Beyond transactions - Building customer partnerships in consumer goods An Economist Intelligence Unit white paper Sponsored by SAP
Beyond transactions - Building customer partnerships in consumer goods An Economist Intelligence Unit white paper Sponsored by SAP
Beyond transactions Building customer partnerships in consumer goods An Economist Intelligence Unit white paper Sponsored by SAP
© Economist Intelligence Unit Limited 2009 1 Beyond transactions Building customer partnerships in consumer goods Preface Beyond transactions: Building customer partnerships in consumer goods is an Economist Intelligence Unit report sponsored by SAP. The Economist Intelligence Unit bears sole responsibility for this report. The Economist Intelligence Unit’s editorial team conducted the interviews and wrote the report. The ﬁndings and views expressed in this report do not necessarily reﬂect the views of the sponsor.
Dan Armstrong was the editor of the report and Sylvia Helm was the author. Mike Kenny was responsible for layout and design. Our thanks are due to all of the executives who responded to the survey. October 2009
© Economist Intelligence Unit Limited 2009 Beyond transactions Building customer partnerships in consumer goods 2 Contents Introduction 3 Key ﬁndings 4 Conclusion 7 Appendix 1: Overall survey results 8 Appendix 2: Americas survey results 13 Appendix 3: Asia-Paciﬁc survey results 18 Appendix 4: EMEA survey results 23
© Economist Intelligence Unit Limited 2009 3 Beyond transactions Building customer partnerships in consumer goods Introduction The global recession and falling demand have hit the consumer goods sector harder than other industries. Except in China and a handful of smaller economies, retail sales fell dramatically in 2009 throughout the Americas, Europe and most of Asia.
According to an Economist Intelligence Unit survey of the sales, marketing and customer service practices of consumer goods companies, respondents cite the global economic downturn as the biggest issue facing their industry.
The economy is one of several factors—including changing consumer needs, emerging new competitors and evolving requirements among retailers and distributors—that is beyond the control of consumer goods companies. Despite these challenges, survey respondents say they have strengthened customer relationships during the past year. They also say they are more engaged in developing products and services collaboratively with retailers and distributors. Consumer goods manufacturers need to satisfy two tiers of customers in order to succeed. The ﬁrst is the retailer or product distributor; the second is the consumer who ultimately buys the product from the retailer or distributor.
Manufacturers have to play to both audiences successfully. The majority of survey respondents say they are doing better than ever managing the ﬁrst relationship, ie, with retailers and distributors. The second one, with consumers, is more problematic.
About the survey In September 2009, the Economist Intelligence Unit surveyed 84 executives of consumer goods companies on the challenges of getting customer-facing departments to work together more consistently and effectively. Survey respondents spanned the globe, with 31% from the Asia-Paciﬁc region, 33% from the Americas and 36% from EMEA. Respondents’ annual revenue ranged from less than US$500m to more than US$10bn. The level of seniority of respondents was high: 32% were C-level or board members and another 20% were vice-presidents or heads of business units.
© Economist Intelligence Unit Limited 2009 Beyond transactions Building customer partnerships in consumer goods 4 Evaluating retailers and distributors Respondents give themselves high marks for providing high-quality service to retailers and distributors.
But this self-assessment appears to be based on anecdotal evidence. Because manufacturers believe they already enjoy strong long-term relationships with their retailer/distributor customers, measuring the strength or value of the relationships is not a priority. In fact, most consumer goods respondents admit that they could not estimate the lifetime value of retailers or distributors, even if they chose to do so. Since they do not have this information, they cannot prioritise investments in service campaigns and customer-speciﬁc relationships.
Gathering customer feedback The second-tier relationship—with consumers—has always been problematic for manufacturers. It is hard for these companies to get information about consumers without going through their retailers and other distributors. Most survey respondents say they rely on point-of-sale data or second-hand feedback from store retail sales staff to secure information about their customers, followed by targeted focus groups and direct response feedback. Key ﬁndings Measuring the value of customers (% of respondents who agree minus % who disagree) Source: Economist Intelligence Unit survey, September 2009.
