RETAILER COLLABORATION: SEIZING THE OPPORTUNITY EUROPEAN CONSUMER GOODS SURVEY 2017

Transcription

1 RETAILER COLLABORATION: SEIZING THE OPPORTUNITY EUROPEAN CONSUMER GOODS SURVEY 2017

2 Customer-centric retailing delivers 2%+ category growth above the market average 2

3 SEIZING THE OPPORTUNITY 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. 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? Our Survey 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. SURVEY HIGHLIGHTS Retail channels are fast-evolving, and CPG manufacturers clearly recognize the increasing importance of retailer insights to stay ahead of these trends. Strong desire to collaborate more strategically with retailers, although some of the old obstacles still exist. Variable levels of satisfaction with current ability to achieve actionable results through retailer insights. Some excellent results; some frustrating experiences. Key benefits are seen as promotional ROI, and category management (assortment and merchandising), while utilization in brand development and targeted marketing are still relatively underdeveloped. Recognition that in-store testing offers compelling evidence for category and business development initiatives, although not all have access to sophisticated tools that enable control store selection, and real-time tracking of results. Joint Business Planning (JBP) and alignment of objectives is a key determinant in true collaboration but a lack of consistency in JBP collaboration tools and processes is problematic. Copyright Symphony RetailAI. All rights reserved. 3

4 RETAIL INSIGHTS ARE INCREDIBLY IMPORTANT, AND INCREASINGLY SO. When asked about the importance of retailer insights, nearly 80% of manufacturers surveyed rated it between 8-10 out of 10. 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. Question: How would you describe the importance of retailer insights to your business today? Importance of Retailer Insights It s a 10; we have the low hanging fruit already, so insights are key to help us accelerate growth. More important, because competition is increasing and the price/promotion focus is excessive 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. 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 viceversa. 0 less than 5 5 to 7 8 to

5 KEY TRENDS DRIVING THE INCREASING IMPORTANCE OF RETAIL INSIGHTS 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. Question: What is driving the increasing importance of retailer insights? Growth of e commerce: squeezing margins and reducing impulse purchase Growth of discounters & focus on price. Reduced basket spend -inc trips to smaller formats: increasing pressure on assortment planning in smaller stores. 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. Channel Convergence: hypermarkets & c-stores repositioning, link to e-commerce (click & collect) Explosion of omnichannel shopping: driving need for integrated plans & budgets Customer centric retailing plans though retailer insights. Copyright Symphony RetailAI. All rights reserved. 5

6 THE COMMON GOAL: DIFFERENTIATION 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. 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. LEARN 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. Question: What are the business benefits that Europe s leading CPG s expect from retailer insights? UNDERSTAND Retailers need to differentiate themselves Hopefully retailers will follow our fact- 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. based advice. We need to talk the same language - using their own data to prove which products contribute to category growth. ACHIEVE DIFFERENTIATION 6

7 JOINT BUSINESS PLANNING AND ALIGNMENT: THE KEY TO COLLABORATION Question: What differentiates those retailers that are really good at customer centric-retailing?..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 for new users and existing category shoppers. Copyright Symphony RetailAI. All rights reserved. 7

8 COLLABORATION VARIES BY RETAILER 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. 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. What people have said: Improving & Quite collaborative Best in class Getting into this Good! we have a long term Improved a lot Way ahead JBP approach with them Responsive to insights One of the best in the UK Improving Good- on a sporadic basis 8

9 OBSTACLES TO COLLABORATION ARE NOT NEW. 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. Question: What are the obstacles to greater customer-centric collaboration? 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. 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. 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. Skill sets today in CPGs are too analytical, and not sufficiently creative/action-oriented. The key is to convert insights into selling stories. Copyright Symphony RetailAI. All rights reserved. 9

10 DISSATISFACTION WITH THE STATUS QUO, FOR SOME 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. 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. How would you rate... 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. Loyalty providers facilitation Training/Coaching Tools Action taken by retailers Business Results Retailer engagement Importance of insights Not satisfied Very satisfied 10

11 PRICE IS IMPORTANT BUT IS NOT THE WHOLE STORY. A recent survey by a global research firm, looked at the factors which shoppers stated were highly influential in their choice of retailer. 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. Highly Influential factors when choosing grocery retailer Typically saving time and the quality of the in-store experience weigh more heavily than price, in the store decision-making process. Products wanted regularly in stock Convenient location Good value for money Carries items needed 55% 52% 47% 46% The application of key retailer insights is crucial in meeting High-quality fresh produce 45% shopper expectations and driving value through the assortment offering and shopper experience. Has lowest prices overall 39% Easy to get in/out quickly 37% Great sales and promotions 35% Layout means easy to shop 34% High-quality meat department 33% Assortment Convenience Cost Copyright Symphony RetailAI. All rights reserved. 11

