17/09/2015

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Achievingcustomermanagementexcellencein
emergingmarkets
Winnersaskfourcriticalquestionsaboutmarketbymarketgrowth,thentailortheirchannelmanagement
approachesaccordingly.
September2015 |by CristinaDelMolino,PavlosExarchos,andFelipeIze

Forproducersofconsumerpackagedgoods,theroadtosustainedgrowthstill
passesthroughemergingmarkets.Despitesomesofteningofenthusiasmforinvestment
inthesocalledBRICmarketsBrazil,Russia,India,andChinaoverthenext15years
nearlythreequartersoftheworldsGDPgrowthwillcontinuetocomefromemerging
marketcountries,includingEthiopia,India,Kenya,Mexico,Nigeria,andVietnam.
Growthinthesepartsoftheworldisbeingdrivenbyforcesthatdontshowanysignsof
weakening:steadypopulationexpansion,rapidurbanization,aproliferationof
technology,andgradualopeningupofeconomiesandadoptionofmarketoriented
policies.
Globalpackagedgoodsproducerscangainsignificantfootholdinthesemarketsifthey
managetalentshortages,infrastructuregaps,andthehighlyfragmentedtrade
landscape.Thereisnoonesizefitsallapproachtodoingthis.Ourresearch
demonstratesthatoutperformingconsumerpackagedgoods(CPG)companiesuseaset
ofstandardizedpracticesortoolsacrossmarketstodeterminetheirprioritiesforgrowth
ineachcountry.Theyclearlydefinetheirvaluepropositionsforcustomers,achieve
optimaldistribution,andcontinuallystrivetobuildsustainableoperationsand
organizations.However,tobesuccessful,thesecompaniescustomizethestandardized
practicesandtoolsbasedonthescaleandstrengthsoftheircompaniesinparticular
regions,andlocalmarketdynamicsandoperationalconditions.
And,nomattertheleverstheyuse,theoutperformersconsidertheuseofinformation
technologiesandcapabilitiesinadvancedanalyticsandbigdatatobecriticaltotheir
success.Digitizationhastakenholdinmanyemergingmarkets,evenasotherareasof
infrastructureintheseregionslagbehind.InsomeAfricancountries,forinstance,poor
roadsandtravelsystemscanmakeitdifficultforconsumergoodsproducerstophysically
delivergoodsto80percentofcustomersinaregionbutthesesamecustomerscanstill
pickupamobilephone,operatingona3Gnetwork,andusemobilepaymentplatforms
thatdontevenexistinsomeWesterncountries.Thechallengesaregreat,butsoarethe
opportunitiesandtechnologyenabledapproachescanrevealthem.
Inthisarticle,weoutlinetheobstaclestogrowthinemergingmarketsandthepotential
actionsthatsalesorganizationscantaketogetoverthesebarriers.

Obstaclestogrowth
OurresearchshowsjusthowtoughitisforglobalCPGgiantscompanieswithmore
than$25billioninglobalrevenuetocompetewithregionalplayers.InLatinAmerica,
forinstance,regionalproducersare2.7timesmorelikelythanglobalgiantstogrow
aheadofthecategory,achieveaboveaverageearnings,andgethighreturnsontheir
tradeinvestments(Exhibit1).

Exhibit1

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Thereareanumberofreasonswhyitsbeendifficultformultinationalstogaingroundin
emergingmarketsperennialissuesforglobalsalesandmarketingexecutives.Forone,
thereistypicallylimitedvisibilityintopointofsale(POS)information:thesmall
independentplayersthatdominatetheretailindustryinmostemergingmarkets,
collectivelyknownasfragmentedtrade,rarelyhavethemodernPOSsystemsthatmost
developedmarketretailershave.Globalplayersoftenneedtoinvestincreatingnew
informationsources,orelseriskbeingunabletospotcleargrowthopportunities.
Second,consumerheterogeneityandincomeinequalityarethenorminmanyemerging
markets:becauseoftheethnic,cultural,demographic,andeconomicdifferencesacross
orevenwithincountries,thereisagreaterneedforcompaniestocustomizeproductsand
distributionstrategiesforlocalmarkets.
Third,unstablesupplychaininfrastructureshinderconsumergoodsproducersfrom
providingseamlessservicethroughoutacountrysecondandthirdtiermarketsareoften
justtoohardtoreach.
Andfinally,companiesoftenfaceashortageofskilledsalestalent,bothinternallyand
amongtheirdistributionpartners.Theytypicallyfindthattheyneedtoinvestmoretime
andresourcesinfieldcapabilitybuildingprogramsthaninitiallyexpected.

