CPG Megatrend: Unleashing New Value Streams with Better CIO / CMO / Sales Collaboration
Being a CIO is one of the most challenging executive roles in the corporate world. While extracting efficiency from people, processes and technology, CIOs are simultaneously tasked with helping their organizations adapt to a connected world that legacy systems were never engineered to address. CIOs in the Consumer Packaged Goods (CPG) industry are arguably in the least advantageous position. Most large, multinational CPG companies possess brands many decades old that achieved success on the back of an IT portfolio canted heavily in support of manufacturing operations. While today’s connected consumer has absolute impact on all business areas, the supply chain, plant, and distribution components lag sales and marketing in terms of understanding, engaging, and nurturing the consumer relationships coming to define brand value. Is it any wonder that prognosticators advise CIOs to reach out to their CMO and partner against a backdrop of digital consumers?
“CIOs are not alone, yet because sales and marketing are so closely tied, their collaboration seems more natural”
Many CPG marketers believe their IT organization is slow moving, controlling and lack a focus on the brand. I heard a senior IT leader in one of the world’s largest CPG companies once say that because they had done things the same way for nearly 100 years, there was little need to change. It’s this attitude which has marketers running for the door, out to commiserate with their digital agency partner or an innovative startup. Every CPG company leverages agencies and those specializing in digital. Most CPG companies have developed an almost symbiotic relationship with them. To continue their status as trusted advisors, agencies have incorporated greater technical, analytical and business consulting talent. Also in the mix are startups offering innovative advertising, mobile and social marketing capabilities available in the cloud on a subscription basis. All of which collectively make it even more challenging for a CIO to have a credible conversation with marketing. These trends promise only to accelerate; consider Gartner predicting the CMO to control greater IT budget than the CIO in the near future.
CIOs are not alone
Not lost in this conversation are the sales, or commercial side of the CPG business. Although brands embody a lot of value, a CPG company makes money by way of retail partners, who receive a significant amount of attention. This comes in the form of teams assigned to ensuring sales, volume and margin are maximized, and includes ever larger sums of promotional monies to support sales at the shelf (but reportedly in a questionably valuable way). I recently attended the presentation of a CPG CMO, where he said one of the most effective moves he’d made was developing a relationship with a leader from the commercial side of his business. In this way, he was able to marry the value of the brand with the execution of sales through retail partners. His story underscores another theme common among most CPGs; even the sales function is often fenced off from marketing.
Bridging the gap
Most CPG marketing organizations are comfortable having consumer data managed beyond the control of IT. It’s challenging for a CIO to make a case against this, even among well-publicized breaches in data security and the resulting harm to brand value–to say nothing of the logic of valuing your consumer data as an asset. What does get a marketer’s attention is how IT leadership can create new capabilities that unlock streams of value otherwise not possible, and do it quickly. It’s just as important that marketers be able to retain the best aspects of agency relationships. Too often, the role of IT is presented as an “either-or” proposition, and the lead agency wins this decision almost every time. With few exceptions, most CPGs lack a highly controlled marketing technology infrastructure that treats digital as a core competency. Rather than proposing to in-source and control what is today outsourced, paid for with OpEx dollars and whose sole purpose is to satisfy marketing, CIOs should consider how the systems and data they do manage aligns with agency-driven technology and data in ways that enable significantly new insights and actions. I’m alluding to systems that CPGs possess in-house today, for use in demand planning, trade promotion management, pricing, distribution, and research and development. A source of data for these systems is often Point of Sale (POS) transactions provided by retailers. It’s used to assess sales performance, manage and optimize trade promotion investment, develop pricing strategies, maximize on shelf availability and minimize brand and sales harming out of stock situations. Syndicated data from third parties, panel data and even social media are often used as well to help the CPG paint a clearer picture of market share and shopper behavior.
Fail fast and succeed faster
Critics of personalized consumer digital marketing in the CPG space cite low transaction values, the price orientation of purchases, and scarce mindshare that household products tend to possess relative to durable goods. Surely the way to sell the most of a mass merchandise product is to market it in the most massively impersonal manner possible. What the critics haven’t seen is how smart brands are shifting strategy from focusing on product benefits and one-off campaigns and promotions, to telling collaborative and personalized stories with their consumers about how a product lives within a larger construct (like a consumer’s hobby, preferred sport, or life stage). Digital channels and the data and analytics to connect brands to their consumers at scale efficiently make this now possible. Brand value is thus shifting to an experience in which a branded product lives. This experience transcends the shopping journey to include consumer behavior prior to and following a purchase. Done well, these efforts engender loyalty, referral and ultimately drive sales while contributing insight into new product development and introduction. The speed with which marketing can be planned, executed and measured accelerates; resulting in more wins, while cutting losses early. These efforts become more differentiated when informed with insight reflecting demand and sell through, from sales, trade promotion and shipping data. The sales function stands to benefit by bringing knowledge and insights of a brand’s consumers to in-store execution and shopper marketing. Some CPG sales teams recognize the opportunity to provide insights and advisory to retail partners for entire stores, not just their particular category. Consumer insights can play a significant role in these efforts, which help retailers dealing with a myriad of issues facing their industry.
Bringing it back to sales
In the end, marketing must support sales, and CIOs can play an instrumental role in enabling a more collaborative relationship between these functions that leads to higher performance for all. On-premise and cloud technologies mean CIOs have options to marry sales and marketing execution. The ideal state is one where stakeholders in marketing, analytics and sales across the enterprise have a lens into the path to purchase–the process that extends from consumer communication to shopper transactions and the post purchase experience.