The State of Collaboration In Our Industry - Strategy& · PDF fileThe State of Collaboration...

Booz & Company

The State of Collaboration In Our Industry A Survey by

Booz & Company • DemandTec •

Trade Promotion Management Associates

Booz & Company 1

“Collaboration” – American Heritage Dictionary

“To work together,

especially in a joint intellectual effort.”

“To cooperate treasonably,

as with an enemy occupation force in

one’s country.”

Booz & Company 2

Survey Overview Key Findings About Booz & Company and DemandTec Appendix

Booz & Company 3

Survey Overview

Survey Objective:

To gain insight into current state of collaboration between manufacturers and retailers – primarily

in the Fast Moving Consumer Goods industry – to help foster further collaboration

Example Questions:

What collaboration challenges do manufacturers and retailers face?

How does each group view its trading partners’ collaboration skills?

What are the key benefits of collaboration to each group?

Logistics:

Web survey

25 questions

20-30 minutes

Respondents self-reported their answers1

(1) Booz & Company also performs a Trade Promotion Effectiveness survey, which is interview based

Booz & Company 4

Survey Participants

Retailers

AAFES

Best Buy

BI-LO

Food Lion

Hannaford

Harris Teeter

Kroger

Nash Finch

Piggly Wiggly

Price Chopper

Publix

Safeway

Supervalu

Wakefern

Manufacturers

20th Century Home Hanesbrands

Alberto Culver Hartz

Anheuser-Busch Hershey

Bacardi USA HJ Heinz

Barilla America Hormel

Cadbury Beverages Johnson & Johnson

Campbell’s Soup Company Kellogg

Cargill Kraft

Chiquita/Fresh Express Land O' Lakes

Clorox Nestle Purina

Coca-Cola Company Procter &Gamble

ConAgra Foods Ready Pac

Crayola Reckitt Benckiser

Dannon Revlon

Del Monte Sara Lee

Dreyers Schick

E&J Gallo Schreiber Foods

Energizer Unilever

Foster Farms Welch's

Georgia-Pacific Wyeth

(1) Does not include Best Buy

Represents

40% of

Retailer ACV1

Represents

55% of

Manufacturer

ACV

Booz & Company 5

Survey Respondent Revenue Distribution

Survey Respondent Distribution by Annual Revenue

Retailers Manufacturers

36%$15B+

$5B - $15 B

14%

$1B - $5 B 50%

21%

28%

$15B+

$5B - $15 B $1B - $5 B

28%

< $1B

23%

Booz & Company 6

Response by Title

Other

Manager

Group / Category Manager

Director

Vice President

C-Level 2%

6%

13%

9%

50%

20%

10%

10%

20%

35%

25%

Booz & Company 7

The majority of respondents believe collaboration is very important to their future success

Importance of Collaboration to Future Success

Very Important

56%

92%

Important

39%

8%

5%

0%

Somewhat Important

Manufacturers

Retailers

Booz & Company 8

Manufacturers and retailers collaborate most on activities related to trade promotion

Business Function %

TPM / Category Management 60%

Operations / Supply Chain Management 50%

Marketing / Consumer Insight 40%

Percentage of Manufacturers and Retailers Engaging in

Collaboration Activities by Functional Area

Booz & Company 9

Most companies currently collaborate in some

of these areas, but not systematically across

all areas

Yet, joint business planning is still an aspiration for most consumer goods companies

Continuum of Trade Promotion Manufacturer Capabilities

Internal

Capabilities

Systematic

Collaboration

Trade Payments

Trade

Funding &

Financial

Control

Promotion

Planning

Analytical

Planning /

Optimization

Post-Event

Analysis

Demand

Planning

Integration

Integrated /

Joint

Business

Planning

Foundational

Capabilities

Advanced

Capabilities

Aspirational

Capabilities

Trade Payments

Trade

Funding &

Financial

Control

Promotion

Planning

Analytical

Planning /

Optimization

Post-Event

Analysis

Demand

Planning

Integration

Integrated /

Joint

Business

Planning

Booz & Company 10

Survey Analysis

Manufacturers

vs. Retailers

More Collaborative

vs. Less Collaborative

Benefits of Collaboration

Collaboration Skills and Behaviors

Collaboration Tools

Barriers to Collaboration

Booz & Company 11

More and Less Collaborative organizations were identified by analyzing their responses on collaboration

