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Fixing your channel priorities

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fixing your channel prioritiesFor retail watchers around the world, 2013 was a momentous year. So much happened! In the US, dollar stores boomed whilst in the UK discounters grabbed share. In other parts of the world shoppers sought stores closer to home, driving sales in convenience stores, minimarts and local supermarkets. Retail giants, like Carrefour and Tesco felt the pinch: Shoppers turned away from hypermarkets, calling into question the fundamentals of their expansion strategies. And of course shoppers moved online in ever greater numbers. With so much change in the retail landscape, channel priorities must also shift.

Are you still thinking about the modern trade and the general trade? 

If so it’s time for a change. You could be missing major growth opportunities in segments of the trade that aren’t even on your radar. At the same time you could be pouring resources into retail behemoths that might be set for long-term decline.

How do you ensure you are getting the best out of the opportunities in your market?

Prioritize channels where you can make change happen

Defining channel priorities is all about understanding the shopper. As shoppers we behave differently in different retail environments. Generically in supermarkets we’re on a mission: to fill our carts as quickly as possible with goods that meet our needs for the next week or two, at least cost. In this environment shopper engagement is often low so your influence on their behavior may be low too.

In other environments, shoppers are much more engaged. Look at how women shop for cosmetics in department stores (generically) or how men get more engaged in electronics stores (again forgive the generalization). Here shoppers are learning about the product as they go and trading off one bundle of features for another. When shoppers are learning about products online, they really do want to know what others think and what the best deal is.

Wouldn’t you rather focus your efforts on getting engaged shoppers to buy?

For every category and every shopper some retail environments have greater potential to influence behavior than others.  By focusing on channels where you can influence shopper behavior to drive the sales and ultimately the consumption of your brand, you gain in the long-term. So prioritize channels which not only attract your target shoppers in abundance, but also have the greatest potential for you to influence these key buyers’ behavior.

Work in the channels that want you

Channels are made up of groups of retail outlets – some are easier to work with than others. Take it from your sales teams! Is it really easy to get a deal from mega-retailers? Is it cheap? Most importantly do they actually implement what they promise?

Once you know the channels where you can influence shopper behavior, then focus on those channels in which retailers can and will both embrace and execute activities that have mutual benefit. Seek to focus on those channels which present the lowest barriers to execution. In our book “The Shopper Marketing Revolution”, Mike Anthony and I suggest a simple matrix tool (shown below) that helps you make these decisions.

channel priorities

Dealing with digital

During the course of the coming year, many of you will have to broach the thorny subject of how to deal with digital channels in this mix. For those of you who fall into this group here a few extra tips to consider when you think about channels:

  1. Prioritize digital in the context of what you already do – View digital as another group of retail environments, not a separate ‘problem’. How you choose to prioritize digital channels will affect the way you manage physical ones in the long-term, so ensure you take a portfolio approach.
  2. Digital is not one environment – it’s many – In the same way as there is not one type of ‘shop’ you sell your products in, e-commerce is not one homogenous environment. Major manufacturers now segment e-com outlets into a number of separate groups, each with its own specific characteristics and then prioritize these accordingly, within the context of all retail channels.
  3. Use the same metrics to evaluate digital as you would any other channel – Just like regular retail channels, e-com channels have varying levels of influence on shopper behavior and differing barriers to implementation. Using the same metrics to evaluate these channels as you would physical ones enables you to prioritize channels across the entire portfolio.

Dealing with changing channel priorities

Changing priorities means changing strategies, and these have a wide impact on the organization. The temptation is often to deal with the issues that arise reactively. Instead, a proactive approach to sequentially deal with the strategic changes you will need to make bears fruit:

  1. In-store strategies – Since the ultimate goal of brands in retail is to encourage more shoppers to buy your brand, more often and in greater quantities, the first thing to establish is the mix of activities that need to go into those outlets in order to be successful.
  2. Route-to-market strategies – With a clear set of in-store strategies in place you can then re-evaluate your route-to-market to ensure fit.
  3. Organization strategies – Once you know you can operationally deliver, the next step is to establish how your people will support execution. Define your team structure and competence requirements to deliver you in-store strategies and route-to-market changes.
  4. Financial strategies – Finally set your investment framework – if the numbers look good – go ahead; if not revise and amend from the beginning!

Re-prioritizing channels is a major undertaking and many managers find the entire idea daunting: fortunately help is at hand. We’ll soon be releasing an eBook on developing channel strategy – sign up here to be the first to get it when it’s published!

Is 2014 the year to invest in online retail channels?

