As we continue our “State of Brands” blog series, we’ve decided to expound upon a recent Clarkston report, Trade Spend’s Unsustainable Trajectory in the New Consumer Reality. To summarize the piece, traditional trade spend alone has begun to show diminishing returns. Manufacturers need to shift focus and strategy from that of short-term spending to making longer-term investments in demand creation through a consumer-centric approach. While trade promotion will continue to play an integral role in driving profitable demand creation, it will be forced to deliver similar or improved results with substantially fewer resources in the future. The piece details the steps necessary to deliver these improved results with fewer resources by establishing an integrated business model within your organization. To create this integrated business model, four key focal areas are highlighted:
- Consumer centricity
- Company alignment
- Capital allocation
- Channel ubiquity
Our next series of posts will take a more in-depth look at these areas and provide insight into applying these transformative processes to shift the trajectory of your organization, starting with consumer centricity.
Creating a Consumer-Centric Organization
Although trade spend can have an immense effect on consumer purchases, this often overshadows the consumer’s relationship with the brand. While offering consumers the best available prices is very much aligned with a consumer-centric approach, this makes the brand peripheral and propels the retailer to the center of the experience. Though trade promotion displays, consumer-centric ideations, it has become a means of “renting” share and shelf space within the retailer which is an appropriate strategy for quick wins, but not long-term sustainability. Instead of taking the “renting” approach, manufacturers must understand that building long-term consumer loyalty requires focus on effectively managing and optimizing trade promotion given its scope and business impacts. Today’s current tactics have been diverted from consumer-focused intention and have become a price war over the consumer – diminishing brand loyalty.
It’s imperative that manufacturers have a clear distinction between the rent versus buy strategy when investing and participating in long-term trade promotion activities. Often the failure to realize this distinction results in minimal return with no long-term benefits. So how do companies embark upon the path to consumer centricity? Brands must re-engage consumers and retreat from the primary strategy of “renting” market share with trade spend. This re-engagement must be accomplished utilizing consumer-focused strategies that place them at the forefront of every decision. To effectively carry out this strategy, understanding and actively pursuing the notion of consumer empathy is critical.
Consumer empathy contributes largely to gaining a fundamental understanding of your consumer’s wants and needs and ensuring you’re receptive enough to listen and act accordingly. Ensuring this lens is applied to every decision involves considering the consumer when setting pricing strategies, developing artwork and packaging, ensuring your marketing and communications is targeted and relevant, and ensuring your brand objectives align with consumer taste and preferences. Achieving this is no easy feat. It requires knowing your consumer and consistently engaging, communicating, and reacting to ever-changing consumer behavior. Investing in analytical tools and ensuring your organization is prepared to send and receive feedback that enables ongoing dialogue is critical for the success of creating a consumer-centric organization.
Understanding both explicit and implicit consumer feedback and behavior, coupled with the ability to rapidly adapt by changing your marketing communication, packaging, or even assortment based upon consumer data will greatly aid in creating this culture. Becoming a consumer-centric organization extends beyond the price of the products and involves creating value for the consumer in multiple avenues. Although you cannot communicate with each individual consumer, utilizing consumer data should be the start of your journey as the voice of the consumer.
Numerous outlets exist today that allow your consumers to share feedback and opinions both directly and indirectly. Keeping a close ear to those outlets and responding accordingly is vital to your consumer-centric ideations and practices. L’Oreal is an organization that has excelled at anticipating consumers’ needs and providing a platform for consumers to interact with its brands instantaneously and build brand loyalty. The organization has numerous customer loyalty programs for its salons and brands. The Makeup Genius app embodies a consumer-centric strategy, as it provide convenience for makeup users to try a variety of looks from the comfort of their own home, informs the user of exactly where to purchase the products, and gathers feedback and consumer data to improve the experience and product offering, along with relevant promotions.
Organizations should utilize these types of applications and programs to gather consumer data and feedback, which will enable the incorporation of key learnings into more meaningful and effective strategies. Returning the focus to creating a brand that resonates with the consumer, meets the consumer’s needs, and is a considered a quality brand is now the struggle for many companies. Though trade was once the smallest portion of the organization’s marketing mix, it has now has become the largest. As with all tactics, once competition increases, the new challenge becomes identifying other methods and opportunities to increase brand presence, loyalty, and awareness. Take an outside-in perspective of the business, through the eyes of the targeted consumer.
Apply insights derived from consumer empathy to inform every aspect of the business model, including products and services, brands, markets, channels, resource intensity and mix, organizational architecture, competencies and alignment. Doing this means taking a step beyond the focus group glass and employing immersive techniques that really grasp the wants and needs of consumers. These tactics will enable the development of a sustainable, consumer-centric organization.