Focusing your sales and distribution on market archetypes helps CPG companies balance global best practices with a tailored approach to local markets.
In a world of high communications and transport costs, it was logical to organize by geography. But now, factors such as globalization and rapid uptake of digital technologies are influencing the way businesses are organized. Many consumer packaged goods (CPG) companies are responding to these changes by redrawing their organizational boundaries.
Structuring around geographical markets doesn’t always work when markets in close proximity couldn’t be farther apart in size or sophistication. For example, CPG companies often group Australia and Indonesia in the same geographic basket. But the two countries are highly dissimilar.
Clustering markets by type—rather than terrain—allows CPG companies to identify markets that share many of the same success factors. The potential rewards? Expanding reach in new markets and segments, reducing the cost of implementing new capabilities, accelerating speed to market, and enabling margin improvement.
But where should CPG companies break new ground? One thing is for certain—one size will not fit all markets. But not all markets are different, and going to market with a different approach per market is not economically viable. You can group markets with similar customers and consumers, routes to market, KPIs and commercial capabilities required to succeed.
There are a variety of ways to do this, depending on the company’s current product ranges, brands and business goals. For some CPG companies, a logical move would be to identify archetypes that focus on routes to market or rates of digital penetration. Others might look at indicators such as pricing or trade promotion sophistication. Groupings that emphasize rates of digital penetration, for instance, might see South Africa and Poland in the same archetype, while groupings based primarily on size of market might see the United States and Canada separated.
These four market archetype examples outline the possibilities:
- The mature market
Mature markets have sophisticated physical offerings as well as an advanced range of digital sales tools. Mobility is an increasingly important theme, with retailers, product providers and consumers always connected.
- The developing market
Developing markets have been experiencing significant growth, but are still building their retail infrastructure. You will find a mixed model of both organized and fragmented trade here.
- The fragmented emerging market
In many emerging markets, CPG companies must distribute through small independent retailers. This makes efficient distribution and coverage very challenging. In this context, how do companies cost-effectively service and get products out to a hugely fragmented customer base?
- The super digital city
In these large urban centers, both traditional and organized trade coexist – and the winner is determined at the individual consumer level. In these markets, digital is a key differentiator and customers and consumers want tailored experiences.