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online retail channelsA very Happy New Year! As many of us dust of the keyboard and make resolutions regarding our waistlines, thoughts turn to the priorities we might set for the coming year. If you’ve paid attention to the extensive coverage given to online sales over the last month, you may be seriously considering whether this year is the year to make significant investments in online retail channels.

Your decision will of course be based on how important you believe online retail will become in your market and category and at what rate its importance will grow. 2013 saw online sales reach the highest levels ever in markets around the world. There’s no doubt that as shoppers become more time poor and continue to struggle with suppressed incomes, many will be attracted to e-tailers offering lower prices and savings in time and transport costs. Yet in many markets, shoppers lack confidence in online retail offers: concerns abound about reliability and quality of products. Equally shoppers in many markets are still unable to access credible e-tail offers either locally or via well-established global players who refuse to deliver outside limited geographies.

How fast will online retail channels grow in 2014?

Depending on where you play and what categories you operate in, there are two potential pathways for the growth of online sales.

The first is that sales will grow exponentially: (and 120% annually between 2003 and 2011). Whilst online retail sales are , in some categories online represents a significant share of business. Some manufacturers’ online sales leap in the last few years to in excess of 8%. If online sales do grow rapidly, manufacturers could easily be caught out and those left napping could see their shares decline whilst their sales in traditional outlets suffer. Equally they may be caught in a double bind, as traditional retailers use price discounting to catch up, causing margins to tumble at the same time.

The alternative is that online will grow incrementally. In the US, sales online seem to be growing at a rate of between 9% per annum, albeit from a base of 8% of total retail sales. If sales grow at this rate, manufacturers will have more time to accommodate changes in their trade structure and the impact of these changes, whilst significant, will be far less dramatic.

In either scenario online retail has the potential to be a significant proportion of sales within 5 years, so changes in marketing strategies, organization structure and business process will become necessary for all.

Shoppers are the agents of change

Whatever happens, the agent of this change is neither the manufacturer nor the retailer however. 2013’s seasonal sales in Europe and the US show that shoppers will reach a tipping point where confidence levels reach a point were reticence to shop online is overcome. For anyone considering what to do now, the message is clear: Understand your shoppers better.

To really get to grips with what to do about online retail channels you need to know how your key target segments are likely to behave in the future. Research programs should consider:

  • Which shoppers are likely to remain offline in the future, their relative importance to your brands and what their expectations from retail stores are.
  • Which shoppers are already online, how important they are to your brands and what is needed to drive value from them.
  • Which shoppers are likely to move online, how they may deliver potential brand value and how you should approach them to gain maximum leverage.

Should you act this year?

For those pondering whether it’s worth making such an investment in research consider this: There are only two likely outcomes: online retail will become important very rapidly or online retail will become important slowly. Against these outcomes you have two choices; to act now or not to. So in deciding what to do; draw matrix: on the vertical axis put rapid growth of online retail at the top and put slow growth on the bottom. On the horizontal axis plot action on the right and inaction on the left.

In the top right quadrant you now have a space where change is rapid but you’ve acted and can anticipate this change. As a result you are competitively ahead of your peers, market share grows and you assure long-term stable growth. Immediately below is the situation where you’ve invested, but online retail doesn’t take off rapidly. At first blush this might seem like you’ve wasted money but if you’ve worked hard on understanding all shoppers and not just those who might go online, you will gain competitive advantage from the insights you now have about shoppers in offline retail and you can anticipate the future. In both cases, you gain a positive result.

Contrast this with the outcomes of inaction – say change happens but more slowly; your inaction may not affect today’s results but as online becomes slowly more important, you may incur greater cost in the future to catch up. The worst outcome of all however is you don’t act this year and there is rapid change. In this scenario, the market moves rapidly ahead of you leading to market share loss and extreme pressure on the topline and bottom line. You have to respond relatively, which means you incur not just catch-up costs but also suffer from talent shortages.

online retail channels

Of course this is just my analysis but I would recommend as you ponder the future that you think about what might happen in your category and your market in the same way. If you feel that action is an imperative, feel free to contact me to discuss your next steps.

A very Merry Christmas and a Happy New Year!

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merry christmas

I’m taking a short break and will be blogging again week commencing 6th January, 2014.

There’s lots to look forward to in 2014, it promises to be an exciting year. Here’s a few things you can expect from my site in 2014:

  • More on how to market to consumers, shoppers and retailers
  • More on how to respond to the changes that the digital shopper provokes
  • More on how to get the best from your marketing investments
  • More free eBooks and whitepapers to download.

Until then I do wish you the happiest of holidays!

The Blueprint for Marketing in the Digital Age

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marketing in the digital ageLast week I wrote about the enormous changes that have taken place in 2013. I wrote about how the use of the internet as a primary source of information is now a global truth; how online shopping is no longer a niche behavior and how the lines between physical retail and online are blurred.

