Over the past five years, 45% of consumer packaged goods categories had flat or declining sales. New, smaller retail formats, aggressive competition and consumer rejection of a “one size fits all” mentality are leading manufacturers and retailers in search of alternative growth strategies, and many are turning to localization.
Localization is not a new concept. In the ’80s, localization was part of the globalization phenomenon. With the mantra “Think globally, act locally,” companies modified products to fit various local cultures and tastes. Since then, the concept has evolved and the meaning has become more granular. Now, “local” can be a market, a store, a household or even an individual consumer.
Both retailers and manufacturers are finding growth by going local. At Nielsen’s 2015 Consumer 360 client conference, Sneha Uppal, vice president of advanced solutions at Nielsen, joined Adam Whitney, Meijer’s vice president of merchandise presentation and pricing, and Joe Davis, The Coca-Cola Co.’s director of shopper insights HQ, to discuss how these iconic brands are reaching consumers on a more personalized level. At Meijer, more granular insights are helping the regional retailer expand into new markets and optimize product assortments to local demand, and Coca-Cola’s localization efforts are building loyalty and margin with the right brand and category buyers.
So how are companies like Meijer and Coca-Cola succeeding at a local level?
Both speakers noted that while it’s not possible to localize every product in every market, it is important to have a strategic view towards localization. To maximize growth, you must focus on the right opportunities—and that often means examining consumer insights at a market-by-market or even household level. The first step in any local strategy should be understanding how consumer behaviors differ at each product level, be it category, subcategory or brand. Consumer demand can vary across these levels of granularity, making localization a good approach for some products but not for others; knowing the difference is key.
Next, assess the geographic differences in demand for these products and let them serve as the basis for determining where to employ local market efforts. Where to localize is important, and picking the right markets can make or break the strategy.
The final step is to identify households that fit your strategic consumer profile within the local market, and then engage those consumers via marketing programs that cater to the uniqueness of their market and behaviors.
Determining how to build local understanding can be daunting, but the array of analytical approaches actually makes for a flexible and accessible start to strategy development. On the more advanced end of the analytical spectrum, like the approach Meijer took when opening new stores in unfamiliar territory, a manufacturer or retailer can leverage local trade areas—micro markets where households in a neighborhood do most of their shopping—to understand the local buying preferences. Meanwhile, a simpler, but still effective, method balances category consumption to population density. Regardless of the approach, local strategies can help most retailers and manufactures facilitate growth and reduce waste.
The bottom line is one size does not fit all when it comes to store space, merchandising, assortment, pricing and promotion. Localization can assist manufactures and retailers in growing both new and mature products, but the key is developing a roadmap to find the hidden pockets of opportunity.