Anda di halaman 1dari 8



COLLABORATION An Economic Stimulus Package



COLLABORATION An Economic Stimulus Package


hopper marketing is taking our companies in the right direction at least thats the perception among manufacturers and retailers who are actively practicing shopper marketing. According to the Promotion Marketing Associations (PMA) 2nd Annual Shopper Marketing Study, investments in Shopper Insights capabilities are clearly paying off for the industry as half of the companies practicing shopper marketing feel they have a very good understanding of their shoppers, representing a significant increase from last year.
Despite this encouraging news, 82 percent of the industry still feels further improvement in retailer-manufacturer collaboration is needed. There was little difference between retailers (78 percent) and manufacturers (87 percent) in their expression of this need. The good news is that survey respondents have indicated there are three areas that, if improved, will lead to more effective shopper marketing collaboration between manufacturers and retailers. The three key areas are: 1. Common metrics, or lack thereof 2. Post promotion evaluation 3. Longer-term joint planning

Rick Abens
Director, Marketing Analytics, ConAgra Foods, and VP, Research, for the PMA

Rob Fields
Director of Member Development, the PMA

With this in mind, more companies could potentially see ROIs in the range of 5-to-1 that the best practitioners are achieving. Isnt that a good investment in our economys future, President Obama?



Are shopper marketing objectives at odds?
etailers and manufacturers have different objectives for implementing shopper marketing programs. Both want to increase sales, and that hasnt changed from last year. After that, retailers list strengthening the relationship with shoppers as their Number 2 objective. Manufacturers top objectives include enhancing brand equity, which remained as the Number 2 most important objective. Strengthening the relationship with shoppers was only noted by 13 percent of manufacturers.

2009 top objectives of SM programs

RETAILER OBJECTIVES 1. Increase sales (40%) 2. Strengthen shopper relationships (30%) 3. Strengthen manufacturer relationships (10%) MANUFACTURER OBJECTIVES 1. Increase sales (42%) 2. Enhance brand equity (16%) 3. Strengthen shopper relationships (13%) 4. Strengthen retailer relationships (9%)

2008 top objectives of SM programs

RETAILER OBJECTIVES 1. Increase sales 2. Strengthen shopper relationships 3. Improve profitability MANUFACTURER OBJECTIVES 1. Increase sales 2. Enhance brand equity (tie) Strengthen retailer relationships (tie) Greater retailer cooperation (tie)



Retailers are using shopper marketing to increase store relevance to shoppers as a way to stimulate profitable growth. This required a strategic shift from marketing categories to marketing to targeted shoppers, a strategy that originally was adopted as a defense for price competition, especially from the value retailers. On the other hand, manufacturers focus on building brand equity and ensuring a strong relationship with their retailer partners. Certainly, this is critical for companies that build brands through retail. However, this focus can also set up frameworks wherein success is measured in terms of retailer cooperation, with less emphasis on shopper satisfaction. Put another way: Marketers try to produce shopper insights and marketing programs that are persuasive to retailers, whereas retailers want shopper insights and programs that delight their shoppers. There are a few reasons manufacturers were slower to adopt shopper marketing practices and are still more focused on their retailer customers than on the shopper: 1. Manufacturers have more confidence in increasing or decreasing advertising or price because they understand the impact of those marketing mix elements from years of measurement. 2. Manufacturer sales teams historically were incentivized based on units sold. 3. Some manufacturers marketers are not as well-versed on the customer business issues and have fewer comparable benchmarks to help them understand what to expect as the practice grows. 4. Manufacturers also required a strategic infrastructure shift in order to adapt to an unprecedented amount of collaboration between their own marketing and sales teams, which is necessary for planning shopper programs.