I explained this has some major implications for consumer goods companies, which, as a result of these changes, can no longer depend on traditional media and traditional retail as key pillars of their marketing strategy.  Real competitive advantage is likely to come from bringing shopper marketing and digital marketing into the mainstream. This requires a new blueprint for marketing in the digital age.

What are the key components of the blueprint?

The good news is that just because the world is changing, we don’t have to ‘unlearn’ everything we already know – tomorrow’s blueprint is based on the foundations of over 100 years of marketing best practice. There are four central pillars on the new blueprint that might enable marketers to build on competence they already have.

Define the true target consumer and the behavior that you want from them – The consumer is still king, or queen in the new world. The only way your brand will grow is by attracting new consumers to it and encouraging consumers to use your brand more often and in greater quantity. What has changed is that there is no longer one ‘target consumer’ cast in generic, catch-all terms.

The true target consumer is the person you can identify as being someone whose behavior your communication can influence.

Future brands will have more than one target consumer: there’s the person who doesn’t use your brand but could and should; there’s the person who should be using your brand but is using someone else’s brand; there’s the light user who could be using heavily and the infrequent consumer who could be using your brand habitually and there’s the consumer who so loves your brand that retaining her loyalty is essential. ALL of these consumers deliver value and all of these deserve specific, targeted messages to change or reinforce their behavior. The new blueprint will lay out how behavioral research and consumer segmentation will adapt to cope with the more rigorous demands of the new world.

Convert potential consumers into shoppers – The traditional marketing model assumes consideration will lead automatically to trial and re-use for a proportion of the market. The new blueprint  for marketing in the digital age will not leave this to chance – too much is at stake! Tiered, targeted messaging strategies will be needed to guide target consumers towards a purchase. An inherent assumption of these strategies will be that in order to build trust and strengthen engagement, it will not be the volume of impressions that is important, instead it will be the quality and resonance of impressions. The new blueprint will lay out how consumer goods marketers transition from mass communicators to micro-marketers and how to create coherent links between the consumer and the shopper.

Convert shoppers into buyers – Shopper marketers know that, in-store, even highly loyal targets can be swayed by a plethora of messages and offers. The new marketing blueprint will demand that much less is left to chance. Having earned the permission to ask for a sale, marketers will seek to convert the sale with the minimum possible disruption. This may mean that new routes to market such as direct sale and subscription become as prevalent in the future as physical retail is today. The new blueprint will lay out how to define the optimum path to securing the sale and the most effective environment in which to do this.

Evaluate and refine in real-time – Today’s marketing model is evaluated weeks if not months after its execution (if indeed at all). The new blueprint will anticipate the potential for immediate evaluation, defining clearer metrics and enabling sales and marketing teams to respond to outcomes in real-time.

Whilst many marketers may conceptually ‘get’ what needs to happen to execute a new blueprint for marketing  in the digital age, the reality is that many organizations lack the infrastructure and will to adopt the types of changes that might be needed today. Most will be challenged with the key question, “what should we do now?”

What action is needed now?

There are four actions that are urgently needed to stay ahead of the competitive curve in the coming year:

  1. Take this seriously – Changes in the way we learn about and buy products have profound effects on the way they are marketed and sold. If these issues are not a topic of board conversation today, they should be. The next five years will be critical to the future of many consumer goods businesses large and small. The very worst consequence of putting too much focus on this now is that your company will be miles ahead of its competitors in the space. By contrast, the cost of being left behind might be catastrophic.
  2. Identify a working group – Large consumer goods companies change slowly and they change by example not by edict. Start the process from a small base of highly competent cross-functional managers working on a specific brand (or brands) in a selected geography and allow them to share their experiences, successes and failures widely across the organization
  3. Understand the opportunity – Before asking the team to make any changes, develop a program of research that is designed to clearly measure the opportunity. Target the research on establishing the potential value accrued from changing different segments’ consumption and purchase behavior via new media and new routes to market and ensure that the business case for changing investment strategies is clear.
  4. Try, evaluate and revise – Enable failure. The first executions will inevitably be flawed, allow the working group sufficient time to try a strategy, evaluate it and revise it until they begin to deliver results. Then ensure they document their working process and support its roll out.

2014 is set to be an exciting year, and one in which change will accelerate. I’d be delighted to share our thinking on how you might construct a blueprint for change. If you’d like to discuss this, please feel free to contact me.

