As empowered consumers, we expect full inventories of the products we want all the time, easy shopping and buying online and having the precious purchase on our doorsteps the next day. The most current research shows that 80% of us begin our shopping searches online, however, more than 93% of us still like to walk into the store to purchase the product. This dichotomy of observations points to the ongoing challenge all suppliers and channels must identify and engage the interested consumer, incite their presence in their stores, convert them into a customer and retain them in their loyalty.
As a longtime analyst in the consumer goods and retail industries; I have seen what technology has done to change the way we do business. The pace of change is far slower than the adoption of technology, especially in the world of fast moving consumer goods. The old paradigms of consumer marketing and the accompanying business processes and technology we have had manage it have long sagged under the weight of go-to-market mandates to accommodate these new ways to reach the consumer. We are seeing an evolution in the Consumer Chain.
The Consumer Chain is the end-to-end business process loop that begins with the identification of the consumer and carries through the entire process of marketing, trade channel promotion, retail execution, analysis of everything that happened and back again to better understanding the consumer. The three main protagonists in this production are the consumer/shopper, manufacturer/supplier and the retailer. The primary functional components include the consumer profile databases, direct-to-consumer marketing campaign management, product assortment and category management, trade promotion planning and execution, retail merchandising and compliance execution, loyalty management, supply chain management, analysis and, of course, financial settlement. Each of these process components is critical to provide the consumer with the best shopping experience they can have. We have almost worn out the term “digital transformation” these days; but in fact, no other descriptor captures the challenges better for both retailers and manufacturer/suppliers. The impact of online shopping and the emergence of super sites like Amazon.com and eBay have forever changed the way we, as consumers, shop. Product, brand and store banner loyalty have eroded significantly and that most dangerous of addictions, the promotional incentive, has forced both retailers and suppliers to spend more on supporting price reductions than any other time in history. In the CPG industry, spending levels for trade promotion have reached as high as 30% of revenues; and there seems to be no end in sight.
For the manufacturer/supplier, the traditional ‘wall’ between sales (who has traditionally owned the trade promotion budget) and marketing (who owns the advertising, direct marketing and rebate budgets) is beginning to show cracks. CMO’s have long coveted the enormous wealth of the trade promotion budget, especially after seeing their own budgets drained each year to support continually increased mandates by the retail channel for trade spending. In my experience, this has certainly been the case for the past four decades. The justification has always been that marketing could never reach individual consumer/shoppers like the retailers, where the products are pulled off the shelf and passed through the checkout scanners. Naturally, therefore, why not spend the money on the most effective way to get the product sold?
However, while we readily admit that the modern consumer now has the power on their own devices to shop anytime, anywhere (where there is a signal) and have the products delivered to their homes the next day, that road travels both directions. The modern manufacturer/supplier can now reach the consumer one-on-one via those same devices. So, the future is here – a manufacturer or retailer can communicate directly to and with the consumer. If you consider the incredible array of knowledge we now have available on consumers through their direct marketing and shopping profiles, knowing who they are, where they are, what they want, what they DON’T want, when they want it and what incites them to buy gives the modern manufacturer/supplier and retailer the ability to go direct in a much more effective and intimate way. Complete marketing campaign management solutions are being consumed by both retail and CPG companies that leverage this data to create targeted and personal communications with response rates that are higher than any other medium in history.
With all these tools coming online, it is no wonder why we are seeing projections that the CMO will be a greater purchaser of technology than the CIO.
The truth is that the retail industry has had the upper hand in trade promotion planning; and that does not seem to be changing soon. However, speaking with a number of major retail chains across North America, I can also tell you that I have seen more willingness on their part to collaborate with the CPG suppliers around trade promotion planning than ever before. The retail marketing organization is increasing their interaction with the CPG’s to participate in more direct-to-consumer marketing events and promotions as well. Given the digital transformation on both sides of the channel, doesn’t it make you wonder how the future looks for consumer promotion?
Here’s an idea: Let’s take a page out of our parenting manuals and get ahead of the growth curve we are seeing. We should dispense with the current and historical dialogue and thinking and consider what our REAL futures will be. Then we can build an entire thought leadership strategy that not only prepares us for this coming of age, but enables us to drive it. In the coming weeks, I will be reaching out to many of you about joining an initiative that will ensure your own success in the Consumer Chain. I am excited about this and look forward to talking with you.