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With increasing options and the rise of private labels, competition is fierce in consumer packaged goods (CPG). Increase your shopper relevance to position your company for growth.
Building a broad base of competitive advantage
The road ahead for consumer packaged goods (CPG) companies is an uncertain one, especially as competition from private label and other products continues to intensify. This volatile environment is challenging companies across multiple fronts: costs, expansion of digital channels and capabilities, innovation and product development, marketing, and merchandising and sales execution.
Private label products have become increasingly popular in recent years, in part due to the appeal of goods with lower price points during difficult economic times. Recent Accenture research—the Accenture 2012 Store Brand Survey, which sampled more than 500 US consumers about their aOtudes toward store brands as well as national brand products—has found that more than half of consumers surveyed (58 percent) believe that their spending power will not have reached pre-recession levels even by this time next year.
Traditionally, consumers have been skeptical about the quality and efficacy of private label products, but those barriers have eroded to the point that private label is much more of a threat to CPG companies than ever before. Major CPG products still have, at this point, a brand advantage, but as private labels increase in sophistication—in the products themselves and the way they are marketed—consumers are more likely to see them as just another brand, not a “generic store label.” Indeed, our research also found that 50 percent of consumers buy private label products because they perceive the quality to be just as good as named brands.
What can CPG companies do to strengthen their ability to compete against private label? Accenture believes that the battle for consumers is actually being fought on the battlefield of “shopper relevance.” Increasing the ability to be relevant to shoppers requires a broad range of capabilities:
In each of these areas, CPG companies have advantages they can build on to improve their positioning and performance against private label products. CPG companies have the scale, the R&D budgets and the global infrastructure that can give them an edge in the marketplace. They have the ability to extend the emotional connection that consumers feel toward their brand over a private label alternative.
This paper explores these advantages in more detail and discusses how CPG companies can use their edge to increase market share against competitors.
Understanding shopper preferences: The importance of predictive analytics
CPG companies have typically been focused on assessing and understanding historical performance: What was the distribution? What was the price gap to private label? What was the promotional lift? That backward-looking perspective is no longer sufficient by itself. Today, CPG companies need to Page 7 of 19 develop more predictive capabilities. They should work to understand the purchasing patterns of the shoppers that frequent their major retail partners’ stores and develop insights into the decisions shoppers make.
Advanced analytic modeling capabilities can give companies the ability to predict shoppers’ reactions to changes in assortment, shelf-space, price and different promotional tactics. Some leading manufacturers are also using advanced analytics to optimize assortment, price and promotion to improve their performance as well as their trading partner’s category performance.
These CPG companies are moving beyond the “what happened” to the “what’s next” and achieving superior competitive performance. Some top-performing CPG companies are beginning to work with retailers to develop specific assortment, price and promotions by shopper segment and related demand- based store clusters. These retailer store clusters are derived from advanced analytics that aggregate stores into clusters based on similar demand patterns. Shopper segments are then overlaid on top of these clusters to understand what segments are driving those patterns. Such analysis can now be performed down to the store/category/SKU levels.
Many CPG companies find it difficult to conduct this level of analysis. One of the challenges is that many companies do not have mature capabilities in consumer segmentation that can generate actionable insights. Companies need the ability to understand, at a more granular level, the recent purchasing history and interests of shoppers, as well as what they are likely to buy next.
Today, most CPG companies’ consumer segmentations are done at the brand level on a national basis with primary market research analyzing consumers’ stated needs and attitudes—not their actual in- store purchasing behaviors. A new generation of segmentation capabilities enables manufacturers to look at transaction data from the retailer and analyze shopper segments based on differing purchase behaviors at the relevant category level. This is what enables the development of assortment, price, promotion and planogram tactics by retailer store clusters that have a predominance of a specific shopper segment.
CPG companies that have deployed predictive analytics modeling and optimization have achieved anywhere from a 1 to a 5 percent increase in sales and a 10 basis point to 800 basis point increase in gross profit margin.
