beyond transactions: building customer partnerships in consumer goods

Beyond transactionsBuilding customer partnerships in consumer goods An Economist Intelligence Unit white paperSponsored by SAP

© Economist Intelligence Unit Limited 20091

Beyond transactionsBuilding 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 fi ndings and views expressed in this report do not necessarily refl ect 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



2

Contents

Introduction 3

Key fi ndings 4

Conclusion 7

Appendix 1: Overall survey results 8

Appendix 2: Americas survey results 13

Appendix 3: Asia-Pacifi c survey results 18

Appendix 4: EMEA survey results 23



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 fi rst 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 fi rst 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-Pacifi c 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.



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-specifi c relationships.

Gathering customer feedbackThe 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 fi ndings

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



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 5040

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)



6

How the three regions differRespondents 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-Pacifi c. More respondents also agree than disagree that over the last fi ve 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-Pacifi c and EMEA.

Asia-Pacifi c. Asia-Pacifi c respondents are the least likely to cite the global recession as their biggest problem in the past year, refl ecting the healthier economy of that region. In keeping with the “export or die” mantra, Asia-Pacifi c 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 fi rms 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-Pacifi c, use the newer online social media less frequently than older feedback channels.



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 infl uential 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 profi tability; prioritise marketing expenditures based on the value of the individual retailer/distributor.

Conclusion

8 Economist Intelligence Unit 2009

Appendix 1Overall survey results


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 knowunits 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




Measuring/optimising effectiveness of marketing and promotional campaigns


Maximising repeat purchases and building consumer loyalty


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




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

0

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


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


In which of the following ways does your organisation empower consumers? Select all that apply. (% respondents)

63

35

32

31

0

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 usingWe are worst at collecting and using

39 25

36 21

18 29

4 39

26 12

33 8

21 7

33 13

11 26

00

7 15




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




45

8

6

8

32

$500m or less

$500m to $1bn

$1bn to $5bn

$5bn to $10bn

$10bn or more

What are your organisation’s global annual revenues in US dollars? (% respondents)

General management

Strategy and business development

Marketing

Finance

Sales

Operations and production

IT

Procurement

Supply-chain management

Customer service

R&D

Information and research

Risk

Legal

Human resources

Other

What are your main functional roles? Please choose no more than three functions.(% respondents)

40

24

24

21

20

15

10

10

7

6

5

4

2

2

2

6

Board member

CEO/President/Managing director

CFO/Treasurer/Comptroller

CIO/Technology director

Other C-level executive

SVP/VP/Director

Head of Business Unit

Head of Department

Manager

Other

Which of the following best describes your title?(% respondents)

2

15

8

2

4

15

5

15

27

5


Appendix 2Americas survey results


Appendix 2: Americas survey results

32

29

21

14

4





Other












Other


4 11 21 43 14 7

4 14 21 39 18 4

7 11 39 29 14 0

7 14 29 29 14 7

7 11 39 18 18 7

18 11 18 32 18 4

15 4 37 15 19 11

7 4 21 46 18 4

11 14 21 36 14 4

7 7 14 7 64

















Other

Don’t know


39

32

29

29

29

25

21

21

18

11

11

11

7

7

4










Other



46

32

29

29

21

21

18

14

7

4

4















25 68 7

68 29 4

64 29 7

33 48 19

32 54 14

32 39 29

50 46 4

57 32 11

46 43 11

50 36 14

46 39 14

36 39 25














Other

Don’t know


68

29

25

21

21

11

11

11

11

4

11

0





Other



29

25

21

18

4

36





Other



54

36

36

36

0

14










Other

Don’t know



43 14

36 14

25 18

4 29

29 14

32 4

21 7

32 21

18 32

00

7 25














Other

Don’t know


36

29

29

29

29

25

21

18

7

7

4

7

North America

Latin America

Asia-Pacific

Eastern Europe

Western Europe



89

11

0

0

0

0

39

39

21






Empower salespeople




Forecast demand



Adjust pricing

How well is customer and consumer information from all sources used to accomplish the following goals?.(% respondents)