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2013 – The Year Consumer Goods Marketing Changed Forever

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consumer goods marketing has changedWhen the dust settles on the breathless wash-up of retail sales over the holiday season in the US and Europe, we will be left with one major learning: the way people shop has changed. But when we look back at 2013 in years to come, we may well conclude that this year stands as the point in history when the entire process on consumer goods marketing changed forever.

How has consumer goods marketing changed in a year?

During the course of this year we have been presented with incontrovertible evidence that three major seismic changes have happened, globally.

  1. The web is a mainstream component of brand choice – It was just two years ago that Jim Lecinski at Google published his findings in “ZMOT – Winning the Zero Moment Of Truth” and already the term ZMOT has been coined by marketers globally. Jim’s e-book laid an entirely new mental model for marketing consumer goods. New research by Joanna Flint at Google in Asia demonstrates that ZMOT, the concept that consumers use internet-based information sources as a key (if not the key) source of information when making a brand choice is not just a US phenomenon, but a global one. Research presented in the forthcoming study “Winning at the Zero moment of Truth – Women, Consumer Packaged Goods and the Digital Marketplace” shows that women across a basket of emerging and developed Asian economies now use the internet as the primary or secondary source of information when they make decisions about consumer goods brands.
  2. Online shopping is no longer a niche behavior – Not everyone buys everything online, but the incidence of online purchase is rapidly growing. There’s absolutely no doubt that this year’s explosive growth in seasonal sales online in China and the US demonstrate a shift in the way we buy. Only the most closed-minded observer would suggest that this tide is likely to halt and recede. As shoppers learn to trust the online environment through their experience of it, more and more purchases will go online.
  3. The lines between physical retail and online retail are blurred – Last year’s end of year wash-ups were full of talk of the importance of ‘showrooming’ and ‘omnichannel’ retailing. Much of the hype around this is already passé. Shoppers have passed the point where they consider a retailer’s online offer to be separate from its offline one and for many the novelty of comparing product and price offers online whilst in-store is wearing off. It’s increasingly common to see global retail brands positioning themselves as being “in-store, online and mobile”. As a result shoppers increasing select retail brands over retail outlets – shoppers increasingly say “I shop at X” instead of, “I go shopping at my local Y”.

What does all this mean for consumer goods marketers?

In short, these changes have massive implications for consumer goods marketers, many of whom are yet to consider their effects on the way products are marketed and sold today.

  1. ‘Spray and pray’ will become increasingly unsustainable as a lead communication strategy – Mass consumer communication via TV and other traditional media has been the key mode of consumer communication since the early 60’s. Whilst this type of communication remains a key influencer of consumer choice, its role has changed. Increasingly it is a stimulus to drive further research and as media becomes more fragmented, its potency will inevitably dilute. Consumer goods marketers and their agencies will have to give greater thought to the role of mass communication in their marketing mix. It will have to become more targeted in its audience and its message and in some cases it will become secondary to more efficient communication strategies via digital media.
  2. The value of physical retail distribution is no longer assured – Holiday sales in the US actually appear to be down by nearly 3% so far this year, despite explosive sales online – why? Online sales are replacing retail sales. Consumer goods companies invest massively in sales and distribution via traditional retail. The continued growth of these channels is no longer universally assured. New online channels and indeed retailers are likely to grow rapidly in the coming years. This will put sales teams under extreme pressure, not just as they struggle to create new skills but also as they wrestle with the demands of bricks and mortar retailers in decline.
  3. The ability to target and lead specific groups of consumers toward a brand is now a point of competitive advantage – As mass communication wanes in efficacy, more targeted communication is becoming more important. In the past, those with the largest advertising budgets gained competitive advantage. Today this competitive advantage is being eclipsed by companies who have the greatest competence in effectively targeting specific groups of consumers and leading them to the point of active engagement with the brand. This is a new model which prizes brains over brawn.
  4. Converting brand considerers to buyers online is an imperative for all brands – For the first time in history, we have a tangible, measurable vehicle for brand consideration in real time. However, no true value is gained from a ‘like’ or a ‘share’. Whilst both are evidence of active consideration, neither deliver a concrete value until they convert to an incremental sale. Too much of today’s ‘digital marketing’ efforts concentrate on securing engagement. This is a hollow goal; attention must turn to rapidly converting good will into purchases. Best-in-class brands are now seeking ways to convert ‘likes’ to ‘buys’ online either via targeted retail channels or through wholly-owned or partner e-commerce sites.

Marketers grappling with the realization that they might need to change are struggling to answer the key questions of how they might approach the new reality – they need a new blueprint for  consumer goods marketing.

In my next blog, I’ll lay out what I see the key components of this blueprint might be and discuss what to do next. To make sure you receive a copy in your inbox as soon as it’s published, subscribe to my blog here.