For example, one beauty products company was finding it increasingly difficult to determine which of its extensive range of products were yielding the best sales and profits, and to allocate resources accordingly. The company was looking to improve business performance through an assortment optimization initiative driven by analytics. Working with Accenture, the company established the attributes of particular products that attracted buyers—and how those attributes could be transferred to other, higher-margin items. The project team also used time-series regression analysis to analyze category-level trends. The team identified potential benefits of more than $200 million, in part because analysis showed that the company could reduce its product porcolio by 30 percent without any loss of sales.
Reaching that level of insight requires a manufacturer to have advanced analytics capabilities and tools. Being able to act on new and differentiated insights requires effective end-to-end planning and execution that can rapidly transform insight into action. Here, CPG companies have an advantage over retailers and their private label brands. CPG companies can leverage their size and cross-channel/retailer access to consumption data and other information resources to develop predictive capabilities that most private labels cannot afford or gain access to.
Predictive analytics and optimization can result in the discovery of patterns and groupings in data that are more detailed and insighful and enable the development of recommendations, decisions and actions that significantly improve performance. Through data collection, modeling and statistical analysis, predictive analytics tools can deliver more objective and actionable shopper segmentation insight—a-data/fact-driven picture of what shoppers’ behaviors and purchase patterns are—which can drive better campaigns, improved cross-selling opportunitiesand longer-term loyalty. As a CPG company’s analytics sophistication grows, it can reach a point where real-time recommendations are delivered about the product assortment and the associated price, promotion and planogram tactics that will attract, retain and maximize the profit contribution from a particular consumer segment at a specific retailer’s stores.
Predictive analytics can also improve decision making about merchandising, pricing, inventory, store labor needs and suppliers. Infusing the organization with consumer insights and shopper data through an advanced analytics capability that can help all functions and business units collaborate to improve customer loyalty and value. This means that, in an integrated fashion:
Having these capabilities in place enables a CPG company to better understand how its products stack up against a consumer’s basket and lifestyle relative to competitors and to a retailer’s private label brand. It enables the manufacturer to take action with vetted tactics that have a high statistical probability of improving its brand performance relative to private label brands. Interestingly enough, in many situations these analytics oven show that deploying different tactics for both the manufacturer’s brand and the retailer’s private label brand can improve performance profit contribution for both parties—a win-win situation.
Creating products and campaigns that appeal to shoppers’ emotional and aspirational values
The emotional component of a brand must be carefully calculated and nurtured, and then used to improve shopper relevance. Although consumers validate their purchase decisions based on rational attributes, the desire to consider purchasing a product, or to engage in repeat purchasing, is linked to emotional connections. These connections stem from personal beliefs or perceptions of the brand/product, based either on personal experience with the product, or on advertising and marketing.
As cognitive anthropologist Bob Deutsch has written, “People react much more emotionally than companies dare to think. Purchasing decisions are never driven by logic alone. Emotion and narrative are key; they are the very structure of mind and of human nature. All successful marketing campaigns—whether using primeval or post-digital technologies—have responded to this phenomenon.”1 So, although understanding product attributes is an important, rational component of marketing and branding, equally important is understanding emotions, aspirations, values and trust.
CPG companies are increasingly embracing social marketing channels, in part because of the power of such platforms to create stronger emotional bonds with consumers. For social media to be effective, however, companies must use more scientific approaches in planning and evaluating such campaigns: analyzing and categorizing followers of their social media channel; rewarding those followers appropriately to create true product advocates; and then analyzing and optimizing the social media campaigns themselves.
Another important issue related to emotion is trust. It has long been an assumption of CPG companies that their brands have an edge when it comes to inspiring trust in consumers, especially around quality. This is one factor that has undergone change in recent years, to the point that CPG companies can no longer take it for granted. In fact, 42 percent of the consumers participating in the Accenture 2012 Store Brand Survey affirm their trust of private label brands as a reason for purchasing. Comparing the trust factor of national brands and private label brands, much depends on the associations in consumers’ minds with the store itself. For example, if a consumer is especially driven by the need to trust in the organic dimension of a product and the assurance that sustainable practices were followed in the product’s creation, it may well be that a “Whole Foods” brand or “Trader Joe’s” brand might well inspire greater trust.