… less than 33% of

sales volume

Retailers

Manufacturers

More Collaborative Less Collaborative

… greater than 33% of

sales volume

… less than 33% of

sales volume

Respondents

Share customer

store-level data with

vendors representing…

Categorization

Criteria

Review trade

promotion analytics

with customers

representing…

… greater than 33% of

sales volume

Booz & Company 12


Retailers vs. Manufacturers More Collaborative vs. Less Collaborative Summary

Booz & Company 13

Retailers Manufacturers

Both manufacturers and retailers have achieved many benefits of collaboration

Achieved Benefits of Trade Promotion Collaboration

16%

68%

47%

34%

37%

53%

53%

More Effective and Efficient Planning

Revenue Growth

More Effective

Promotions

More Efficient New

Product Introductions

Share Growth

Reduced Out-of-Stock

Increased Customer

Loyalty 42%

83%

58%

50%

50%

58%

75%

More Effective and Efficient Planning

Revenue Growth

Reduced Out-of-Stock

Share Growth

More Effective

Promotions

More Efficient New


Increased Customer

Loyalty

Booz & Company 14

Retailers are much more satisfied with their performance – as they “win” more often than do manufacturers

Lack of Satisfaction with Return on

Trade Promotions

Event Level Retailer Versus

Manufacturer Contribution

Manufacturer Contribution

(Index)

Retailer Contribution

(Index) Manufacturer

Loses

Retailer Loses

0 (80) (60) (40) (20) 0 20 40 60 80

(20)

100

40

60

80

20

Manufacturer Wins

Retailer Wins

CLIENT EXAMPLE

50%

87%

Manufacturers Retailers

37%

Difference

Booz & Company 15

Overall, both retailers and manufacturers rate their partners’ skills for supporting collaboration as inadequate

Effectiveness of Partners at Skills That Support Collaboration

Relate Promotion Events to the Goals of Your Partners

Understand the ROI for a Proposed Event

Identify Implementation Issues (out-of-stocks, etc.)

Measure and Improve Replenishment Timing

Forecast Consumer and Warehouse Demand

Evaluate the Effectiveness of a Completed Event

Plan a Promotion Event Considering Category Impact

Identify the Implication sof Category Strategies at Shelf

Retailers’ Ratings of Manufacturers

Manufacturers’ Ratings of Retailers

Majority of

respondents rate

their partners’

collaboration

skills at or below

“Somewhat

Effective”

Not

Effective

Somewhat

Effective

Effective

Booz & Company 16

Manufacturer’s Response Retailer’s Response

Large gaps exist between skills manufacturers and retailers value most and their opinion of partner performance

Importance and Effectiveness of Partners at Skills That Support Collaboration

Understand the ROI for a Proposed Event

Forecast Consumer and Warehouse

Demand

Relate Promotion Events to Partner

Goals

Identify the Implications of Category Strategies

Importance

Perspective on Partner Performance

Forecast Consumer and Warehouse

Demand

Evaluate the Effectiveness of a Completed Event

Understand the Category Impact of a

Proposed Event

Understand the ROI of a Proposed Event

Importance

Perspective on Partner Performance

Booz & Company 17

Quality of Interaction By Functional Area Benefits of Market Research/Consumer Insight

Retailers cite TPM collaboration as the best quality, but opportunities exist to incorporate market/consumer insight

Low Medium High

Market Research /

Consumer Insight

TPM

Evaluating

Competitor

Performance

Household

Dynamics

Shopper

Insights

In-Store

Research

Retailers

Manufacturers

Booz & Company 18

Post-

Event

More than 25% of respondents have adopted some “forward-looking” predictive analysis tools, though “backward-looking” post-event tools are still more broadly used

Current Use of Tools to Help Plan, Optimize, and Measure Promotions

29%

Post-Event Analysis:

Systems

Predictive Tools:

Spend Optimization 11%

42%

Predictive Tools:

Promotion Outcomes

63%

87%

42%

75%

25%

Post Event Analysis:

Spreadsheets

Retailers

Manufacturers

Booz & Company 19

Retailer’s Response Manufacturer’s Response

Both manufacturers and retailers maintain that a bias towards established promotion tactics is a main barrier to success

Barriers to Successful Promotion Events

This is interesting given that both currently rely more on post-event analysis than predictive tools to assess new promotions

58%

67%

67%

Insufficient Data

Bias Towards Established

Promotion Tactics

Inability to Measure Execution in Store 57%

68%

60%

Bias Towards Established

Promotion Tactics

Promotion Proposed by Partner not Aligned

with Own Goals

Inadequate Time to Review Previous

Events

Booz & Company 20



Booz & Company 21

Intangible Benefits Tangible Benefits

More collaborative retailers are substantially more satisfied with the results they get


100%

0%

40%

83%

More Effective

Promotions

Share Growth

Less Collaborative Retailer

More Collaborative Retailer

83%

Better Working

Relationships

60%

More Efficient

Planning 100%

80%

Improved Customer

Loyalty

21%

68%

0% Improved Customer

Service 51%

More Collaborative Retailer

Less Collaborative Retailer

Booz & Company 22

More collaborative manufacturers have more effective promotions and more efficient product introductions, …

