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RETAILER COLLABORATION: SEIZING THE OPPORTUNITY EUROPEAN CONSUMER GOODS SURVEY 2017

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Page 1: RETAILER COLLABORATION: SEIZING THE OPPORTUNITY...SEIZING THE OPPORTUNITY • Retail channels are fast-evolving, and CPG manufacturers clearly recognize the increasing importance of

RETAILER COLLABORATION:

SEIZING THE OPPORTUNITY

EUROPEAN CONSUMER GOODS SURVEY 2017

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Customer-centric retailing delivers 2%+ category growth

above the market average

2 www.symphonyretailai.com

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Ensuring the shopper is at the heart of everything, delivers profitable growth through increased loyalty and affinity for brands and retailers alike. Customer-centric retailing requires genuine collaboration in identifying how retailers and manufacturers can differentiate their offering and deliver shopping experiences that delight their customers.

The availability of retailer data, and the translation of shopper insights into actionable initiatives is vital in the development of effective, joint business plans and delivering profitable growth. So, to what extent has true collaboration through this shared shopper understanding been achieved?

The ever-increasing pressure on retailer margins through the growth in discounting, e-commerce and increased competition, offers a real opportunity for CPG manufacturers to provide an alternative to the current focus on price and the inevitable race to the bottom.

Our survey of Europe’s largest consumer goods manufacturers, at senior levels, identifies where the opportunities lie and looks at how we can move forward in reducing the collaboration gap. We hope you enjoy our report.

Our Survey

SEIZING THE OPPORTUNITY

• Retail channels are fast-evolving, andCPG manufacturers clearly recognize theincreasing importance of retailer insights tostay ahead of these trends.

• Strong desire to collaborate morestrategically with retailers, although some ofthe old obstacles still exist.

• Variable levels of satisfaction with currentability to achieve actionable results throughretailer insights. Some excellent results; somefrustrating experiences.

SURVEY HIGHLIGHTS• Key benefits are seen as promotional ROI,

and category management (assortment andmerchandising), while utilization in branddevelopment and targeted marketing are stillrelatively underdeveloped.

• Recognition that in-store testing offerscompelling evidence for category andbusiness development initiatives, althoughnot all have access to sophisticated tools thatenable control store selection, and real-timetracking of results.

• Joint Business Planning (JBP) andalignment of objectives is a key determinantin true collaboration – but a lack ofconsistency in JBP collaboration tools andprocesses is problematic.

3Copyright © Symphony RetailAI. All rights reserved.

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It’s a 10; we have the low hanging fruit already, so insights are key to help us accelerate growth.”

We need less focus on purely transactional business and negotiations, and more focus on shopper-centric, fact-based decisions and joint, forward-looking opportunity identification.”

More important, because competition is increasing and the price/promotion focus is excessive.”

Retailers have never had a more uncertain future, with digital and new channels; we need to ensure we partner with them. We depend on them and vice-versa.”

How would you describe the importance of retailer insights to your business today?

Question:

The lowest score (4), came from a category with considerable legal restrictions, which impacts the opportunities to leverage retailer insights. While retailer data has been available for some time, and many manufacturers have been proactive in using it, there is still some variation in the extent to which these insights are leveraged. This is often dependent on leadership, KPIs, skills and company culture.

When asked about the importance of retailer insights, nearly 80% of manufacturers surveyed rated it between 8-10 out of 10.

RETAIL INSIGHTS ARE INCREDIBLY IMPORTANT, AND INCREASINGLY SO.

less than 5 5 to 7 8 to 100

50

100

Importance of Retailer Insights

4 www.symphonyretailai.com

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We want to change the pitch away from price, into something more category-driven.”

An increasing demand from retailers to customise brand programmes.”

A growing need for growth, and the unconditional demands by retailers.”

Critical to help retailers develop value propositions to drive shopper loyalty; Amazon’s Subscribe & Save shows that it’s very hard to break that kind of loyalty.”

We are changing our internal strategic alignment to be more customer- focused in all areas of our business.”

What is driving the increasing importance of retailer insights?

Question:

Discounters are improving their offering and in-store environment, hypermarkets are repositioning as multi-service destination hubs, incorporating e-commerce and foodservice, and convenience stores are evolving from top-up shops to more frequently-used, as single, urban households continue to increase.