The trust component of product differentiation must now be front of mind for CPG companies as they formulate and execute a brand strategy. Trust is not necessarily an overriding factor for every product and every shopper’s purchasing decision. But companies must do the necessary analysis to determine which products have a high trust barrier and then design sales and marketing initiatives accordingly. In the end, trust must be demonstrated and earned over time not only in marketing images and verbiage but in quality and experience.
A related idea is that people are not just about what they are or do, but about their aspirations or their image of themselves. Consider that, although consumers’ eating behaviors are oven not aligned with sound nutritional concepts, their shopping behaviors oven speak to their intentions or ideals to “eat healthier.” So, for example, Campbell’s has had significant success with its Healthy Request® soups, products that have even received certification from the American Heart Association. Campbell’s and the AHA promote the products (and a heart-healthy lifestyle) through a joint Facebook page called “Campbell’s Kitchen.” The company shares healthy recipes and enables community members to share ideas and their own recipes, as well.2
In general, these efforts to appeal to emotions, aspirations and values can result in a brand being taken very deeply into the daily life and consciousness of the consumer in a way beyond a particular product—something difficult and perhaps impossible for a private label brand to match.
Driving product relevance by more effectively harnessing the power of innovation As noted, CPG companies generally have R&D capabilities and budgets against which a private label brand has difficulty competing, so a great deal of focus should be placed on innovation—in products, packaging and operations. The following are especially important areas to bear in mind.
Taking a more disciplined and industrialized approach to innovation and product development
At the highest level, CPG companies need extremely disciplined methods and processes so that innovation is not a serendipitous or occasional outcome, but rather something planned and executed like any other function or capability.
A.G. Lafley, former CEO of Procter & Gamble (P&G) and an influential thinker and writer in the area of innovation, has expressed this point well. In his book, The Game Changer, he wrote: “To succeed, companies need to see innovation not as something special that only special people can do, but as something that can become routine and methodical, taking advantage of the capabilities of every employee.”3
An important aspect of this routine is developing a predictable approach to locating and commercializing innovation. In our experience, the following are important keys to success in developing an industrialized innovation capability:
Several major CPG companies are approaching innovation in a much more industrialized fashion. Colgate-Palmolive, for example, has established nine Category Innovation Centers around the world, each responsible for developing new products based on insights into consumer behaviors. The company also has a Global Innovation Fund that provides seed money to selected projects submittedby employees across all business functions.4
Funding and harnessing innovation in more methodical and predictable ways is something private labels have great difficulty imitating.
Embedding unique alributes and intellectual property in a productCPG companies are increasingly integrating their intellectual property (IP) strategies and brand strategies to drive the creation of science-based, IP-protected products. One well-known example of such a product is Tide Coldwater, the laundry detergent. P&G scientists designed the product to provide cleaning capabilities in cold water comparable to the results from washing in hot water. So, for a product often seen as commoditized, P&G has been able to deliver an innovation that has enabled it to sell the product at a modest premium. In North America alone, the brand has added millions in annual sales.5
In recent remarks before the US Senate Environment and Public Works Committee, Len Sauers, Ph.D., Vice President of Global Sustainability for Procter & Gamble, spoke of the unique blend of science and consumer research at the heart of this kind of product: “Beyond the consumer insights, solid science is at the heart of our strategy. Using a disciplined scientific approach can include a lifecycle assessment of a product... We combine two key strengths, consumer understanding and science, to deliver sustainable innovations that do not require trade-offs in performance or value.”6
Driving more effective product creation through collaboration and open innovation
With the mindset that ideas and solutions can come from anywhere, open innovation is now a recognized method for harnessing capabilities outside the “four walls” of a company. Companies like P&G and Colgate-Palmolive that have been successful at opening up their innovation engines have leveraged a variety of outside entities, including:
A number of CPG companies have created open innovation placorms as a means of encouraging open innovation. Germany’s Beiersdorf, for example, has created such a platform, called “Pearlfinder.” The platform offers opportunities to share ideas, and to provide education based on the considerable knowledge the company has of skin and beauty care.
