What shoppers really want from personalized marketing.

Anyone who has gotten an unsolicited and irrelevant offer related to something they’ve done online knows that creepy feeling that someone is watching me. This kind of reaction is the third rail of today’s drive to personalize interactions with customers.

That’s a problem because, when done right, personalization can be a huge boon for retailers and consumers. Targeted communications that are relevant and useful can create lasting customer loyalty and drive revenue growth of 10 to 30 percent. The challenge is to personalize in a way that doesn’t cross lines and delivers genuine value and relevance.  But how do you know?

To better understand what customers really value, we asked 60 shoppers to create mobile diaries of their personalized interactions with various brands over two weeks. With over 2,000 entries in total, we were able to see what kind of personalized communication works for customers and what doesn’t.

Here are the five things that customers said they value when it comes to personalized communications:

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Simpler is (sometimes) better: Managing complexity in consumer goods.

Here’s how consumer-goods manufacturers can master complexity—and even turn it to their advantage.

With consumers’ product preferences diverging and retail formats proliferating, consumer-packaged-goods (CPG) companies have compelling reasons to constantly launch new SKUs. Fast-growing niche markets—such as health and wellness products, socially and environmentally responsible wares, and ethnic foods—represent enticing opportunities for CPG companies, as do new online and offline retail channels. Indeed, product innovation can help CPG companies win shelf space and capture growth, which is crucial at a time when many CPG categories are experiencing flat sales. But manufacturing more SKUs means having more complexity in the entire business system—and that’s not a trivial matter to CPG companies already under pressure to cut costs and to become ever more efficient. We estimate that complexity among food-and-beverage manufacturers, for example, is costing them as much as $50 billion in gross profit in the US market alone.

Many companies are painfully aware of the problem, and acknowledge the difficulty of keeping complexity under control. CPG executives from a range of companies—including Campbell Soup, Colgate-Palmolive, ConAgra Brands, and Hershey—have made public statements about their efforts to reduce complexity in their businesses. It’s a tricky undertaking, precisely because some level of complexity is necessary and advantageous. Traditional approaches to simplification—such as “cutting the tail,” or discontinuing the lowest-volume SKUs—are suboptimal, both because they tend to address only one aspect of the business system (a cut-the-tail program is all about assortment) and because they can produce unintended consequences. For example, by discontinuing a low-volume SKU, a manufacturer might inadvertently eliminate a product that plays a unique strategic role in the assortment. Or it might unknowingly drive up the per-unit cost of manufacturing other SKUs made on the same production line.

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Some lessons from Latin America’s leading consumer-goods companies

The Latin American economy has seen better days. Over the past few years, Latin American countries have experienced slowdowns in both GDP and private-consumption growth, a rise in inflation rates, and devaluations in currency. In this difficult environment, consumer-packaged-goods (CPG) manufacturers must make careful choices and deliberately weigh trade-offs.

How are the region’s leading CPG companies managing their customers and channels? Our survey of 35 companies offers some best practices. We examine what “winners” do differently from their peers—winners being companies that achieved higher sales growth than the categories they play in while also outperforming peers on one or more customer- or channel-management metrics. 

The survey results show that by applying best practices, companies can grow sales by more than seven percentage points ahead of others, while reducing selling expenses as a percent of net sales (Exhibit 1). This difference in performance between winners and others is bigger than in any other market we studied except China, where the gap is 17 percentage points.<sup>1

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Playing catch-up: How to partner with the retailer of the future

There’s no denying that the balance of power in the consumer industry has tilted. Retailers have the advantage over consumer-packaged-goods (CPG) manufacturers—and retail buyers are deftly using their leverage at the negotiating table. Retail buyers are more sophisticated, more analytical, and more demanding than ever. Consider this: each of the top ten US retailers employs dozens of big data professionals who provide buyers with valuable insights. The same retailers have also hired more than 70 executives from European retail companies, known for having more aggressive negotiation styles than their American counterparts. In this increasingly adversarial environment, what’s a CPG key-account manager to do?

These changes in the retailer-manufacturer dynamic are the result of three trends that have been playing out in the US consumer industry: the steady rise of newer retail channels including hard discount and e-commerce, stagnant growth among the largest CPG brands, and burgeoning capabilities in big data and advanced analytics. The trends have been evident for a few years, yet in our experience the majority of CPG sales leaders are still largely doing things the way they always have. They continue to use the same key-account management (KAM) model and they haven’t enhanced key-account managers’ skill sets to keep up with the increasingly competitive business environment.

The future success of CPG sales teams rests on how aggressively sales leaders move to overhaul their KAM model and upgrade their sales capabilities. In this article, we discuss the most important changes that CPG companies will need to make. Companies that have implemented these changes have driven incremental growth of up to 3 percent above the category, while also reducing sales expenses.

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The Retail Job

The new form of retail marketing - TESCO Homeplus, Korea