Part 3 of 4: Emerging from the Storm: How Leading Customer Organizations Reignite Growth. Findings from the 2010 Customer and Channel Management Survey
About the Survey:
The 2010 Customer and Channel Management (CCM) Survey provides an up-to-date perspective on the practices of top-performing CPG companies across the following dimensions: sales strategy, pricing and trade investment, strategic customer collaboration, and complexity management. This year’s survey was conducted in spring 2010 and is produced in collaboration with the Grocery Manufacturers Association (GMA), McKinsey & Company, and The Nielsen Company. Approximately 220 CPG executives from more than 50 companies with close to $160 billion in U.S. manufacturer sales—in the food, beverage, personal care, and home care categories—participated.
A new, more collaborative way of working is replacing the often adversarial relationship between manufacturers and retailers. A majority of CPG companies report having recently undertaken multiple strategic collaboration efforts with retailers. The survey defined strategic customer collaboration as joint initiatives between manufacturers and retailers that go well beyond the normal course of business. These initiatives are designed to deliver impact in multiple dimensions: sales lift, cost savings, ROI, and the impact captured by the retailer.
While most manufacturers believe that their collaboration efforts are effective, few deliver winning results; 50% have only modest impact, with category performance at participating retailers slightly better than the baseline, and 30% yield no measurable impact. However, a small group of manufacturers—20%—is realizing the full potential from these collaboration initiatives. Our review of these winning companies suggests that the following leading practices increase the return on collaboration.
Select the right retailers. Winning companies cast a wide net, exploring potential collaboration initiatives with more retailers than other companies do: 50% of these companies have approached ten or more retailers as potential collaborators versus 22% of others who have done so. After the net has been cast, winning companies closely evaluate prospective collaborators, choosing to work only with those with the greatest potential to deliver impact based on sales, profitability, and growth outlook.
Define a bold ambition. Eighty-eight percent of winning companies, versus 62% of others, include 90% of total category sales in collaboration efforts. Top performers also have a proactive rationale to develop strategic collaboration efforts. For example, winners view collaboration as an opportunity to increase access and influence on merchandising and marketing initiatives or to build a "preferred" relationship with retailers, as opposed to reacting to performance issues.
Develop a true strategic alliance. Winners align with retailers on common performance goals at the start of a given initiative. These manufacturers ensure that joint efforts with retailers are mutually beneficial and establish at the outset how benefits will be shared. While retailers commonly share information on store sales, loyalty-card data, and shopper research, winners go a step beyond basic data sharing and provide retail collaborators with information on brand performance, competitor performance, and price elasticity.
Set up the joint team for success and focus on execution. To support a given collaboration effort and develop comprehensive solutions, winning manufacturers and their retail collaborators dedicate more resources across a broad range of cross-functional experts (for example, those in brand marketing and category management) to work on the joint team. Furthermore, manufacturers and retailers invest more, going beyond the basics (for instance, consumer and shopper research) to address such areas as IT, supply chain, and new product development.
Furthermore, manufacturers and retailers jointly tracked performance metrics and shared incentives, performance routines, and a focus on the bottom line to enable successful execution, which is critical to collaboration efforts.
Obtain a free copy of the full report: Emerging from the Storm: How Leading Customer Organizations Reignite Growth, The 2010 Customer and Channel Management Survey.