WASHINGTON - Outsourcing of responsibilities to sales and marketing agencies by consumer product goods companies is expected to nearly double over the next four years, according to a study commissioned by the Grocery Manufacturers Association here.
Retail sales revenues of CPG companies represented by the sales and marketing agencies are $116 billion, or 54% of total revenues, the study indicated, and that amount is expected to grow by 15% annually over the next two years and 10% a year after that to $213 billion by 2010, with the gains coming from growth in new categories, such as organic and natural foods; growth in channels, such as dollar stores and non-grocery retail outlets like Best Buy and Toys "R" Us; and further shifts from direct sales forces to agencies.
According to the study, outsourcing results in $4.2 billion in annual cost savings to CPG companies, with the potential for an additional $3 billion if the remaining 46% of their revenues not currently represented by agencies was outsourced. Simply increasing collaborative efforts to increase the agencies' effectiveness in achieving CPG company marketing objectives - including promotional effectiveness, customer-service processes and new-market entries - could add another $400 million in annual benefits, the study noted.
The study, entitled "Value of Outsourcing Sales and Marketing," described itself as "the first detailed assessment of the value contribution of SMAs to CPG manufacturers and retailers." It was conducted over an 18-month period with input from CPG companies, retailers, and sales and marketing agencies by researchers from the Institute for Customer Relationship Management, Duluth, Ga., Georgia State University and the University of Colorado.
Retailers in the study said the agencies do a better job than CPG companies of gathering marketplace intelligence and market-monitoring tasks, while CPG companies said they felt their own capabilities were superior in observing local trends.