Percentage of Manufacturers Realizing Benefits of Collaboration

More Effective

Promotions

63%

27%

More Efficient New


9%

63%

More Collaborative Manufacturers

Less Collaborative Manufacturers

Booz & Company 23

… cite a number of intangible benefits to collaboration, …


63%

36% Improved Customer

Service

64%

85%

67%

36%

Better Working

Relationships

Better Focus



Booz & Company 24

… and decentralize decision making to allow their sales force more flexibility to meet retailer needs

Decision Making Authority for Trade Promotions Typically Granted to the Sales Force

Adjust Selling Price as Necessary 32%

50%

Manage Brand Portfolios by Shifting

Funds from One Brand 60%

33%

Design Customized Displays or Pallets 64%

42%

Re-Calendarize Events to Match the

Calendars of Your Customers 88%

67%

Freedom to Select Promotion Tactics 92%

92%



Booz & Company 25

In addition, more collaborative organizations display the following Collaboration Skills and Behaviors …

Retailers

Have made more progress towards

forecasting cannibalization and

category effects of events

Receive more help with display

implementation and in-store

execution

Receive more real time demand

forecasting support from

manufacturers and more support in

the analysis of store level auto

replenishment data

Manufacturers

Have made more progress in

optimizing price and have more

access to data for enhanced offer

targeting

Provide more execution support for

merchandising and in-store displays

Booz & Company 26

More collaborative retailers leverage planning and post-event analysis tools more

Usage of Predictive Modeling, Tactic Selection, and Post-Event Tools

17%

67%

Less Collaborative Retailers

More Collaborative Retailers

Booz & Company 27

In addition, more collaborative organizations typically use the following types of collaboration tools …

Retailers

Have implemented more tools to

help plan promotion events and have

been more successful at using data

for targeting offers

Have a higher level of data mining

tool implementation for store level

data, household purchase tracking,

and pricing optimization

Manufacturers

Are more likely to use predictive

tools to choose promotion tactics

Feel that they will need better tools

and increased resources to work

with their growing data flows

Booz & Company 28

More collaborative retailers seem to have overcome data-related barriers

% of Respondents Reporting Specific Barriers to Successful Trade Promotion

0%

Insufficient Data

50%

0%

Poor Data Quality

67%

Analyzing Event Performance

0%

67%



Booz & Company 29

While more collaborative manufacturers have reduced data-related barriers – they now face new challenges

Barriers to More Successful Trade Promotion

52%

Inability to Align

with Partner Goals

17%

Poor Data Quality

40%

67%

Insufficient Data

56%

92%



Data-

Related

Barriers

More Strategic Barriers

Booz & Company 30



Booz & Company 31

Summary

Both retailers and manufacturers have achieved significant benefits from collaboration across

multiple dimensions, including more effective promotions

Nonetheless, both retailers and manufacturers feel that their partners lack many key skills

required to effectively support collaboration

Despite a bias towards repeating established promotion tactics being cited as a barrier, post-event

analysis tools are more pervasive than predictive tools

Not surprisingly, those who are more collaborative have realized greater benefits – in part by

employing a wider array of tools to aid planning and decision making

Collaborative companies have broken down the data barriers – now the key challenges are more

strategic in nature

Data itself is only part of the equation; the insight that can be gleaned from it is what’s truly

important

Several companies have clearly made progress on collaboration, but there is still a long way to go

to achieve true systematic collaboration in the form of integrated / joint business planning

Booz & Company 32


Booz & Company 33

Atlanta

Boston

Chicago

Cleveland

Dallas

Detroit

Florham Park Middle East

Abu Dhabi

Beirut

Cairo

Dubai

Doha

Riyadh

Asia

Beijing

Delhi

Hong Kong

Mumbai

Seoul

Shanghai

Taipei

Tokyo

Founded in 1914

More than

3,000 people

58 offices in more

than 30 countries

worldwide

Solely owned

by its 200+

officers

Our founder,

Edwin Booz, had the

foresight to start the

management consulting

profession

Houston

Los Angeles

Mexico City

New York City

Parsippany

San Francisco

Washington

North America

Amsterdam

Berlin

Copenhagen

Dublin

Düsseldorf

Frankfurt

Helsinki

Paris

Rome

Stockholm

Stuttgart

Vienna

Warsaw

Zurich

Istanbul

London

Madrid

Milan

Moscow

Munich

Oslo

Pacific

Bangkok

Brisbane

Canberra

Jakarta

Kuala Lumpur

Melbourne

Sydney

Europe

About Booz & Company

South America Andean

Buenos Aires

Rio de Janeiro

Santiago

São Paulo

Booz & Company 34

Selected Booz & Company Publications

We are recognized "Thought Leaders"