The platform has built-in protections to inspire trust among collaborators. Every registered community member can offer ideas without worrying about misuse.
By registering with Pearlfinder the user enters into a confidentiality agreement with Beiersdorf.7
A related point when it comes to leveraging broader pools of innovation has to do with tapping into the collaborative diversity of being a global corporation. In a recent report called “The Power of Diversity,” Bayer Healthcare—a global company with four divisions—explicitly notes the power of its ability to bring people from all over the world into conversation, tapping into the diverse, innovative strength of its employees.
In addition to a better understanding of customer requirements, an enhanced image and greater appeal as an employer,“business case diversity” is also gaining importance in day-to-day business: the more diverse the workforce, the greater the creative potential released through cooperation. Working together, men and women, different age groups and nationalities, and people with different ways of thinking can have a more well-rounded approach to challenges and may find solutions which would not have even occurred to a group with a more homogeneous composition.8
Spurring innovation in packaging and design Increasingly, packaging and design are being seen as core functions in overall brand building. Industry leaders are taking distinctive steps to understand shoppers’ interests and attributes and then incorporating those into design principles.
For example, P&G now has a design andbrand-building organization that has moved beyond a function-specific orientation to take more holistic, consumer-entric approach. The company’s Febreze Home Collection is one product coming out of this kind of alignment between design and marketing. Designers spent considerable time interacting with consumers in their homes and in stores to understand their needs. Since launching the line, P&G has gained two share points in the air freshener category.9
A couple of drivers are especially pertinent in creating this interest in design. One is simply the power of in-store marketing on the actual product itself. Recent research by Bases (a Nielsen company) has found that in-store marketing beats television as the leading medium to build brand awareness for new products in several markets, including the United States.10
Another driver is a recent store trend oven called “clean store” policies, where stores restrict or eliminate point-of-purchase displays and dictate packaging components to increase overall eco-friendliness. So, effective design is now essential and a major target of CPG innovation.
One hot trend in packaging and design is the pouch, an innovation being leveraged by companies such as Campbell’s Soup Co. and H.J. Heinz Co. The size of pouches can enable more varieties of brand communications, and pouches can also keep products fresher, longer. Pouches can cut packaging costs by 10 to 15 percent, and can also save on shipping costs. The lower costs mean that CPG companies can reduce prices to compete more effectively with private label products.11
Speeding products to market and to the shelfNew product development in the CPG industry is often too slow. Companies need to leverage data on consumer expectations and the competition to more quickly identify new products and then manage their supply chains to get these products to market at the right places around the world at the right times. In other words, “speed” means both faster innovation and faster time to get products on shelves.
One important area for CPG companies to pursue is something oven called “fast innovation”—a process for helping companies reach the marketplace fast enough so differentiated products can earn higher margins for a longer period of time, and then enabling the company to continuously work toward the next generation of products when the currentone becomes commoditized.
Using leading-edge proprietary tools and methods of fast innovation, companies can facilitate diagnosis and resolution of variation and inefficiencies in their innovation processes, resulting in faster speed-to-market and potentially up to a 50 to 80 percent reduction in new product and service development lead times.
However, the fastest product innovation and development in the world does not matter in the end if products are not delivered faster to inventory and to store shelves. Here, many CPG companies do not perform optimally for a variety of reasons. One is that many companies operate with a high level of local autonomy, so local or regional leadership have goals that may not always be in alignment with general distribution goals.