Varyingroadstoexcellence
Followingadecadeofworkwithleadingfastmovingconsumergoodscompanies
aroundtheworld,wehavecodifiedasetofcustomerandchannelmanagementbest
practicesthatallowCPGcompaniestoaddressthechallengescitedaboveandcapturea
disproportionateshareofgrowthinemergingmarkets.
Specifically,thebestperformingcompaniesaskthemselvesfourfundamentalquestions,
theanswerstowhichcollectivelymakeupamenuofapproachesforachievingcustomer
andchannelmanagementexcellence:Whatareourgrowthpriorities?Whatisour
distinctivevalueproposition?Howwillwedeliveronourvalueproposition?Howwillwe
enablechange?Companiescanapplyvarioustoolsandtechnologiestoaddressthese
fourkeyconsiderations(Exhibit2).Asthefollowingexamplesshow,thechosenlevers
andapproacheswillbedifferentforeverycompany,andevenfordifferentbusinessunits
withinacompany,dependingonstrategicintentandlocalcontext.

Exhibit2
Enlarge

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Whatareourgrowthpriorities?

CPGcompaniescanusearangeoftoolstocollecttheinformationrequiredtogaina
comprehensiveviewofthepotentialPOSopportunitiesandareasforoperational
improvement.
Onefastmovingconsumergoodscompanyusedprioritizationmappingtouncover
growthopportunitiesattheregional,neighborhood,andoutletlevelsinLatinAmerica.
Inapilotstudy,thecompanystartedwithadatadrivenhypothesisofhowvariouscities
inemergingmarketswouldgrowovera20yearperiod.Salesandmarketingleaders
workedwithinternaldataanalyststolookatageprofiles,genderandhousehold
behaviors,socioeconomiclevels,andotherdemographicstobetterunderstandwhereand
howconsumptionofitsproductscouldchangeoverthenexttwodecades.Theyalso
analyzedtheconsumptionofvariousproductcategoriesandsawthat,foreverycategory,
anincreaseinpurchasingpowerdidntnecessarilytranslateintoincreasedconsumption.
Forsomeproducts,consumersdidnottradeuptopremiumlinesastheirincome
increased.
Thecompanycrossreferencedthesecityandcategoryperspectivestogetadetailedview
ofthoseLatinAmericancitiesandeventhoseneighborhoodswheretherewaspotential
tosellmoreofthecompanysproducts,aswellasthosepocketswheregrowthhad
slowed.Inaddition,thecompanyreliedongeospatialanalyticstechnologiestosee,store
bystore,thesalesofitsproducts,itsonsiteshareofmarketfortheseproducts,and,
therefore,thegrowthpotential.Asaresultofthesefindings,thecompanywasableto
determinethetradepackages,investments,pricingschemes,andproductmixthatwould
yieldthebestresultsincertainstoresandneighborhoods(basedonfactorssuchasstore
sizeandformat,andlocalconsumerincomeandpopulation).Thecompanywasableto
boostitssalesinthepilotoutletsby40percent.Thenewapproachalsoallowedthe
companytoincreasepenetrationby25percentagepointsanditsmarketsharebyupto4
percentagepointsinthepilotoutlets.
Oncethecompanyidentifieditshighestprioritycategories,cities,andoutlets,itwasable
toallocateresourcesmoreeffectivelyandmakedecisionsrelatingtodistribution,sales
forceeffectiveness,andchangemanagementmoreeasily.
Whatisourdistinctivevalueproposition?