My company has an accurate way to estimate the lifetime value of retailers or distributors My company prioritises sales and marketing resources based on lifetime value of retailers or distributors Disagree Agree -30 -40 -20 -10 0 10
© Economist Intelligence Unit Limited 2009 5 Beyond transactions Building customer partnerships in consumer goods Manufacturers admit that they are not good at using newer tools such as proprietary or third-party websites and online social media, although there have been some successes. Consuming branded goods is a universal experience in modern market economies, and social media allows consumers from all walks of life to share that experience. Twitter and Facebook provide ways to connect over the purchase and ownership of goods. Nike, Ikea, Guess, PlayStation, Adidas, Apple—all are widely mentioned across a variety of social networking, blogging, photo- and video-sharing sites.
Priorities for improvement By a small margin, the top priority among survey respondents is reducing the cost of sales. As manufacturing becomes a commodity business and distribution channels multiply, more resources are required to maintain the power of the brand. This pressures margins. Moreover, as revenue growth levels off, the temptation increases to supply private-labelled goods for big retailers like Wal-Mart, Target and Costco. In the short term, private-label extensions may boost revenues, but they can also erode brand equity, exacerbating the problems caused by creeping commoditisation.
0 10 20 30 50 40 Source: Economist Intelligence Unit survey, September 2009. Reducing the cost of sales Measuring the effectiveness of marketing/promotional campaigns Maximizing repeat purchases and building consumer loyalty Creating effective consumer marketing campaigns Areas in need of improvement (% respondents)
© Economist Intelligence Unit Limited 2009 Beyond transactions Building customer partnerships in consumer goods 6 How the three regions differ Respondents from all regions have differing perceptions of the global recession and the trend towards commoditisation.
Companies in some regions are working more collaboratively with their retailer/ distributor base to develop new products; others are not. And the use of newer marketing media tracks differently in different parts of the globe. Americas. The economic recession has had a disproportionately larger impact on consumer goods companies in the Americas than in Asia-Paciﬁc. More respondents also agree than disagree that over the last ﬁve years, their products and services are increasingly seen as commodities. And the Americas region—particularly North America—is the centre of social media: Consumer goods companies there use online social media for gathering consumer and retailer feedback far more frequently than their peers in Asia-Paciﬁc and EMEA.
Asia-Paciﬁc. Asia-Paciﬁc respondents are the least likely to cite the global recession as their biggest problem in the past year, reﬂecting the healthier economy of that region. In keeping with the “export or die” mantra, Asia-Paciﬁc is focused on creating consumer goods to order for markets in the West. Perhaps as a result, the region scores higher than the other two in terms of working with retailers and distributors to develop products collaboratively. Respondents do cite “commoditisation” as a problem in their industry, however. Their use of online social media is much lower than in the Americas.
EMEA. EMEA consumer goods respondents are most likely to say the economic downturn is the major hurdle facing their business, with 80% citing it as the factor with the biggest impact. With regard to commoditisation, most respondents (53%) see no increasing trend, perhaps because EMEA-based ﬁrms have had to contend with the threat of private-label competition far longer than those in other regions. As a result, 53% disagree with the statement “We are more engaged in developing products or services collaboratively with retailers and distributors than we were 12 months ago.” Companies in EMEA, like those in Asia-Paciﬁc, use the newer online social media less frequently than older feedback channels.
© Economist Intelligence Unit Limited 2009 7 Beyond transactions Building customer partnerships in consumer goods Consumer goods manufacturers are faced with the need to retain market share in a recession while fending off global competitors. Commoditisation makes their goods indistinguishable from their competitors. Their margins are squeezed and they must reduce the cost of sales. Lessons from the survey include the following: l Use online and social networking media to build brand loyalty, attract inﬂuential buyers and gain ground-level feedback. Use online services to get as much information as possible from the consumer rather than relying on retail store-level pass-back.
