Analyst News -- December 2003

A solution that, in years past, was seemingly in search of a problem to solve, customer relationship management (CRM) lacked tangible applicability in the CG landscape. Many questions surfaced surrounding the technology and so did the elusive search for ROI in CRM -- it reminded me of the old Wendy's commercial -- "Where's the beef?" As recently as two to three years ago, I recall reviewing the inventory of CRM solutions available at the time that raised the following questions:

> Automate the sales force using contact management, call reporting and other sales force automation (SFA) tools? Great, we're going to save 0.0001 full-time equivalents! But where are the hard dollars in that?

> Sales order configuration for order management processes? Would it produce a worthwhile ROI?

> Call center functionality in our customer service area? How about computer telephony integration (CTI)? But do we really need a computer to tell us that Harry from Target's replenishment office was calling before we answered the telephone? How much more was Target willing to pay us for those personalized cordials?

> Drive our sales activities directly to the consumer through the Internet? CRM was going to mean personalized web pages and oodles of margin. I'm no Mary Meeker, but I think the bricks won!

I can go on and on, but you get the point.

Clarity Emerges

That was then. Now, suddenly, over the past year or so, clarity has emerged.

Not only are the economic opportunities behind CRM compelling, but the emerging strategic (private label growth) and regulatory forces (Sarbanes Oxley) are driving convergence and focus on several critical areas of CRM application. A good number of examples of this newfound clarity are emerging across the CG landscape. The most notable examples include Procter & Gamble and H.J. Heinz with their deployment of common account planning and trade promotion platforms that are leveraging Siebel's eConsumer Goods suite.

Additionally, companies such as Kraft and Nestle are breaking new ground in direct to consumer permission marketing. These companies are aligning consumer marketing efforts across a number of channels and redefining connectivity of the CG company to consumer relationship -- perhaps executing true consumer relationship management. They are no longer willing to cede total ownership of the consumer to the retailer.

Handheld Protocol

The proliferation of handheld devices and advanced wireless protocols allows more store-level follow through than one could imagine a few years ago. Field level personnel are monitoring out-of-stock positions, ensuring promotional merchandising elements are effectively displayed and competitive activity is communicated back to headquarters. All this brings visibility to the store shelf. Revlon is leveraging these tools to dramatically impact in-stock positions across their most critical retail outlets.

The Future

The past year was a building period for CRM within the consumer goods industry. With the combination of clarity of purpose and demonstrable benefits starting to amass, CRM interest levels and adoption are growing by the minute. I foresee significant CRM developments throughout 2004 that include:

> CG companies will continue to advance their capabilities in account planning and trade promotion effectiveness -- advances in pre-event evaluation, pricing optimization, the usage of consumption data in analytics and the linkages with both the supply chain and retail execution will all become the next wave of focus.

> The total cost to serve and manage trade relationships will be positioned at the forefront of the trade effectiveness agenda. Hidden costs embedded within the supply chain -- promotional displays, custom packs, inventory carrying costs and the like -- will gain visibility like never had before.

> By recognizing the benefits and ROI, CG companies will expand CRM solutions outside of traditional retail focused lines of business/divisions and into other divisions such as food service and industrial,

> On the solution provider front, two dominant players will emerge as the technology suppliers of choice: Siebel and SAP. Siebel will further leverage its broad suite of CG functionality and customer base to drive the convergence of trade marketing, consumer marketing, partner collaboration and retail execution -- all in a single platform. SAP's CRM 4.0 release promises a robust solution architecture around the five-step closed loop trade promotions process.

The Bottom Line

CRM has evolved from hype and conjecture to clarity and tangible value for CG companies. It is not by chance that its adoption and momentum are increasing at a growing rate across all segments of the industry. As a matter of fact, given the industry's preoccupation with supply chain efficiency and cost reduction for the better part of the last five years, it is the logical next step of progression. I believe we will see an added evolution in the near future, where the tight linkage of supply chain and CRM capabilities will drive competitive advantage from both a cost and customer loyalty standpoint. Deloitte research indicates that those who link their supply chains to customer facing processes are significantly more profitable