Despitenothavingthebreadthanddepthofretailerandconsumerdatathattheyre
accustomedtohavingindevelopedmarkets,innovativeCPGcompaniesarefindingways
totailortheirretailandconsumervaluepropositionsinwaysthatwillenablesuccessin
emergingmarkets.
Onemajormulticategoryfoodproducerwaslookingtoincreaseitsmarketsharein
Mexico.Thecompanyhadbeenusingbasicoutletsegmentationstrategiestodefineits
servicelevelsandproductassortmentinvariouslocations,butithadlittleinformation
aboutretailersandconsumersbehaviorsandpurchasetriggers:whichoccasionsand
offerspromptedwhichpurchasedecisions?Withoutthisdata,salespeoplestruggledto
optimizereturnsfromthelargenumberoffoodcategoriestheymanagedandfromthe
installationofinstorematerials.
ThecompanyinstitutednewITsystemsforcollectingretailerandshopperinsights.
Usingthenewlyavailabledata,thecompanywasabletodevelopadetailed
understandingofoutleteconomicsand,consequently,amoresophisticatedoutlet
segmentationstrategy.Itwasthusabletocustomizeitsretailervaluepropositions,with

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cleardirectivesanddifferentiatedincentivesforoutletowners.Foreachcategoryor
location,thecompanyprovidedcertaincustomerinvestments,orgivessuchas
refrigeration,discounts,ortraininganditrequiredcertaincommitments,orgets,from
theretailer,suchaspricingcomplianceorexclusivity.Thespecificgivesandgetsvaried,
dependingonwhattheretailervaluedmostandonthepotentialreturnsforthecompany.
Incertainoutlets,thecompanyinstalledcoolers,whichultimatelyallowedittosell20
percentmorebeveragesandotherrefrigeratedgoodsinthosevenues.Inotherlocations,
thedatapromptedthecompanytoinvestindevelopingretailerloyaltybyvisitingstores
morefrequentlyoradvisingthemonremodelingandfinanceissues.Instillother
locations,thecompanyinvestedinexhibitingpricelabelsmoreprominently.
Foreachcategoryorlocation,CPGcompaniesshouldhavealistofdemandgeneration
andloyaltyofferscompaniescanprovidetoretailers,andalistofcommitmentsthat
companiescanrequirefromretailers.Insightanalysisandothertechenabled
approachescanhelpcompaniesfindtheidealinvestmentsituationthatwillsupportthe
desiredretailerandconsumervaluepropositions.
Howwillwedeliveronourvalueproposition?

Globalproducersofconsumergoodsoftenciteunstablesupplychaininfrastructuresand
sourcingconditionsasanobstacletoprovidingseamlessdeliveryandhighlevelsof
customerservice.Thebestperformingcompaniesinemergingmarketsaremeticulous
aboutdistributorsegmentationandviewaccountmanagementfromaholistic
perspective.
AglobalspiritscompanylookingtogrowitsbusinessinAsiaconductedanendtoend
transformationofitsroutetomarketmodel.Thecompanysoughttocapturea
burgeoningmiddleclassofconsumerswithadesireforbetterproductaccessbyproviding
themwithawiderselectionofwhiskies,rums,andvodkas.Butthecompanyhadto
contendwithoutdatedroadandrailnetworksandcongestedseaports,makingproduct
deliveriesandsalesvisitsdifficult.Thecompanyssalesinthisregionwereinconsistent
promotionaldisplayswereoftennotvisible,opportunitiesforbundlingspiritswithother
beveragesweremostlymissed,andtherewerepricingchallengesduetoregionaltrade
regulationsandlaxretailercompliance.
Thecompanyssolutionwastorefineelementsofitsroutetomarketmodel.Itsprevious
onesizefitsallstructuregavewaytoamodelthatencouragesdifferentiateddistribution
accordingtocustomerneeds.Thecompanywasabletoextenditscoveragetosmallor
hardtoreachstoresbydevelopingaportfolioofroutetomarketoptionsforinstance,
continuingdirectstoredeliverywithlargetruckstocriticalaccounts,whileconvening
reconteamswithmotorizedhandcartstovisitbetween500and700moreremotestores
perweekandvalidatePOSdata,inspectpromotionaldisplays,andperformpricechecks
asneeded.

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Thecompanyalsosystematicallystudiedandrefinedelementsofitsthirdparty
distributormanagement.Itevaluateddistributorsbasedoncriteriasuchaswarehousing
andlogisticscapabilities,financialstrengthandinfrastructure,andwillingnessto
partner.Thecompanyrankeddistributorsbasedonanaggregatedscoreanddeveloped
programsinwhichtradetermsweremoreexplicitlylinkedtothedistributors
performance.Ratherthanpartnerwithmanydistributors,itnarroweditsrelationshipsto
onlyafew.Forthesefew,thecompanycreatedplanstoaddresscapabilitygaps.Under
thismodel,partnerdistributorsaremanagedasanextensionoftheglobalspirits
company,withstandardoperatingprocesses,sharedsalesexpertiseandincentives,
commonsystemsandmetrics,andtightperformancemanagement.
Howwillweenablechange?