l Develop internal procedures to analyse and segment the retail/distributor customer base. l Manage the retailer/distributor relationships based on proﬁtability; prioritise marketing expenditures based on the value of the individual retailer/distributor. Conclusion
8 Economist Intelligence Unit 2009 Appendix 1 Overall survey results Beyond transactions Building customer partnerships in consumer goods Appendix 1: Overall survey results 42 25 14 14 5 Customer service and relationships: Building and managing relationships with key customers (retailers and distributors) to grow shelf presence and expand share of category Differentiated marketing: Building brand equity by reaching consumers with compelling, relevant marketing Operational excellence: Creating highly efficient processes Product innovation: Being first to market with groundbreaking new products or services Other In your view, which of the following best represents the core strength of your overall business? Select only one.
(% respondents) 1. No coordination; 2. Ad hoc coordination; 3. Some procedures 4. Procedures 5. Broad, systematic and Don’t know units are completely not systematic established, but not established, regular consistent integration of separate or consistent consistently followed interaction information and strategies Planning and executing promotional activity Developing and launching new products Planning and executing marketing campaigns Analysing and segmenting customers Analysing and segmenting consumers Gauging customer satisfaction Measuring effectiveness of processes Responding to customer demands or complaints Incorporating customer feedback into products/services Other Each of the organisation’s customer-facing departments influences the customer via different channels.
For each of the processes below, how closely do your marketing, sales and customer service units work together? Please rate on a scale of 1 to 5. (% respondents) 1 15 15 46 19 2 2 12 19 38 27 1 5 12 27 36 20 0 8 14 29 32 14 2 12 10 32 30 14 2 12 19 25 33 10 1 11 16 36 23 11 4 6 7 19 39 25 4 5 23 19 36 14 2 8 4 12 4 73
Appendix 1 Overall survey results Beyond transactions Building customer partnerships in consumer goods 9 Economist Intelligence Unit 2009 Measuring/optimising effectiveness of marketing and promotional campaigns Reducing the cost of sales Maximising repeat purchases and building consumer loyalty Creating effective consumer marketing campaigns Involving customers in product/service development (co-creation) Targeting the right consumers in order to achieve sales volume and revenue objectives Cross-selling or upselling consumers Gathering consumer intelligence in the course of providing service Building long-term relationships with customers (retailers and distributors) Ensuring that service issues with retailers and distributors are resolved quickly Measuring the satisfaction of retailers and distributors Segmenting and profiling consumers Segmenting and profiling customers (retailers and distributors) Other Don’t know In your view, which of your organisation’s activities are most in need of improvement? Select up to four.
(% respondents) 43 43 33 31 30 25 25 24 23 20 17 13 12 2 1 Helping each function within your organisation find and act on ways to support the others Developing and sharing a detailed picture of consumer behaviors and preferences Measuring the probability that planned promotions will result in achieving sales and volume targets Integrating tracking of retailer relationships from annual planning through promotions to claims management Establishing common definitions, assumptions and data Making each part of your organisation aware of how the others have interacted with a given retailer or distributor Presenting retailers and distributors with a consistent picture of the organisation Prioritising resources directed towards retailers and distributors by total value over the life of the relationship Our company sees no need to integrate our marketing, sales and service activities Other Don’t know/Not applicable Which of the following would provide the biggest benefits in integrating your organisation’s marketing, sales and service activities? Select up to three.
