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Partners’ strategic and collaborative value should drive allocation of collaboration resources

SECTION TWO

Strategic Value

Tier 1 Partners

Tier 2 Partners

Tier 3 Partners

Resources

Majority of resources, some dedicated; onsite staffing where relevant

Moderate resources dedicated to the partner, potential onsite liaisons

Low level of resources, bundled approach, potentially outsourced

Program Development

Programs are developed in a collaborative process with shared control and insights from both parties

Customized and tailored insights are used to develop programs in a collaborative process

Programs developed and then brought to partner

Collaboration

Strive to integrate with partner, develop service level agreements, and become part of the process

Work to understand partner’s systems and processes to foster strong collaboration

Develop a basic level of understanding of part’nser process and offer programs through their channels

Customer Service

Highest level of customer service and Service Level Agreements

Medium level of customer service and Service Level Agreements

Base level of customer service and Service Level Agreements

Tier 2 Partners

Low

Example Manufacturer Segmentation of Retail Partners

High

Retailer A

Retailer G

Retailer B

Tier 3 Partners

High

Retailer C

Retailer D

Tier 1 Partners

Retailer G

Low

Collaborative maturity

= Sales Volume

Retailer F

Retailer E

Source: Deloitte Consulting LLP

Manufacturers should allocate collaboration resources and determine future resource needs according to the resulting value of the partnership. Some partners may warrant dedicated cross-functional, co-located teams; others may be served through a shared, headquarters shopper marketing group. Likewise, retailers should leverage their most valuable partners as strategic advisors, and commit resources to working with these manufacturers to co-develop ideas on growing the category and meeting mutual cross- category goals. An important step in this process for both manufacturers and retailers is to understand where they stand with a potential partner and make sure the match is mutually beneficial.

Overlooking regional or niche partners is a pitfall to avoid for both parties in this pro- cess. Niche partners may offer strategic value despite smaller revenue numbers, providing enticing potential for collaboration and growth. Likewise, there is value in working with partners who are still developing their collaborative capabilities. For example, less sophis- ticated but strategically valuable retailers require more analysis and development from the manufacturer while they build up their shopper marketing capabilities. This may require additional resources in the short-term, but will enable manufacturers to create more buy-in and develop deeper committed relationships.

The Right Insights “What is right for arget is not necessarily right for Wal-Mart.” - Manufacturer

Sophisticated retailers demand custom-tailored insights based on their specific shoppers and tangible proposals for commercializing insights to support their distinct retail position- ing. They are no longer content to passively receive whatever the manufacturer decides to share. They are now demanding active participation in targeting and prioritizing insight development.

Meeting the expectations of the most valued partners entails developing a thorough un- derstanding of each retail banner’s differentiation, customer segmentation model, shopper marketing organization, and in-store capabilities for program execution. That understand- ing allows more granular insight development and application to joint target segments, trip segments, store clusters, and even individual stores.

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SECTION TWO

However, retailer commitment to joint insight development is still far from consistent. Manufacturers are still largely expected to provide the resources for this expensive ef- fort. Often, manufacturers grow frustrated when they bear the expense of developing deep shopper insights and produce retailer-specific programs that demonstrate promising results, only to see them haphazardly implemented or scaled back. They are also frus- trated with many retailers who do not have the human capital to ensure consistent in-store execution. Retailers who are able to consistently able to execute, ensure compliance and measure results of shopper marketing programs and manufacturers who are able to sup- port their retail partners in implementation will see disproportionate benefits to their joint efforts.

Manufacturers can support less strategic partners by clustering their insight development and bundling programs across similar players.

The Right Structure

Getting past the barriers to committed collaboration requires more than just commitment and clever insights. It also typically requires organizational change, process change, align- ment of incentives/performance measures, development of new skillsets, and upgraded technology. In many cases, collaboration extends beyond marketing/sales/category man- agement and into supply chain, product development and finance to holistically address all elements of the go-to-market strategy.

The breadth of organizational changes needed for committed collaboration can daunt companies trying to consolidate their position with key partners:

  • What needs to change in our talent recruiting, advancement, and incentive structures?

  • Do we need to co-locate resources with our partners? Which resources, and with

which partners?

  • Where should shopper marketing sit in our organization?

  • What processes need to change?

While the old way of doing business will no longer do, the truth is that there are many paths to creating genuinely collaborative relationships. There is no “one size fits all” for structuring a shopper marketing organization for effective collaboration, or indeed for structuring the relationship with every partner. Instead, companies need to realistically weigh the costs against the potential gains given each partner’s strategic value and willing- ness to collaborate.

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