Most manufacturers have organized their businesses around products. Products grouped into brands that convey trust and positioning to the consumer. This successful marketing approach has been propelled by the power of mass-market advertising. Over the past 60 years, manufacturers have organized their personnel, budgets and metrics to drive individual brand strategies.
Recently, the winning combination of big brands and mass media has begun to falter. Fragmentation of the media and consumer lifestyles has eroded the effectiveness of traditional marketing. The industry answered by increasing the number of commercial messages while VCRs and the Internet stole eyes from television.
In the early '90s, Ed Artzt, then chairman and chief executive officer of Procter & Gamble, spoke boldly at a meeting of the American Advertising Agency Association. He warned the agencies that mass-market advertising was failing to deliver brand equity and growth. He demanded new ways to reach the consumer -- or else P&G would find a different way to build brand value. P&G and other manufacturers began to assess the consumer-centric and loyalty-focused marketing of other consumer industries.
Over the past 10 years, most manufacturers have dabbled in consumer-centric marketing (CCM) initiatives like customer relationship management (CRM), direct mail, direct sampling, consumer segmentation, loyalty card marketing, e-mail marketing, Web sites and databases. The goal was to gain some initial learning. These initiatives have been tactical "tests" or "pilots" led by individual brand managers who have vision.
Early consumer packaged goods tests have yielded fantastic returns: e-mail and direct-mail marketing; retailer and manufacturer CRM collaboration; and targeted sample delivery. However, even the biggest success stories have not become a "way of business" for most companies because their organizations are designed for product management, not consumer management.
This organizational challenge has brought a new question to top management: "How can we enhance our brand marketing approach with the new consumer-centric strategies we need to retain and grow our consumers?"
To answer this question, companies must investigate their current business structure and practices to identify the barriers to CCM.
Today, corporate strategy is driven from brand and product vision, not from a share of consumer perspective. New CCM capabilities are seen as tactical components to the product-focused brand strategies. Leading manufacturers are developing consumer strategies for the entire company. These strategies seek to grow the company's share of consumer wallet. CCM will fail to deliver significant results until brand strategies flow from a corporate consumer strategy.
Many manufacturers have created separate marketing groups, like direct marketing, e-marketing, Web-marketing, loyalty card marketing or one-to-one marketing teams. Often, several separate consumer-centric teams will exist in the same company. Most of these teams seek investment from each brand to deliver results.
Unfortunately, this budget structure continues a brand-by-brand approach that is not effective for direct communication and relationship building. Consumers don't have time to "relate" to each individual brand. They respond when entire lifestyle solutions are provided (e.g. baby, pet, travel, clothing, home care, health).
In CPG marketing today, brand-marketing methods are measured in ways that have become industry standards. Measures like incremental brand sales, market share, all commodity volume coverage and cost per thousand are used across the industry to assess effectiveness. However, these same measures fail to correctly assess the benefits of CCM initiatives like direct-mail campaigns or loyalty card program investments. In fact, many CCM initiatives will seem like failures if the only measures are short-term volume growth and per-message cost.
If a brand manager were to drive short-term incremental sales and market share through promotions and coupons, this would be rewarded even if brand loyalty went down and the product became more price-driven over time.
As manufacturers look to the future, they must find new ways to communicate to shoppers and build brand value.
Consumer segment strategies. New overarching consumer strategies should include supporting roles for all of the brands to help grow profitable consumer loyalty.
Centralize CCM resources. Companies must reorganize and centralize their internal CCM resources, including the integration of systems and all consumer data. Much of this is fragmented by brand.
Consumer metrics. Manufacturers must add new consumer-centric measures, such as loyalty and consumer profitability, to the brand scorecard.
CCM budgets. Companies must take CCM initiatives out of the "testing track." Only a progressive increase in CCM initiative budgets over time will make the change happen. Money talks.
These organizational changes, along with training and hiring, will help branded players maintain brand heritage while mastering new consumer-centric tools for future growth.
Peter Leech is a managing partner of Equilum, a consulting practice focusing on consumer-centric marketing.