KEY TRENDS DRIVING THE INCREASING IMPORTANCE OF RETAIL INSIGHTS

Customer centricretailing plansthough retailer

insights.

Growth of discounters &focus on price.

Growth of e commerce:squeezing margins and reducing

impulse purchase

Explosion of omni-channel shopping:

driving need for integratedplans & budgets

Reduced basket spend-inc trips to smaller formats:increasing pressure on assortment

planning in smaller stores.

Channel Convergence:hypermarkets & c-stores repositioning,

link to e-commerce (click & collect)

5Copyright © Symphony RetailAI. All rights reserved.

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Retailers need to differentiate themselves more; and we need retailers to share more insights. We need to move from channel plans to more specific retailer plans - only by knowing these specificities, can we differentiate the activation.”

Hopefully retailers will follow our fact-based advice. We need to talk the same language - using their own data to prove which products contribute to category growth.”

Retailers have long expressed the desire for suppliers to offer tailored brand programs, but true differentiation is borne out of fully understanding the shopper at home, online, in-store and their habits and attitudes at every point in between. This mutual understanding fuels category growth initiatives. Lack of progress is often due to the time and short term margin pressures on retailers, but increasingly retailers are open to a more collaborative approach.

Yet, the momentum still appears to be weighted on the side of the manufacturers as some retailers, despite their desire for differentiation, are not demonstrating a consistent commitment to achieving it.

The convergence of channels, as each retail space aims to become more things to more people, means the need for retailer differentiation is greater than ever.

THE COMMON GOAL: DIFFERENTIATION

What are the business benefits that Europe’s leading CPG’s expect from retailer insights?

Question:

LEARN

UNDERSTAND

ACHIEVE DIFFERENTIATION

6 www.symphonyretailai.com

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What differentiates those retailers that are really good at customer centric-retailing?

Question:

..where we can develop JBPs and proper customer development plans.”

..wherever we have a JBP – we have to have common objectives. Without this it’s just tactical.”

..when there’s a sharing relationship, and we can get to specific insights, it definitely reflects in the overall relationship with the retailer. With Jeronimo Martins and Sonae in Portugal - when they share insights with us, it allows us to ‘fly’ in how to activate.”

..when they really understand how to get the most value from the tools; when there’s a common understanding between retailer and manufacturer, and a determination to implement based on the insights.”

..when they take a broader perspective of a category - looking at the entire shopper journey at category level - what is the path to purchase - pre-store vs. in-store, in aisle/ at shelf - both fornew users and existing category shoppers.”

JOINT BUSINESS PLANNING AND ALIGNMENT: THE KEY TO COLLABORATION

7Copyright © Symphony RetailAI. All rights reserved.

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What people have said:

Collaboration was often seen to be better at the more senior or regional level, and weaker at the local level when commercial issues can often take precedence.

When asked which retailers were “best in class” at collaborating around insights, a range of European retailers were mentioned, with the general view that most were improving.

COLLABORATION VARIES BY RETAILER …

“Responsive to insights”

“Good! we have a long term JBP approach with them”

“Good- on a sporadic basis”

“Best in class”“Getting into this”

“Way ahead”

“Improving & Quite collaborative”

“Improving”“One of the best in the UK”

“Improved a lot”

8 www.symphonyretailai.com

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Lack of trust, and the old ways of working are the biggest obstacles; only by partnering can we win.”

In the Discounter-driven German retail market with low profit margins, there’s limited belief that collaboration is better than negotiation to drive business results.”

Price and margin still play a huge role vs. what’s right for the shopper. There’s a lack of courage among buyers to implement new ideas, and a fear of failure. It’s especially hard when your recommendations go beyond one category.”

Commercial conditions always come first; when something’s wrong here, there’s no interest in sharing insights.”

Some retailers are over-charging for their data. This should be viewed as a source of growth rather than a means to make money from just selling the data.”

Skill sets today in CPGs are too analytical, and not sufficiently creative/action-oriented. The key is to convert insights into selling stories.”

The major obstacles to greater customer-centric collaboration were reported as a lack of trust, reluctance to use shopper data on behalf of the retailer, and the overriding focus on margin. A lack of alignment of goals was also cited as a key obstacle.

OBSTACLES TO COLLABORATION ARE NOT NEW.