12 RETAILER INSIGHTS: IMPROVE PROMOTIONAL EFFECTIVENESS 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. Question: Please rate the value of retailer insights when reviewing promotional funds. 1 is low and 10 is high. 7.5 out of 10 for importance 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. JBP Test & learn 1:1 Marketing activation Brand development Assortment recommendations Trade promotion optimization Not Very 12

13 RETAILER INSIGHTS: KEY TO AVAILABILITY AND ASSORTMENT All respondents in our survey rated highly the use of retailer insights in determining the optimum assortment when making merchandising recommendations. 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. Question: 7.7 out of 10 for importance Please rate the value of retailer insights when working on assortment recommendations. 1 is low and 10 is high. Really useful for switching analysis, Would like to be able to or for seeing the big volume drivers so we get insights on the impact of can double-space and reduce OOS. secondary displays. Especially useful in making the Most actionable for us; right pack/price recommendations. argumentation about the right range is very useful. JBP Test & learn 1:1 Marketing activation Brand development Assortment recommendations Trade promotion optimization Not Very Copyright Symphony RetailAI. All rights reserved. 13

14 RETAILER INSIGHTS: BRAND DEVELOPMENT 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. Question: Please rate the value of retailer insights for brand development 1 is low and 10 is high. 6.2 out of 10 for importance 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 Symphony Retail data is better than other kinds of research that measure claimed intention to purchase. JBP Test & learn 1:1 Marketing activation other kinds of research that measure claimed Millennials are less loyal. Brand development purchase/consumption. We discovered our brand was purchased very heavily on a Sunday evenings- key in understanding consumption habits. Will go with what makes them feel good. So shopper insights are more important. Assortment recommendations Trade promotion optimization Not Very 14

15 RETAILER INSIGHTS: VALUABLE IN DELIVERING 1 TO 1 MARKETING. 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. 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. Question: 7.3 out of 10 for importance Please rate the role of retailer insights for better activation of 1 to 1 marketing. 1 is low and 10 is high. Yes because the database is so big, so it s a statistically relevant sample for whatever you want to explore. Would help with message management to new category users vs. re-purchasers. JBP Test & learn 1:1 Marketing activation 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. Especially for e-commerce, that s the best place to activate this. Brand development Assortment recommendations Trade promotion optimization Not Very Copyright Symphony RetailAI. All rights reserved. 15

16 RETAILER INSIGHTS: TEST AND LEARN The value of retailer data in conducting in-store tests was rated the most valuable of all of the applications in this research. 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. 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. JBP Test & learn 1:1 Marketing activation Brand development Assortment recommendations Trade promotion optimization Not 7.8 out of 10 for importance Very 16

17 RETAILER INSIGHTS: JOINT BUSINESS PLANNING 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+. 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 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. 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. JBP Test & learn 1:1 Marketing activation Brand development Process is very consistent, and cadence of meetings globally. Tools vary by retailer and locally. Performance reporting is quite automated, but not the ideation. Assortment recommendations Trade promotion optimization Not Very Copyright Symphony RetailAI. All rights reserved. 17

18 Appendix 18

19 FULL QUESTIONNAIRE ADDITIONAL SURVEY INSIGHTS Current engagement level with retailers: score 5.8 Retailers are a bit slow; too preoccupied with price and promotion. Medium and long-term takes a back seat. Even retailers that sell it, aren t that skilled in using it. Hard to find aligned objectives and aligned measures. When it s possible to have common objectives then the collaboration can be powerful. 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 the system themselves. 9/10 times they take action based on our recommendations. Tools: score 6.2 The tools deliver great insights. Joint Business Planning tools are not standardized across markets; so each market develops 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 a capability issue) and then get things executed at the POS (mainly a retailer issue). We ve used Symphony Retail data to defend against de-listings, based on repeat purchase data. Consumer Decision Trees, segmentations, and cross-category buying - we got this from retail data. Our experiences and the business bene its have 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 structure reports based on the style of the buyer. (e.g. more detailed-oriented vs more top-line). How would you describe the importance of retailer insights to your business nowadays? Is it getting more or less important to your business? What s driving that? What are the main business benefits that could be generated from greater collaboration with retailers around shopper insight? Which retailers are best-in-class at collaborating around insights? 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 result of using loyalty data with retailers Rate the level of action taken by retailers as a result of loyalty data insights, delivered by your teams to retailers Rate the value of the tools you use to gain insight from retailer loyalty data Rate the value of training/coaching provided to your teams by loyalty data providers Rate the overall ability of loyalty data providers to facilitate engagement between your company and retailers Do loyalty data providers help your teams navigate the retailer s requirements? Are loyalty data providers able to help your teams drive action from insight? What differentiates a retailer s performance as a partner in Customer-Centric Retailing with your company? Are the Brand or Trade Marketing departments able to utilize the data/insight to improve business decisions, above and beyond 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 retailers around CCR? Copyright Symphony RetailAI. All rights reserved. 19

20 About us Symphony 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