Companies need to ensure their pipelines are not siloed in headquarters but instead have a regional pipeline where people work together and agree on launches and rollouts, all aligned through the entire supply chain. Having R&D, marketing, sales and supply chain at the table at the same time also can ensure the pipeline is managed more effectively.
One CPG company thatexcels at this kind of coordination is Reckitt Benckiser. One key to success is that the operating units are measured in terms of whether particular SKUs are on shelf in sufficient numbers at the right time. In this way the company keeps individual units and locations in alignment with global plans.
Expanding into emerging markets
Recent data indicates that,by 2020, emerging markets will account for more than 60 percent of the global expenditure on food and nonalcoholic beverages. What is important, however, are products tailored to the unique needs of consumers in those emerging markets. Companies cannot just try to sell the same products in developing countries that they sell in industrialized nations, but must deliver on localized tastes and shopping formats.
CPG companies have the opportunity to leverage their innovation and scale to meet the distinctive needs of these shoppers in emerging economies, something store brands in most cases cannot match. Success in this area will require substantial work in the area of consumer analysis, discussed earlier, a more challenging task given the predominance of largely rural consumers in many emerging markets.
L’Oréal, for example, has stretch goals of growing its consumer base by one billion people. Its announced research mission, therefore, depends on an in-depth knowledge of the culture, needs and preferences of consumers in countries like China, India and Brazil. With the consumer at the heart of research and innovation, L’Oréal has decided to create a “Consumer Insights” International division as well as regional research and innovation hubs in areas like Asia.12
Companies also needan effective strategy for reaching consumers at the so-called “bottom of thepyramid.” In many cases,the avenue to reach such consumers requires an integrated sustainability strategy. For example, some CPG companies have been successful in pursuing an approach that involves overall development of low-income farming families in emerging nations, including technical and business training and transfers of technology. This approach raises the overall standard of living in the area (helping to create a new middle class of consumers), while also reducing costs and improving local access to higher-quality product components.
Creating effective multi-channelconsumer interactions
Leading CPG companies are working to improve their capabilities to increase shopper relevance across all types of interaction and to build the right platforms to enable increasingly effective interactions over time. E-commerce and mobility are critical channels, for example, as consumers’ use of digital and social channelsis growing exponentially.
Consumers are becoming increasingly comfortable purchasing consumer packaged goods online. This growth is affecting how shoppers interact with companies, as seen in the shrinking size of brick-and-mortar stores. One study found that there has been a 56 percent reduction in square footage from 2005 to 2010.13 Yet, shopper touchpoints are increasing as more online and social networking capabilities come into existence. Even traditional touchpoints such as the vending machine are seeing a resurgence in environments such as airports and malls.
In the wake of the increased access to shoppers via multiple channels, especially digital ones, comes a host of nimble competitors who are not just adapting to the online and mobile world, but were born into it. Consider the growth of Pinterest, which enables social media users to organize and share with friends interesting things they find on the web. MajorCPG companies have taken note of the power of this social media platform. Other important examples of the power of digital media include AmazonFresh’s newuse of channels, Shopkick’s loyalty solutions, and Tesco’s new access model that enables mobile shopping in subway stations. All in all, these new entrants are helping to redefine the path to purchase, and can constitute a major threat to CPG companies.
One issue CPG companies have had is that they have invested millions of dollars in their brand websites and new social media capabilities, yet they are uncertain about the extent to which their websites are influencing brand purchases in stores. To help CPG companies better understand these influence points, Accenture, comScore and dunnhumbyUSA collaborated on an important research study exploring the link between consumers’ usage of brand websites and their brand purchases in retail stores.
The study found that:
The study also concluded that to maximize impact, the most important website features include compelling brand value messaging, frequent content updates and content that engages visitors such as promotions, philanthropic appeals, product demonstrations, recipes, surveys and downloadable applications and games.
Enabling easier mobile commerce also supports CPG companies in selling directly to the consumer, bypassing the retailer entirely, which can become a critical element of competing more effectively against private label products.