What are the obstacles to greater customer-centric collaboration?

Question:

9Copyright © Symphony RetailAI. All rights reserved.

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When asked to rate the value of the tools and training/coaching by loyalty data providers, scores ranged from 1 to 8, again showing a significant opportunity for some data providers to improve. The best data providers should offer category knowledge and insight development training, and so facilitate mutual understanding between retailer and manufacturer.

Scores for the level of ‘action’, taken by retailers as a result of data insights also ranged from 4 to 8 suggesting retailers may be more responsive to some manufacturers, or the actions they propose, than others.

Given the clear importance of retailer insights, scoring between 8.1 to 10, the relatively low scores obtained for all other measures suggests there is significant work to be done in developing better tools, training and finding new strategies to impact engagement and therefore business results.

When asked to rate the level of engagement with retailers and quality of the business results achieved through the use of loyalty data, scores from European manufacturers ranged from 3 to 8/10, indicating some have found effective ways of working with key retailers whilst others have yet to achieve this.

DISSATISFACTION WITH THE STATUS QUO, FOR SOME

Loyalty providers’ facilitationTraining/Coaching

ToolsAction taken by retailers

Business ResultsRetailer engagement

Importance of insights

Not satis�ed

Very satis�ed

How would you rate...

10 www.symphonyretailai.com

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Loyalty providers’ facilitationTraining/Coaching

ToolsAction taken by retailers

Business ResultsRetailer engagement

Importance of insights

Not satis�ed

Very satis�ed

The application of key retailer insights is crucial in meeting shopper expectations and driving value through the assortment offering and shopper experience.”

The most common reason for 55% of shoppers was, ‘products that they wanted being regularly in stock’ whereas 52% stated a ‘convenient location’ was highly influential. Factors relating to convenience and the right assortment all featured more strongly than those relating to price. While 47% of shoppers cite “good value for money”, only 39% cited “lowest prices overall” as highly influential.

Typically saving time and the quality of the in-store experience weigh more heavily than price, in the store decision-making process.

A recent survey by a global research firm, looked at the factors which shoppers stated were ‘highly influential’ in their choice of retailer.

PRICE IS IMPORTANT – BUT IS NOT THE WHOLE STORY.

Products wanted regularly in stock

Convenient location

Good value for money

Carries items needed

High-quality fresh produce

Has lowest prices overall

Easy to get in/out quickly

Great sales and promotions

Layout means easy to shop

High-quality meat department 33%

34%

35%Assortment

Convenience

Cost

37%

39%

45%

46%

47%

52%

55%

“Highly Influential” factors when choosing grocery retailer

11Copyright © Symphony RetailAI. All rights reserved.

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Net Revenue Management is a huge initiative, and promotional effectiveness is one of the major pillars.”

Useful for building shopper-based account plans e.g. why would we buy impulse space when 90% of purchases are pre-planned?.”

Insights into pre-store and in-store touchpoint insights are critical to spend money in the right way.”

We don’t do a lot of promotions ROI analysis, because we don’t have the resources to track them. We’ve done analysis before but it’s not been very insightful. Lots of factors drive effectiveness, like the weather.”

When asked to rate the value of retailer insight in reallocating ineffective promotional spend, all manufacturers rated this highly. The ability to illustrate the over-promotion of some categories, or the ineffectiveness of some promotions at a total category level is valued by manufacturers and retailers alike.

RETAILER INSIGHTS: IMPROVE PROMOTIONAL EFFECTIVENESS

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

Please rate the value of retailer insights when reviewing promotional funds. 1 is low and 10 is high.

Question:7.5 out of 10 for importance

12 www.symphonyretailai.com

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Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

Really useful for switching analysis, or for seeing the big volume drivers so we can double-space and reduce OOS.”

Especially useful in making the right pack/price recommendations.”

Would like to be able to get insights on the impact of secondary displays.”

Most actionable for us; argumentation about the right range is very useful.”

All respondents in our survey rated highly the use of retailer insights in determining the optimum assortment when making merchandising recommendations.

RETAILER INSIGHTS: KEY TO AVAILABILITY AND ASSORTMENT

EPOS data alone is no longer sufficient to determine an optimal mix. To achieve sustainable growth, categories must provide an offering for every shopper at all price points for every need. Retailers and CPG’s must develop creative assortments and fixtures in store, and compelling dialogue though other channels, in order to drive the loyalty of their most valuable shoppers.

