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Retailers and consumer packaged goods (CPG) companies must collaborate by adopting joint business planning to achieve improved sales, profit margins and market growth.
Consumers today demand convenience regardless of the shopping channel, they want the right item at the right time and value remains their highest priority. These are some of the consumer trends shaping the industry. But as consumers reach across channels to satisfy their needs, special interests and budgets, retailers and CPG companies are finding it harder to predict their needs and behavior.
To achieve high performance in this rapidly changing business landscape, retailers and CPG manufacturers must work together at the strategic business planning stage to get an integrated view of the opportunities and challenges. Also, putting the consumer at the heart of their business will help them gain deeper insights into purchase decisions.
Despite the proliferation of channels, retailers still wield significant power as market influencers, and they define the rules of engagement. Their enduring hold over most consumer interactions makes it essential for CPG companies to cultivate and strengthen ties with retailers to drive sales further. Promotions, payment terms, as well as product quantity, assortment and placement are the levers that can be used in investment negotiations to initiate joint business planning.
Joint business planning is not about increasing investments—it’s about making better investments to improve returns. By combining retailers’ point of sale insights with CPG manufacturers’ product growth and development engine, both parties can better deliver on consumer expectations and increase loyalty. This will enable both companies to concentrate on key areas to drive sales and margins by using point of sale data and analytics to determine the right marketing, sales and innovation investments.
To facilitate joint business planning between CPG companies and retailers, Accenture recommends that both should align their business goals and identify mutually beneficial opportunities during annual negotiations and monthly account planning. To work harmoniously, they need to incorporate a new commercial vision based on three crucial steps:
Creating a starting point based on the shared objectives that aligns corporate strategy to the account plans and investment requirements.
Developing a joint, shopper-based plan to identify how best to invest in trade initiatives to maximize returns for both.
Establishing ongoing, joint reviews of the plan’s outcomes during execution to ensure that both achieve the mutually agreed business benefits, prevent and address problems, take necessary corrective actions, and remain reactive to changing market conditions.
Meeting these goals requires a change in mindsets. This includes listening to each other more closely, improving trust and understanding, transparency and visibility into each other’s businesses, progressive sharing of plans and joint responsibility.
CPG manufacturers and retailers need to establish a strong partnership based on a 12 to 18-month strategic plan that is regularly reviewed and updated to help improve alignment to brand and channel marketing, as well as reaction to market changes.
Joint business planning offers a number of tangible and intangible benefits that impact the business performance of retailers and CPG companies.
This collaboration helps define strategies that drive growth and increase actionable consumer insights. Both can tackle persistent challenges in inventory, product development, placement, promotional investments and assortment to gain increased volumes and profits—while better serving the shopper with products they want, at a competitive price, and with the right margins.
August 31, 2012
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