Between the Lines -- March 2004

Consumer Products companies face a unique combination of sales and marketing challenges not seen in other industries. Trade promotion spending and private label competition, for instance, create a tough environment to bolster brand equity. CGT caught up with John Pollard, vice president of product strategy, CAS Americas to discuss these challenges. John draws upon a vast pool of experience, including a stint at Bausch & Lomb, to serve up a unique perspective on POS data, price and promotion optimization and private label competition.

Do you see consumer goods companies seeking solutions that offer more than a generic TPM or SFA functionality?
We find that most Tier-1 and Tier-2 consumer goods companies have some level of automation around trade promotion management or SFA capabilities simply to remain competitive. When they look for more specialized capabilities, they have a better understanding of what technology can provide their selling, executive and marketing organizations.

They are looking for more specific capabilities now that they have their hands on the transactional data that flows across the enterprise, and they are looking for more intelligent output from their technology investment. If you gather a lot of information on a solution platform and make it more readily available to marketing, sales and investment teams, CG companies will actually be more proactive with their strategy session.

Elaborate on the integration of POS scan data into a trade solution suite.
I have a bit of a bias. In my practical experience, I held roles that included the brand manager and category manager for a Fortune 500 company for a number of years.

A great perspective to have, obviously.
There was always a reliance on this third-party market data, such as an AC Nielsen or an IRI. However, there are technical capabilities available now -- software providers that specialize in data mining, data collection and POS data. It's a pretty unique animal. Any company that provides data mining and collection capabilities around the technical information will be vitally important to the future of the CG industry. Where the reliance in the past has been in parts data, it is now critical to take another perspective and consider integrating the transactional data or POS data into a trade platform.

Regarding POS data, how do you create a 360-degree view of the customer without Wal-Mart's syndicated data?
First off, point solutions have capabilities around POS, data mining and cleansing abilities. Secondly, POS data is not just necessary for the category manager at Wal-Mart or for the key account manager at Target, but that type of transactional data is also relevant in the budget process and for production management and category management. It's relevant in the forecasting model, and it is also relevant when it comes to supply chain management, demand planning and other similar processes.

Our goal is to look at it and say this data is really premium unleaded fuel and you can take it across the enterprise and make it pertinent to everything you do.

How can CG firms do a better job with price and promotion optimization?
Most of the large Tier-1 and Tier-2 companies have come up with automation around price and promotion capabilities, business planning capabilities and budget allocation capabilities. This helps to define their strategy a little more versus being in a reactive mode of administering tactical promotion that was used in the past. That is why price and promotion optimization is interesting.

A CG firm wants to learn how to price its products better, knowing that one price for all of its products and for all of its customers is not the way to do business anymore. In addition, all merchants are not created equal. We are seeing that manufacturers are finding this to be extremely important.

How can manufacturers empower their brands to bolster retail relationships?
Wal-Mart has perfected the ability to offer a certain product at a certain price point to a certain consumer in a short length of time to increase return and it has done it better than anyone that I have ever seen. Manufacturers are now being given the same capabilities, so there is a certain level of return that Wal-Mart expects from a large manufacturer across a number of its brands.

Also, manufacturers need to look for capabilities that will help them replenish more quickly, efficiently and effectively. Reducing out of stock is critical because they know that is not only lost time, but is more likely a retail shift to private label, and they may never get that shelf space back.

How should CG firms address private-label competition?
Providing solutions around price optimization is one way to combat or cohabitate with private label. Battling head to head with the private labels isn't fruitful. It is part of the business, and the more quick wins you can have, the better. Also, a more effective execution of retail -- making sure you have a branded product on the shelf -- is also a way to compete with private label business.

Do manufacturers need to tap into consumer loyalty by analyzing the history that consumers have with specific brands?
It's fascinating. Private label has benefited from consumer confusion. It's not that they don't like branded products or that they are not willing to pay a premium price for a better product. It's just that there are simply more brands out there.

Plus, retailers have more control of the process from product generation distribution to placement on the shelf. Retailers are taking advantage of the broken processes that exist in some of the world's largest manufacturers. They know that they are ineffective and inefficient in the way they do things in retail. You can't blame the retailer for enjoying the margins that private label provides.