Please rate the value of retailer insights when working on assortment recommendations. 1 is low and 10 is high.

Question:

7.7 out of 10 for importance

13Copyright © Symphony RetailAI. All rights reserved.

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We are not using it enough yet; there are lots of potential learnings for the brand teams.”

Good for brand managers to see key purchases vs consumption… it is better than other kinds of research that measure claimed purchase/consumption.”

We discovered our brand was purchased very heavily on a Sunday evenings- key in understanding consumption habits.”

Symphony Retail data is better than other kinds of research that measure claimed intention to purchase.”

Millennials are less loyal. Will go with what makes them feel good. So shopper insights are more important.”

Manufacturers vary significantly when it comes to using retailer insights for brand development purposes. When asked to rate the value of retailer insights in brand development, scores ranged from 2 to 10, indicating some manufacturers are generating real consumer insight from their data and using it to understand the consumer as a shopper. Others surveyed recognized the opportunity in retailer insights fueling brand plans, but had yet to action.

RETAILER INSIGHTS: BRAND DEVELOPMENT

Please rate the value of retailer insights for brand development 1 is low and 10 is high.

Question:

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

6.2 out of 10 for importance

14 www.symphonyretailai.com

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Yes because the database is so big, so it’s a statistically relevant sample for whatever you want to explore.”

Should be important, but we haven’t done much yet. Still in its infancy.”

Very interested in Loss/Gain analysis – new shoppers, and lost shoppers, substitution data, etc.”

Would help with message management to new category users vs. re-purchasers.”

Especially for e-commerce, that’s the best place to activate this.”

The value of retailer data in delivering and measuring the effectiveness of direct marketing and 1 to 1 communication was rated highly by nearly all CPG’s surveyed. Verbatim comments however suggested this was an advanced capability that was somewhat aspirational.

RETAILER INSIGHTS: VALUABLE IN DELIVERING 1 TO 1 MARKETING.

Understanding the impact of 1 to 1 communication with either a brand’s most valuable consumers (MVC’s), or those with the most potential, can deliver the most lucrative and measurable ROI for marketing managers.

Please rate the role of retailer insights for better activation of 1 to 1 marketing. 1 is low and 10 is high.

Question:

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

7.3 out of 10 for importance

15Copyright © Symphony RetailAI. All rights reserved.

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Can give you insights about touch-point effectiveness – which ones drive conversion best.”

We’re starting out, but the re-testing, and refining process doesn’t work as smoothly as it could; in near future would be valuable to have this, but local capabilities aren’t there yet.”

Especially keen to Test & Learn in e-commerce, like how to extend offers as shoppers are walking around a store.”

We’re very interested in this to explore actual behaviours vs. claimed or intended behaviours.”

The value of retailer data in conducting in-store tests was rated the most valuable of all of the applications in this research.

RETAILER INSIGHTS: TEST AND LEARN

The ability to measure the impact of changes to assortment, pricing or the addition of promotional space, the impact of NPD, distribution changes and in-store positioning enables the true impact on revenue, margin and shopper behaviour to be monitored in real time.

When compared to a set of control stores, matched on demographics and category performance, compelling business cases can be presented to retailers with clear benefits for both. The range of measures that can now be incorporated make ‘Test and Learn’ the most sophisticated and compelling argument in any business case. There is some dissatisfaction in that some retailers want to charge for this, despite the obvious win-win elements, and also some frustration at the quality of the tools currently available.

7.8 out of 10 for importance

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

16 www.symphonyretailai.com

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Have experimented with a few systems; but haven’t found one yet that really works. Use internal tools. Would like to connect external and internal data to see the complete customer.”

Process is very consistent, and cadence of meetings globally. Tools vary by retailer and locally. Performance reporting is quite automated, but not the ideation.”

Would be valuable if scalable across multiple markets.”

We don’t have tools for JBP which are standardized, but would be very interested in this.”

When surveyed, the majority of respondents rated joint business planning as a key enabler of the benefits of retailer data. While the average shows as 7.8, the vast majority of respondents scored 8+.