Bypurposefullyembracingandincorporatingnewtoolsandtechnologies,suchas
geospatialtools,intotheirorganizations,consumergoodsproducersmaybebetterable
tostreamlinetheirsalesanddistributionprocesses,trainandmotivatestaffersacrossthe
globe,andimprovesalesresultsandgeneralperformance.Particularlyinemerging
markets,wheretheuseofmobiletechnologiesisrisingrapidly,IThasacentralroleto
playinensuringstandardizationandrollingoutnewandfasterwaysofworking.
Sensorandscanningtechnologiesarealreadyhelpingmanycompaniesimprovetheir
salesforceeffectivenessinemergingmarkets:fieldrepresentativescanusehandheld
devicestoscancoolersineventhemostremoteoutlets,collectingdatathatcanbe
monitored(viatabletsandsmartphones,insomecases)andusedtoforecastsales,
demand,andotherrelevantmetrics.Asmentionedpreviously,companiesarealsousing
geospatialanalyticstocreatecomprehensiveoutletanddistributionplans.
Onthehorizonarecorporategamingappsthatcanberolledouttosalesforcesacross
internationallocations,eveninthemostfragmentedmarkets.Imagineamultiplatform
gamingprograminwhichsalesrepresentativesarechallengedoneverycalltogoona
designatednumberofmissionstheyaregiventhesalesroutetheyneedtofollow,the
taskstobecompletedateachoutlet,andthetimeframesinwhichthosetasksmustbe
completed.Iftheyachievetherequisitenumberofmissions,theyarerewardedwitha
certainnumberofvirtualpointsthatcanbetradedinforbothfinancialandnonfinancial
rewards.Inthisway,salesrepresentativesmaybemotivatedtoperformeventhosetasks
thatareusuallyconsidereduninterestingforinstance,checkingcompetitorspricelists
incertainoutlets.Missionsaretrackedusingacommonsoftwareapplicationand
websitethatsalespeoplecanaccessthroughlaptops,smartphones,tablets,andsocial
media.Agraphicinterfaceallowsuserstoseeataglance,andinrealtime,notonlytheir
ownstatusandproductivitylevelsbutthoseoftheircolleaguestheycanquicklygiveand

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receivefeedback.
Throughtheseandothertechnologies,companiescandevelopnewinhousecapabilities
aswellasamechanismforcontinuouslearninganddevelopment.Thesecapabilitiescan
bereinforcedbyhavingadedicatedinmarketoperationsunitto,forinstance,handle
analysisoflocaldataandredesignregionalsalesroutesonthefly.Technologyisa
powerfulallybutthebestperformingcompaniesarethosethatcommitsufficienttime
(atleastthreeyears)andresourcestotheirinitiativesinemergingmarkets.

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Thecompaniesmentionedinthisarticlesystematicallyandintenselyconsideredthefour
keyquestions.Buttheactionstheydecidedtotaketocreatechangeorcompetitive
advantagewerenotfixedorrotetheywerebasedonthelocaltradeenvironmentandon
thecompanysstrategicintent.Thesecompaniesfocusedonbuildingpartnershipsin
emergingmarketscreatingrelationshipsonthegroundthatcouldserveasextensionsof
theorganization.Theycontinuallymonitoredtheirprogressagainststatedgoalsaswell
aschangingmarketconditions.Andtheyfocusedontechnologyasameanstodealwith
thechannelfragmentationfoundinemergingmarkets.
Ourresearchsuggeststhatbyaskingeachofthefourcriticalquestionsanddevelopinga
tailoredapproachtocustomerchannelmanagement,companiescancapturea
disproportionateshareofgrowthinemergingmarkets.
Abouttheauthors

CristinaDelMolinoisaspecialistinMcKinseysLondonoffice,PavlosExarchosisadirectorinthe
Athensoffice,andFelipeIzeisaprincipalintheMexicoCityoffice.
TheauthorswishtothankSimonLandandMatteoZaninfortheircontributionstothisarticle.

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