(% respondents) 43 36 32 29 27 26 25 23 5 2 2 Do you agree or disagree with the following statements? (% respondents) In choosing to do business with my organisation, prices are the single most important factor most customers consider If price is not driving factor, my organisation can win shelf space and expand its presence in the category based on service, convenience, brand reputation or other intangibles My organisation has stronger relationships with retailers and distributors than do our competitors My organisation has an accurate way to estimate the lifetime value of retailers or distributors My organisation prioritises sales and marketing resources based on the lifetime value of each retailer or distributor We are currently developing a social media strategy My organisation has more flexibility that its competitors in pricing its products Despite the recession, my organisation has greatly strengthened customer relationships over the past 12 months We are more engaged in developing products or services collaboratively with retailers and distributors we were 12 months ago My organisation has integrated its activities to provide high-quality service to retailers and distributors at all touch points Consumers view my organisation’s products and services more as commodities now than five years ago Our margins are higher than the margins of most of our competitors Agree Disagree Don’t know 24 73 4 73 19 8 63 26 11 24 57 19 36 45 19 29 46 25 46 48 6 65 26 8 49 43 8 58 31 11 46 40 13 35 50 15
10 Economist Intelligence Unit 2009 Appendix 1 Overall survey results Beyond transactions Building customer partnerships in consumer goods Global economic downturn Evolving consumer needs Emergence of new competitors Changing requirements among retailers and distributors Significant demand shifts for our products/services Focusing on sustainability efforts Accessing key components or resources through our supply chain Finding access to credit/capital Emergence of new markets for our products and services Disruptive technology developments Other Don’t know Which of the following trends have had the greatest impact on your business over the past 12 months? Select up to three.
(% respondents) 65 38 32 32 24 13 12 11 7 7 8 Making prices and sales terms more transparent for easy comparability Investing in self-service tools across multiple channels (web, mobile devices, e-mail, point of sale) Improving online or self-service product support tools Improving usability, search and navigation of retailer- and distributor-facing websites Other Don’t know/Not applicable In which of the following ways does your organisation empower retailers and distributors? Select all that apply. (% respondents) 48 33 25 19 1 14 Offering additional value along with products (ie, in-store service, merchandising improvements, sustainable packaging, etc) Improving usability, search and navigation of consumer-facing websites Creating educational forums for consumers (eg, online content, in-store content, communities of interest, direct-to-consumer outreach, etc) Building or supporting online communities of consumers Other Don’t know/Not applicable In which of the following ways does your organisation empower consumers? Select all that apply.
(% respondents) 63 35 32 31 11 Point of sale feedback Feedback from in-store sales staff Our own e-commerce site(s) Third-party e-commerce sites Phone order interaction Direct response feedback Call center customer service interactions Targeted focus groups Online social media efforts Other Don’t know What avenues of retailer and consumer feedback is your organisation best and worst at collecting and using to improve the experience of both types of customers?
Select up to three from each column. (% respondents) We are best at collecting and using We are worst at collecting and using 39 25 36 21 18 29 4 39 26 12 33 8 21 7 33 13 11 26 7 15
Appendix 1 Overall survey results Beyond transactions Building customer partnerships in consumer goods 11 Economist Intelligence Unit 2009 Synthesising information from retail outlets into coherent recommendations Monitoring the results of actions in terms of consumer behavior and marketing metrics Persuading consumers to share experiences, both positive and negative Putting recommendations into action Demonstrating to retailers and consumers that their comments are being addressed Persuading our employees to share feedback from retailers, both positive and negative Distinguishing relevant from irrelevant retailer and consumer information Dealing systematically with extremely high volumes of retailer information Synthesising information from online channels into coherent recommendations Synthesising information from customer service into coherent recommendations Other Don’t know My organisation’s greatest challenges in using information from retailers and consumers to improve the customer experience are: Select up to three.
(% respondents) 39 35 31 31 24 23 20 20 15 14 1 4 Asia-Pacific North America Western Europe Eastern Europe Middle East and Africa Latin America In which region are you personally based? (% respondents) 31 30 20 8 7 4 48 38 14 Individuals (eg, retail) Businesses or other organisations (eg, business-to-business) An equal mix of both Who are your organisation’s primary customers? (% respondents) 1 Consistently and systematically 2 3 4 5 Not at all Don’t know Empower salespeople Empower customer service staff Create effective marketing campaigns Refine product development process Forecast demand Improve customer service Improve retail offerings and selections Adjust pricing How well is customer and consumer information from all sources used to accomplish the following goals? (% respondents) 18 33 34 7 4 5 11 42 26 15 2 4 18 38 26 17 1 0 15 30 35 17 2 1 15 30 34 16 5 0 18 37 29 11 2 2 10 45 26 10 5 5 10 42 34 6 5 4