Driving Retail Collaboration

In 2012, consumer goods (CG) manufacturers need a new “currency” to fuel collaboration with retail trading partners. This new currency should be based on consumer and shopper insights that define win/win/win (consumer/retailer/manufacturer) ideas for mutual growth. Johan Sauer of Cognizant’s Consumer Goods Consulting Practice (www.cognizant.com) explains the origins of the trade promotion model, and how to drive collaboration with retail trading partners.


CGT: What are the origins of our trade promotion model?

Sauer: The current trade promotion model of high list prices and aggressive promotions dates to the “Nixon Shock” of 1971. In response to rising inflation, Nixon invoked a 90-day wage and price freeze (as well as eliminating the gold standard for the dollar). When the freeze ended, manufacturers raised prices in fear of another price hold. But the new prices were not sustainable, and so began our 40-year journey into trade promotion. Since that time, trade promotions have become ingrained in the processes and metrics of the CG industry. Yet, the processes and rewards for sales teams and retailer category managers too often provide disincentives to optimize trade spending, rendering it a zero-sum game.  

After years of battling over trade dollars, it is time for industry leaders to develop a new currency to drive collaboration and value between trading partners. This new currency is based on insights that are shared for mutual benefit.


CGT: How do you establish and begin to trade in this new currency?

Sauer: Understand your trading partner’s objectives and strategies. What makes the banner relevant to consumers versus competitors? What are consumers and shoppers saying in social media channels regarding your customer? How are they planning to grow; increase loyalty of certain customer groups?

Build an internal culture of analytics. This is more than creating a demand signal repository. It is about using hard data to drive decision-making across the business. This often starts at the top with business leaders demanding more intuitive, actionable ways of digesting information and creating insights. It is focused on sharing tools and techniques across account teams. We are seeing a new analytics approach emerge where companies outsource the heavy lifting of data collection, alignment and storage, together with the “operational” analytics and reporting. This frees the business to focus on strategic analytics, to better understand the customer and to deliver value, to trade in the new currency of analytics.

Deliver value quickly and consistently. Like any currency, the currency of analytics must be “liquid”. It has to convert to value quickly and dependably. By starting with a pressing retailer need, the first “transaction” is likely to create value. With an analytics factory in place, account teams can provide a consistent stream of value-producing insights. This same analytics capability will address price optimization, assortment optimization as well as trade promotion optimization.

Trade promotion has a purpose in the trading relationship and can create real value. With all the analytical tools and data available, we believe it is time to create a new currency to trade between retailers and suppliers. This currency pivots around insights and is focused on creating mutual value to effectively reinforce brand and banner strategy.