Selected Booz & Company

Thought Leadership

Shelf-Centered Collaboration

Trade Promotion Effectiveness

Right @ Retail

Smart Customization

Demand-Driven Supply

Booz & Company 35

Company

Value Proposition On demand applications and insights to better understand, optimize and

influence consumer demand

DemandTec Price™ – Increase Gross Margin +2-5%

DemandTec Promotion™ – Increase promoted volume +10-15%

DemandTec TradePoint™ – Lower deal handling cost by 90%

SaaS Applications &

Business Benefits

About DemandTec

Founded 1999 (NASDAQ: DMAN)

Works exclusively in Consumer Products arena with

retailers & manufacturers

http://www.demandtec.com/customers/customers_landOlakes.htm

Booz & Company 36

Contact Information

Booz & Company and DemandTec both have extensive experience helping our manufacturing

and retailer clients realize the benefits of collaboration

Please contact us for additional details about the survey results or to understand how we can help

you achieve the identified benefits:

– Hans Van Delden (Vice President, Booz & Company): [email protected]

– Armen Najarian (Senior Director of Consumer Products Industry Marketing): [email protected]

Booz & Company 37


Booz & Company 38

Retailers found customer retention, store execution, and impact on category sales more important than manufacturers

Please rate the importance of the following metrics in evaluating your (trade) promotions:

Not Important Somewhat Important Important Most Important

Impact of Event on Retailer (Manufacturer) Partner

Cost per Incremental Unit

Incremental Units Sold

Impact of Event on Category Sales

Total Event Profit

Return on Investment

Level of Execution in Store

Customer Retention

Impact Against a Mutually Agreed Upon Consumer Objective

Media Impact (Impressions, etc.)

Manufacturers

Retailers

Booz & Company 39

Which of the following do you consider to be barriers to using analytics & insight

collaborate with vendors in the future?

Barriers to using analytic insights center on data quality

75% 0% 25%

66%

63%

63%

63%

50%

58%

58%

58%

50%

42%

37%

34%

32%

100%

66%

68%

37%

Data in Formats That Are Non-standard (Hierarchies, Formats, Data Attributes, etc.)

Retailer Databases That Don’t Include Causal Data (Displays, Features, etc.)

Incremental Costs to Purchase and Utilize Retailer POS Data

Systems That Can’t Talk with One Another so the Data Can’t Be Shared

Retailer Databases That Exclude Category, Competitive or Private Label Data

Lack of Joint Key Performance Indicators

Inadequate Tools to Work with Data

Data That Is Not Timely

Resources to Utilize Growing Sources of Data

Incremental Costs to Purchase Retailer POS Data

Lack of Standardization in How Data is Analyzed Between Trading Partners

Misaligned Objectives

Lack of Formal Business Process Touchpoints

Lack of Agreement on What Should Be Measured

Lack of Trust with Your Partners

Booz & Company 40

POS data and daily sales data are the most common forms used today – shopper insights are also prevalent

75% 25% 50%

46%

51%

48%

0% 100%

57%

57%

54%

53%

63% POS Data That Provides Store Level Sales to Identify Issues Related to

Assortment, Execution, etc.

Daily Sales Data to Support Customers On Supply Chain, Promotion Execution,

etc.

Research On Key Demographic Trends

Household Level Dynamics Like Demographics, Purchase Patterns, etc.

Store Level Data to Measure Out of Stocks, Identify Cluster Opportunities, etc.

Analysis of Shopper Dynamics Like Trip Missions, Need States, etc.

In Store Research (Intercepts, Observation, Shop a Longs, etc.)

Studies That Utilize Retailer Specific Samples

What percentage of sales do the retailers represent that you support with the following?

Booz & Company 41

How are you funding your investments in analytics and insight* to collaborate with retailers?

The average reported spend* on analytics and insight was $2.8 million, the majority of which was incremental to trade

* Spending includes retailer POS data, systems, syndicated, custom research, etc.

Sourced from Market Research

Spending is Incremental to Trade Spend

0% 100% 25% 50% 75%

25%

36%

50%

56%

Sourced from Brand Management

Spending is Deducted from Customers Trade Spend

* Spending includes retailer POS data, systems, syndicated, custom research, etc.

Booz & Company 42

What types of value added analytics are you investing in to enhance your transactional data?

Pricing optimization and execution tools have received the highest levels of investment from retailers

75% 50% 25% 100% 0%

42%

58%

58%

67%

83% Pricing Optimization Tools

Tools to Analyze Store Level Data to Support

Execution Efforts

Data Mining Tools to Support Targeted

Marketing Approaches

Tools That Analyze Sales On a Daily Level

Tools to Track Purchases of Individual

Households and Consumers

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