RETAILER INSIGHTS: JOINT BUSINESS PLANNING

An alignment of objectives and agreement with retailers on the strategies and plans to deliver them is seen as hugely influential in retailer collaboration.

No manufacturers in the survey have consistent Joint Business Planning tools across markets, and there is interest in tools that can automate the process, and ensure a rigorous and consistent thought-process.

7.8 out of 10 for importance

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

Not Important

Very Important

JBP

Test & learn

1:1 Marketing activation

Brand development

Assortment recommendations

Trade promotion optimization

17Copyright © Symphony RetailAI. All rights reserved.

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Appendix

18 www.symphonyretailai.com

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ADDITIONAL SURVEY INSIGHTSCurrent engagement level with retailers: score 5.8• “Retailers are a bit slow; too preoccupied with

price and promotion. Medium and long-termtakes a back seat. Even retailers that sell it,aren’t that skilled in using it.”

• “Hard to find aligned objectives and alignedmeasures. When it’s possible to have commonobjectives then the collaboration can bepowerful.”

Level of action: score 5.9• “Has to be massively compelling before retailers

will act; they don’t leap at opportunities.”

• “One retailer doesn’t have time to go into thesystem themselves. 9/10 times they take actionbased on our recommendations.”

Tools: score 6.2• “The tools deliver great insights.”

• “Joint Business Planning tools are notstandardized across markets; so each marketdevelops its own tools (Access/Excel).”

Quality of business results: score 6.1• “The usual issue is not to get the data, but to

translate it into actionable insights (mainly acapability issue) and then get things executed atthe POS (mainly a retailer issue).”

• “We’ve used Symphony Retail data to defendagainst de-listings, based on repeat purchasedata.”

• “Consumer Decision Trees, segmentations, andcross-category buying - we got this from retaildata. Our experiences and the business bene itshave been good.”

Training and coaching: score 5.3• “Please help us to connect the dots and

combine the data/KPIs”.

• “It’s a case of ‘buy the data and get on with it.”

The extent data facilitates engagement with retailers: score 5.3• “Coaches could give more advice on the kinds

of analysis we could do; or how to structurereports based on the style of the buyer. (e.g.more detailed-oriented vs more top-line).”

• How would you describe the importance of retailer insightsto your business nowadays?

• Is it getting more or less important to your business? What’sdriving that?

• What are the main business benefits that could begenerated from greater collaboration with retailers aroundshopper insight?

• Which retailers are best-in-class at collaborating aroundinsights?

• Rate the level of engagement you receive from retailers,based on having access to their loyalty data

• Rate the quality of business results you achieve as a resultof using loyalty data with retailers

• Rate the level of action taken by retailers as a result ofloyalty data insights, delivered by your teams to retailers

• Rate the value of the tools you use to gain insight fromretailer loyalty data

• Rate the value of training/coaching provided to your teamsby loyalty data providers

• Rate the overall ability of loyalty data providers to facilitateengagement between your company and retailers

• Do loyalty data providers help your teams navigate theretailer’s requirements?

• Are loyalty data providers able to help your teams driveaction from insight?

• What differentiates a retailer’s performance as a partner inCustomer-Centric Retailing with your company?

• Are the Brand or Trade Marketing departments able to utilizethe data/insight to improve business decisions, above andbeyond the engagement with the retail partner?

• Which types of retailer insights do you value particularly

• Reallocate ineffective promo funds• Make better assortment/merchandising

recommendations• Provide insights for brand development• Better activation of 1:1 marketing• Create opportunities for Test and Learn• Help facilitate collaborative business planning

• What is your JBP process with retailers?

• What are the obstacles to greater collaboration with retailersaround CCR?

FULL QUESTIONNAIRE

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About usSymphony RetailAI is the leading global provider of Artificial Intelligence-enabled decision platforms, solutions and customer-centric insights that drive validated growth for retailers and CPG manufacturers, from customer intelligence to personalized marketing, and merchandising and category management, to supply chain and retail operations.

Symphony RetailAI is innovating rapidly to drive faster, more profitable decisions through AI, machine learning and voice technologies. We are trusted by over 1200 organizations including 15 of the world’s 25 largest grocery retailers, thousands of retail brands, and hundreds of national and regional chains worldwide to help solve their toughest business problems, through AI-powered customer intelligence and retail solutions.

For more information, please visit www.symphonyretailai.com