Economy has caused complications

Both sides agree that more collaboration is needed to improve the relationship between retailers and manufacturers. Unfortunately, the current state of the economy has only exacerbated the collaboration gap. Manufacturers are facing brand marketing budget cuts to cover inflation and increased shopper sensitivity to price. Prices increased when input costs rose, resulting in both manufacturer and retailer margin pressures. When input costs moderated, retailers started calling for manufacturer price rollbacks because their shoppers were defecting to lower-priced outlets, looking for value. Delhaize threatened to remove up to 300 of Unilevers products from its stores in Belgium; but they have since collaborated on a plan with a positive outcome for both companies. Some manufacturers have resorted to excessive discounting to narrow the price gap to private label brands and gain back market share. The brand discounting helps to recover some of the market share losses in the short-term, but the longer-term impact is lower brand equity and lower margins. Perhaps the industry needs shopper marketing more than ever to rescue brand equity and salvage retailer and manufacturer margins. Price discounting is certainly helping shoppers with their pinched pocketbooks and is an effective tactic to drive sales. But what shoppers really need is not price discounts: They need products that offer good solutions to their needs at the price they are willing to pay. For marketers who resort to price discounting, this can be a margin trade-off vs. a product differentiation strategy that can command higher margins. It can also be a trade-off when a brand does not offer enough utility to justify the higher price. By contrast, retailers are counting on shopper marketing to differentiate their banners with a point-of-difference other than price.


Disagreement on key performance indicators

As every marketer knows, different objectives lead to the use of different metrics, and shopper marketing is no exception. Another cause of the collaboration gap is that neither the retailer nor the manufacturer is significantly focused on the others key performance indicators. Results of this study show that less than 4 percent of manufacturers rank retailer profit as a key KPI. As the chart below shows, that is the retailers Number 1 KPI! None of the retailers surveyed seem to care about manufacturer profit. The chart below shows that the key metric used by retailers is incremental profit (31 percent), whereas the key manufacturer metric is incremental unit sales (42 percent), a holdover from their traditional sales focus. Only 13 percent of retailers used incremental unit sales as a KPI. Therefore, lack of interest in each others KPIs prevents effective collaboration.

Top retailer metrics

Retailer profit 31% Retailer revenue 25% Awareness of program/brand 25% Unit sales 13%

Top manufacturer metrics

Unit sales 42% Manufacturer revenue 15% Retailer revenue 15%

Interestingly, awareness of program and brand tied for second place among retailers, reinforcing their emphasis on shopper marketing as a strategy to build equity and brand differentiation.




Joint planning and post-program evaluation
here are substantial gaps in how well retailers and manufacturers feel they are doing vs. what is important to them. The top partnership collaboration factors include both promotion evaluation and joint planning, and yet, the judgment of most is that their performance is unsatisfactory.


Apply post-promotion learnings to future Conduct/share post-promotion measurement Develop shopper marketing programs jointly Actively engage in long-term planning Agree on measurement criteria Share ownership/accountability of program results Agree on common metrics for program evaluation

Extremely / Very important 73% 68% 68% 65% 64% 59% 58%

Excellent / Very good performance 34% 30% 34% 22% 28% 26% 34%

Formal integrated planning processes are critical

Companies that have a formal process are three times more likely to be highly integrated. Its worth noting that retailers want to incorporate the manufacturers marketing strategies into their own marketing plans, but only when given sufficient lead time. Six to 12 months (68 percent) seems sufficient as few retailers (38 percent) are requesting 12 months or more lead time.

Post-promotion evaluation needs improvement

In order to facilitate effective post-program evaluation, both sides have to have upfront agreement on program metrics: 64 percent indicated that this was extremely or very important, but only 28 percent felt they were currently performing at that level. In fact, when asked about the areas of joint strategic planning, compromise and post-program evaluation, both retailers and manufacturers indicated high levels of dissatisfaction in areas that are extremely/very important to them. Manufacturers complained about the lack of agreement on evaluation criteria. Retailers feel that performance can be improved with better measurement and application of the learnings. SATISFACTION LEVEL Top performance improvement drivers Joint strategic planning Compromise Post-promotion evaluation Retailers Poor Poor Fair Manufacturers Fair Fair Fair



Support through shopper insights
fforts to improve collaboration are at least moving in the right direction: Nearly 40 percent of retailers are satisfied with the support they get from their vendors, a 5 percent increase compared with 2008. And 32 percent of manufacturers are satisfied with the support from their customers, which is a huge 12 percent gain over last year.