Influencing changes in consumer aOtudes about online purchases of consumer packaged goods will be important, however. The Accenture 2012 Store Brand Survey found that 42 percent of consumers would not consider purchasing products from a CPG manufacturer’s online store. A reluctance to pay for shipping was the primary sticking point for three-quarters (74 percent) of shoppers. It may also be critical for CPG companies to collaborate with major online retailers rather than attempt to build their own Web distribution capability.
Establishing a multi-channel digital marketing platformAs shoppers’ adoption of digital technologies and social media continues to grow, so has their desire for “super-connectedness,” their knowledge of products and competitors’ promotions, and their expectation for on-demand access to information. CPG companies will need to respond to these needs to increase shopper relevance across all channels, helping to differentiate their company and improve brand equity.
A critical part of maintaining this super connectedness is through dialogue marketing—an approach that promotes and maintains highly relevant shopper experiences. By enabling a consistent, high-quality experience of a CPG brand across channels, companies can establish an ongoing dialogue with consumers that binds them closer to the brand while also capturing important data, enabling companies to offer values unique to particular customers. Shoppers are more likely to buy a branded product because they have a consistently relevant and positive experience with the brand. Whenever shoppers interact with the company, their needs should be recognized. The company needs to adapt to shoppers’ contexts, respect both their needs and their privacy, and take action on the consumer’s behalf.
Driving execution excellence at the point of purchase
The final key to success in increasing shopper relevance is to deliver an optimal shopper experience at the point of purchase. A lot can go wrong in that short time period just before a “shopper” becomes a “buyer” and the best brands must execute flawlessly at that point of purchase.
Here again, an analytics-based understanding of the shopper also drives point of purchase techniques and strategies. Companies that master shopper analytics know where the hot points are for the most desirable consumer segments, and they work especially hard to make sure the important products are stocked at those store clusters. This also then means companies can better prioritize where they are making investments, understand where they need to focus their supply chain efforts, and determine what kinds of discussions with retailers and merchants need to happen.
The focus, in other words, is on where the high priority consumers are.
Pricing and promotion
A critical capability needed by CPG companies, discussed earlier but important enough to warrant additional specific focus, is more statistical and fact-based price and promotion optimization. Companies face numerous challenges in performing that optimization. Retailers typically do not have a good understanding of price elasticity and purchasing motivations. Once branded manufacturers price products, retailers will price based on their view of the appropriate price differential. This results in a vicious cycle, ultimately driving down overall category sales and margins for both the manufacturer and the retailer.
Another obstacle is an unclear pricing strategy, where price and other deal elements are not clearly aligned with business goals and shopper purchasing patterns. Analytics capabilities oven lag as well, meaning a company lacks up-to-date transactional-level profitability analytics, as well as the data needed to make informed pricing decisions. Uncontrolled price execution can also be a challenge— insufficient pricing control and accuracy at the point of sale, which can be rooted in a retailer’s unclear governance structure and inadequate data infrastructures.
The good news, however, is that pricing best practices can drive improved performance relative to these challenges. Pricing is the biggest profit improvement lever available to CPG companies, since increases in price drop directly to the bottom line. Pricing optimization technologies are mature and readily available to improve pricing based on retailer and consumer purchasing patterns.
To achieve pricing excellence, companies must focus on four key elements: strategy, process, people and technology.
Through working with clients on improving their pricing and promotion effectiveness, Accenture has seen CPG manufacturers significantly increase profit contribution. Both price and promotion represent the largest value creation levers for CPG manufacturers, especially when, on average, 15 to 20 percent of sales are invested in trade promotion with, frequently, an inadequate return on that investment. With advanced pricing and promotion optimization analytics, and the ability to more quickly translate the associated insights into action, manufacturers have the potential to increase their return on sales anywhere between 2 and 4 percent.