14 29 36 7 7 7

11 46 18 14 11

11 39 36 14

14 29 29 25 4

8 27 38 19 8

11 36 29 14 4 7

4 46 29 11 4 7

4 30 56 4 4 4




Board member





SVP/VP/Director


Head of Department

Manager

Other


0

7

7

0

4

18

0

14

43

7

50

11

7

4

29

$500m or less

$500m to $1bn

$1bn to $5bn

$5bn to $10bn

$10bn or more


General management

Marketing

Sales



Finance

R&D



IT

Procurement

Legal

Human resources

Risk

Customer service

Other


29

29

29

21

18

14

11

7

7

4

4

4

4

0

0

14


Appendix 3Asia-Pacifi c survey results


Appendix 3: Asia-Pacifi c survey results

46

27

12

8

8





Other












Other


19 15 50 15 0

12 23 27 38 0

8 4 23 38 27 0

12 12 19 42 15 0

15 8 19 38 19 0

15 19 19 38 8 0

15 27 27 23 8 0

8 12 19 23 35 4

4 31 4 42 19 0

17 17 67

















Other

Don’t know


54

46

42

38

35

27

27

27

23

23

23

15

4

0

0










Other



46

46

42

35

31

27

23

19

4

0

0















23 73 4

69 19 12

65 23 12

15 62 23

31 42 27

12 50 38

50 46 4

69 23 8

62 27 12

58 31 12

54 27 19

38 54 8














Other

Don’t know


58

46

46

35

23

23

19

12

8

0

4

0





Other



62

35

31

23

0

0





Other

Don't know/Not applicable


69

38

31

27

0

8










Other

Don’t know



27 35

35 23

12 42

4 54

31 12

38 8

31 4

27 4

8 23

00

8 8














Other

Don't know


58

35

35

31

31

23

23

15

12

12

0

0

Asia-Pacific

Latin America

North America

Eastern Europe

Western Europe



100

0

0

0

0

0

54

35

12






Empower salespeople




Forecast demand



Adjust pricing


27 38 35

12 54 15 15 4

19 42 27 12

19 27 46 4 4

8 38 35 12 8

19 42 19 15 4

23 27 27 8 8 8

8 50 23 8 8 4




46

12

12

12

19

$500m or less

$500m to $1bn

$1bn to $5bn

$5bn to $10bn

$10bn or more


General management

Finance


Sales

Customer service

Procurement

IT


Marketing


Risk


R&D

Legal

Human resources

Other


42

31

15

15

15

15

12

12

12

8

4

4

4

0

0

4

Board member





SVP/VP/Director


Head of Department

Manager

Other


4

19

8

0

4

15

12

12

27

0


Appendix 4EMEA survey results


Appendix 4: Europe Middle East and Africasurvey results

47

33

10

7

3





Other












Other


17 10 47 27

3 10 13 47 27 0

20 20 40 20

7 17 37 27 13 0

13 10 37 33 7 0

3 27 37 30 3 0

3 17 43 30 7 0

3 7 17 47 23 3

24 31 31 10 3

100

















Other

Don’t know


53

47

43

37

30

27

23

20

20

20

10

10

10

0

0










Other



37

33

33

30

30

30

27

23

3

3

3















23 77

80 10 10

60 27 13

23 60 17

43 40 17

40 50 10

40 50 10

70 23 7

40 57 3

67 27 7

40 53 7

30 57 13














Other

Don’t know


80

40

30

30

23

13

10

10

7

3

10

0





Other



53

43

23

13

0

7





Other



67

33

30

27

0

10










Other

Don’t know



47 27

37 27

17 27

3 37

20 10

30 13

13 10

40 13

7 23

00

7 13














Other

Don’t know


43

33

30

27

27

23

23

20

17

13

0

3

Western Europe

Eastern Europe


Asia-Pacific

Latin America

North America


57

23

20

0

0

0

50

40

10






Empower salespeople




Forecast demand



Adjust pricing


14 31 31 14 3 7

10 27 43 17 3

23 33 17 23 3

13 33 30 20 3

27 27 30 17

24 34 38 3

3 60 23 10 3

17 47 23 7 3 3




Board member





SVP/VP/Director


Head of Department

Manager

Other


3

20

10

7

3

13

3

20

13

7

40

3

0

10

47

$500m or less

$500m to $1bn

$1bn to $5bn

$5bn to $10bn

$10bn or more


General management


Marketing

Finance


Sales

IT

Procurement


Risk

Customer service

Legal

Human resources


R&D

Other


50

33

30

20

17

17

13

10

7

3

3

3

3

0

0

0

28

Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsors of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper. Co

ver i

mag

e: S

hutt

erst

ock

LONDON26 Red Lion SquareLondon WC1R 4HQUnited KingdomTel: (44.20) 7576 8000Fax: (44.20) 7576 8476E-mail: [email protected]

NEW YORK111 West 57th StreetNew York NY 10019United StatesTel: (1.212) 554 0600Fax: (1.212) 586 1181/2E-mail: [email protected]

HONG KONG6001, Central Plaza18 Harbour RoadWanchai Hong KongTel: (852) 2585 3888Fax: (852) 2802 7638E-mail: [email protected]