Stick or twist? The Consumer Products company dilemma

15 February 2012

Jaime Wood

Jaime Wood

Consultant

Trends in Consumer Products markets

With the economic times of the day, Consumer Products (CP) companies are experiencing significant challenges in maintaining market share and remaining profitable, never mind achieving expansive profits targets. Consumers are changing not only the products they buy, but also where they shop. Recent surveys seem to demonstrate that perception is reality - with shoppers reducing their expenditure based not on a drop in income or loss of job, but rather because they feel like they should be cutting back based on media and social discussion. This extends through grocery shopping to social entertainment such as eating out and alcohol consumption.

Products from detergent to dog food and from bread to beer all rely on consumer need and confidence in order bleep through the checkout. How can Sales Directors alter the course of that pessimistic sales curve and present the vision and enablement of an upward trend? Software will play a role. What role, if any, does the SAP software landscape, and SAP CRM in particular have to play?

Direct and indirect channels to market

CP organisations will typically fall into 1 of 2 main channels to market. Firstly, Direct, whereby the CP organisation sells direct into their own customer base. Secondly, Indirect, where there is a reliance on retailers such as the big supermarket chains for product distribution as middlemen before the Consumer touches the product. Of course there may be a bit of both.

Strategies for winning will differ according to the organisation and sales channels in use. For Direct models there needs to be a complete and utter focus on the customer. For Indirect channels there needs to be a mechanism for creating a win:win environment for what Bluefin term "Retailer Collaboration".

IT as an enabler

Regardless of model, you can be sure that IT will play a role in analysing current performance, mapping the opportunity and executing a new approach to success. This brings me back to my strap line on this blog. As a Sales Director do you stick with the systems and processes in hand, or do you twist and seize the initiative? OK this may be a slightly uncomfortable analogy - gambling the future of your organisation and of course it's not quite like that. But the point is this. The temptation is strong to 'make do and mend', squeeze the last drops out of aging IT systems and postpone those strategic initiatives which will marginalise your competitors and secure the future. According to a recent Gartner report for 2012, "The euro crisis will likely cause IT spending to drop by almost 1 percent across Western Europe this year".

Seizing the opportunity

Battening down the hatches and hoping to weather the storm with inefficient processes and outdated tools is one way to proceed. However I'm working with a number of consumer products companies who are choosing to seize the opportunity and invest. They see the current climate as an opportunity to differentiate themselves from competitors by either providing customers with a world class experience or ensuring their Retailer Collaboration is mutually successful in creating value on both sides. Emerging from 2012 stronger than ever, with a loyal customer base acting as a foundation for growth in the next phase of the economic cycle is the goal.

Again, according to the same Gartner report, "enterprise software spending is predicted to rise by 6.4%". This is a trend already proving true with SAP recently posting record results for 2011. Note the evidence of forward thinking organisations seizing the moment.

Direct customer channel

A customer centric approach requires a single, consistent and timely view of all customer interactions and account data. Customer facing employees need highly usable and responsive tools to support high quality interaction with 100% of customers 100% of the time.  We've all experienced a poor call centre experience. Not conducive to a long term relationship is it?

What if all your interactions with a call centre were met with absolute clarity on who you are, what products you've purchased and specific offers that genuinely interest you based on an obvious analysis of you as an individual? What if all your service queries were answered on time? In essence what if the agent you're talking to just seemed to have all the right answers?

SAP's CRM software has made great strides of late in positioning solutions which at last cut to the chase and add the value.

  • 360º view of all customer master and interaction data is readily available and not just SAP CRM held data, but also from other sources both inside and outside the SAP landscape
  • A renewed focus on the Sales Force. Success of the sales pipeline is as important as it's ever been. Smarter execution of the sales cycle, benchmark analysis of the opportunity pipeline, more efficient planning of the sales force journey and on-line empowerment of the sales force to deliver on their promises are all themes I'm seeing as CP customers seek better return on sales team investment.
  • Service processes which all but demand appropriate team routing and on time SLA closure
  • Ability to propose, real time, products and services that are relevant to the customer based on infinite historic events and transactions. Checkout Jim Cook's blog on Real Time Offer Management - Is it the technology that's holding us back, or just our imagination? Suddenly even a bad experience has a silver lining.
  • Continuing the theme, how about provision of a customer loyalty scheme which will track my spending and issue credits or allow free of charge purchase based on set thresholds? Once again, as a consumer I'm gaining additional benefits for maintaining a relationship with Consumer Products Co. That's Loyalty Management.
  • Finally, as a consumer I'm now so impressed with the customer experience that I'm shouting about it on various social networking sites. How about the CP company searching the unstructured data out there via "Sentiment Analysis" in order to build an outside picture on our offering, good or bad. Then push products, services and key messages back to those communities to try and address any dissatisfaction? OK, this SAP Social Media offering isn't purely based on CRM in the SAP toolkit, but execution of outcomes in relation to that analysis may well be led by Sales, Service & Marketing business functions. Check out Tony Rosenthal's blog How social is SAP CRM?

In essence just having the data isn't enough. It's how you use it to the benefit of the customer that counts. It's an exciting time in this space as SAP CRM moves forward into new ways of managing the customer.

Indirect retailer channel

Trading via retailers is obviously a very different card game. A retailer such as a supermarket chain wants to make as much money out of CP products as possible. But the CP organisation is chasing the same goal but with an important middleman sitting in front of the consumer. How do consumer products companies ensure that the retailer is not making disproportionate profits? This is particularly relevant where promotions are involved. Short and long term promotions are designed collaboratively between CP organisation and Retailer. Trouble is the retailers often want significant sums of money up front. So how can a consumer products company be confident in the investment and also monitor the profit of the retailer in conjunction with their own profit for any of the promotions being run? How can the CP company design and plan promotions that ensure win:win (?)

SAP TPM & TPO

SAP Trade Promotion Management is well documented in a number of blogs on the Bluefin Solutions Website.

But execution of promotion management is not enough. Recently, SAP TPM got a new sibling - SAP Trade Promotion Optimisation.  In essence this allows a CP organisation to model future promotions based not only on defined parameters but importantly also on actual historical ePOS sales data. 'What if' scenarios can be modelled which will offer insight into the most appropriate promotions to run at any given time taking into consideration various factors such as pricing, historic promotions, historic sales volumes and even the weather. The tool can be used to collaborate with retailers in the design of mutually beneficial promotions based on history.

Bluefin Solutions is currently at the forefront of SAP TPO enablement in the UK. Working closely with SAP we're running initiatives under the banner of "SAP TPO In a Month" whereby CP organisations get to trial the benefits of the solution via access to a hosted SAP TPO system that's built and modelled using actual customer master and ePOS data. There's more on TPO at the above link.

Conclusion

Understanding the pain in this space is a prerequisite to any realistic evaluation of the myriad of solutions available. They say fortune favours the brave, and that may or may not be the case. The fundamental question is this. Can Consumer Products organisations afford to stick until their competitors have already taken the step forward?

 


 

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