Marketing execs weigh in on promotion evaluation

Most CMOs (61 percent) plan on setting clear goals and tracking deliverables as a key strategy for operational efficiency, as cited in the CMO Council Marketing Outlook 2009 Report. Improv[ing] analytics to support resource allocation is a high priority. Measure results relentlessly to find out whats working and whats not, said Tony Palmer, CMO, Kimberly Clark, at the 2009 PMA Integrated Marketing Conference.

Perception of partner support



30% 20% 10% 0%



Retailers Manufacturers

Improved shopper insights are a leading contributor to better collaboration. Both retailers and manufacturers ranked shopper understanding as the most important success factor (81 percent reported as very important). In fact, since last years study, the percentage of companies reporting feeling good about their shopper insights improved from 40 percent to 49 percent. Clearly, this improvement is the result of prioritizing shopper insights as an important business function and supporting it with the appropriate resources. Retailers have increased their shopper marketing staffs by 60 percent over the past year, and manufacturer staffs are 23 percent bigger, according to the latest Grocery Manufacturers of America/Deloitte Shopper Marketing Study.

Feedback and Cascading Program Learning

A good understanding of your shoppers helps to set strategies and design programs which are likely to be effective. However, insights are not enough to be successful. Post-promotion evaluation illuminates what is working and what is not. Constant feedback on promotion performance leads to continuous improvement. Another opportunity exists to better cascade program learning throughout both organizations in preparation for future shopper marketing efforts. This internal socializing of the shopper marketing learnings fosters more collaboration between the marketing and sales departments, making each partner more prepared to work with the other.



Four keys to successful collaboration

The PMAs Seven-Point Manifesto for Shopper Marketing Success
1. Turn the war room into the win room. Get the key players from both organizations together in one place and embrace the practice of joint planning. 2. Schedule the celebration now. The best planned and executed programs still need to be measured, and the key learnings must be gathered and shared. 3. Lead with insights. Successful shopper marketing begins and ends with the consumer, so work from that point. 4. Speak a common language. If the retailer has a segmentation model, use it, they are their shoppers, after all. 5. Forge a shared vision of success, and agree how youll know when you get there. 6. Dont wait, integrate. Shopper marketing programs are even more effective and efficient when they are planned and implemented as a core element of the entire marketing mix. 7. Double down on sure bets. Shopper marketing has already proven to be the better investment over the long term, so take the lead from best practitioners and make a strong commitment to ensure the maximum return.

In order to improve retailer/manufacturer collaboration, four areas must be addressed: 1. Closer alignment of objectives and mutual respect for each others KPIs. It will continue to be difficult to achieve true collaboration if both parties have different success metrics. 2. Upfront agreement on post-program evaluation criteria, and a willingness to measure and share results. Both partners must commit to sitting down and reviewing the good and bad aspects of programs. 3. Processes for applying the learnings for future program improvement. Both retailers and manufacturers must also commit to cascading learning throughout each others organizations to best apply the knowledge and experience theyve gained from working together. 4. Increased commitment to joint long-range planning. Neither retailers nor manufacturers turn on dimes, so its only prudent to get well ahead of activation deadlines.

Implementing the plan

The most important steps are easy. Collaborating with business partners is somewhat like nurturing a friendship. You have to care about the friend, you need to spend some time with her, understand her needs and selflessly help her. Brand marketers need to spend more time in the field office working directly with their retail customers. The more progressive marketers make field sales office experience a part of the brand manager career path. This helps manufacturers gain a better appreciation of retailers business issues, as well as a better understanding of the shoppers buying process. Retailers also need to be open and honest and nurture the relationship.

Call to action
Shopper marketing promises great returns for the entire industry. Retailers are effectively differentiating their banner, manufacturers are extending brand equity right up to the first moment of truth, and shoppers are enjoying a better retail experience. Those that collaborate better and implement measure-learn-change processes are much more likely to be successful.

For more information on the PMA and its Shopper Marketing Center of Excellence, please visit or call (212) 420-1100.