Considerable emphasis must be placed on an organization’s ability to translate insight into action efficiently and effectively. The best analytics and insights in the world will not necessarily improve performance unless an organization’s end-to-end processes, decision frameworks, organization structure, roles, responsibilities and accountabilities are appropriately aligned to drive action with retailers at speed. Advanced analytics must be implemented with an eye on how to simultaneously change the way business is conducted; if this is not done, companies are likely to realize less of a return on their investment.
In-store sales executionIn-store sales execution is a critical issue for CPG companies and can be instrumental in increasing the ability to deliver based on shopper relevance. The Accenture 2012 Store Brand Survey found that almost one-third (32 percent) of shoppers decide what to buy at the store shelf when they see the products and deals.
A challenge for CPG companies that are not direct-store delivery players is something sometimes referred to as the “last nine yards”—that is, the distance from the storage room to the shelf. In many stock-out situations the problem is not with the manufacturer’s supply chain or delivery capabilities, but rather with geOng the product onto the shelves from a back room. The manufacturer’s status report will show that the product has been delivered; it just won’t actually be somewhere that a consumer can find it. This problem is especially vexing with products that do not spoil and have a long shelf life, meaning store managers feel less urgency with moving it out of storage.
In some cases, CPG companies have analyzed this last nine yards challenge and decided that it is worth an investment to either increase the size of the sales force or turn a portion of the sales team into field merchandisers. Companies can also work more extensively with brokers so that the company has an increased presence in the stores, working with store/department managers to make sure that the product is out of the back room and onto the shelf.
Retail execution specialists manage store sales execution through four primary levers applied to shelf and off-the-shelf merchandising.
The primary focus is to ensure that the plans developed to drive both brand and retailer category performance are being executed—or, alternatively, that those plans are adjusted in real time based on the dynamics that are playing out at shelf.
Innovative digital merchandising solutions are available today that can improve in-store sales execution. One innovative approach enables headquarters’ sales strategy and planning functions, as well as Page 17 of 19 manufacturers’ account teams, to monitor the quality of execution at retail stores’ shelves as well as the effectiveness of the merchandising tactics (e.g., assortment, price point and promotions) managed at the store level.
With this solution, the sales force or a dedicated force of “digital merchandisers” take pictures of shelves with their mobile phones. A proprietary algorithm scans the image and compares it with expected shelf performance. Based on this information, key performance indicators are determined and relevant recovery actions are recommended and launched. Digital merchandising can be applied every time a company needs to ensure that the agreed-upon manufacturer/retailer plans and tactics on shelves within store clusters are appropriately implemented or that corrective actions are taken so that both parties benefit.
Another innovative solution uses RFID technology to determine the location and execution of in-store promotional displays. Reporting capabilities provide retailers and CPG companies with the information they need to maximize sales from promotional display campaigns. The product directly measures daily store execution of promotional display campaigns as well as consumer response and performance metrics. Combining daily point-of-sale information with display location, timing and execution data, the solution identifies a range of sales livs within and across campaigns.
Conclusion: Shopper relevance as a key to success against private label and other competing products
For branded products to increase sales and remain profitable in today’s economic climate with diverse, demanding and value-conscious consumers—and increased competition from new entrants and private label products—CPG companies need to focus on increasing shopper relevance.
This can be accomplished in a variety of ways: by differentiating their products with innovative attributes that appeal to shoppers’ interests and expectations; by understanding and speaking more to shoppers’ emotional needs; by distinguishing their brands through multi-channel marketing and direct connections with consumers; by leveraging digital channels more effectively; and by ensuring excellent assortment and sales execution at the point of purchase.
Traditional CPG companies have numerous advantages over retailers and their private label brands: they have deeper pockets to drive research and innovation in product development; they have a powerful foundation of brand awareness and emotional connectedness; and they can marshal economies of scale that their smaller competitors usually cannot match. Yet, creativity and nimbleness too oven seem to be arising from smaller, digital-era competitors in the marketplace. CPG companies must quickly adapt to the new environment of innovation and social media, and must also develop deeper analytics capabilities, if they are to be relevant to consumers and improve their competitive advantage in the marketplace.
August 6, 2012
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