The Wal-Mart factor, coupled with media fragmentation, consumer lifestyle changes and other influences, is creating more opportunities for manufacturers and retailers to collaborate on customer relationship management strategies, industry observers and manufacturers said.
Collaborative CRM -- including e-marketing, direct mail, Web site interaction, in-store activities and other tools -- is gaining speed through the efforts of leading-edge consumer packaged goods manufacturers, including Procter & Gamble Co. and Unilever.
The approach benefits both parties, industry observers said. Retailers, for instance, get the manufacturer marketing expertise needed to understand consumers at a micro level. Manufacturers, in turn, get to talk directly with consumers via the retailer.
"We bring segmentation and category insights, while [retailers] bring an understanding of retailing," said Sebastian Munden, vice president of customer marketing, Unilever Home & Personal Care, Greenwich, Conn., a unit of Anglo-Dutch consumer products giant Unilever.
Since most consumers are in the supermarkets once a week, they have more loyalty to the retailer than the manufacturer. Through collaborative CRM, manufacturers can develop a meaningful, one-to-one dialogue with consumers via the retailer.
"Consumers don't want hear from manufacturers; they want to hear from retailers," noted Darcy Raymond, brand manager, corporate programs, P&G, Cincinnati.
P&G has just begun working with one of the mass-merchandiser chains for a collaborative CRM initiative. Raymond declined to identify the chain. Under the test, three issues of P&G's "S" magazine will be e-mailed to a "substantial" number of consumers who have given their permission to receive the retailer's news and promotions via e-mail. The e-magazine will be customized for the retailer.
Located on the Web at www.s-mag.com, "S" magazine is an e-newsletter designed to simplify everyday living. It includes coupons and samples, along with content focusing on home, garden, food and family. Brands rotate on a monthly basis. Non-competing external brands are included as well.
Along with the mass-merchandiser test, "S" has been used for another collaborative effort. Over the summer, it was e-mailed to a large number of loyalty card holders at a Northeastern supermarket chain. Raymond declined to name the chain. The newsletter was co-branded for both P&G and the chain. The supermarket retailer managed customer interaction but shared aggregate data. P&G handled the fulfillment.
While the program paid out, it wasn't "outstanding," said Raymond. Still, it generated key learnings. One was that seasonality plays an important role in the success of direct-marketing efforts (summer isn't a great time for an e-newsletter mailing). It also realized it needed to beef up the number of samples and coupons, and make the offers more compelling. Moving ahead, P&G's goal is to continue working with retailers, as well as manufacturers of non-competing brands.
Working with retailers is getting easier for manufacturers because, in times of a sluggish economy and staunch competition, retailers increasingly realize the importance of building customer relationships. Raymond pointed out that some retailers are even creating consumer marketing departments with employees who hold MBAs.
"Retailers are becoming more consumer-oriented," he added.
The success of such partnerships requires a truly strategic business relationship. This means using the same rigor in understanding consumers as shoppers, as category users.
"Retailers aren't interested in transferring consumers from one brand to another; they want to build business," said Munden of Unilever.
Unilever Home & Personal Care relies heavily on retail collaboration, so much so that it includes marketing people in its key customer teams. Its goal is to work with retailers through a variety of consumer touch points, including e-mail, database marketing, direct mail and in-store events. It's even collaborating on Web site interactions, including the use of "store-within-a-store" Web sites. One of these is the new "Dove Store" on cvs.com. The section features a variety of Dove products for sale, including cleansing cloths, body washes and anti-perspirant.
"Everything we sell, we sell through the retailer, so it's important that we build strategic relationships with them," Munden said.
Collaborative CRM is necessary to understand consumer shopping behaviors and motivations, said Christine Overby, CPG analyst, Forrester Research, Cambridge, Mass., a technology research firm.
"It's critical for retailers and manufacturers to create a better view of their consumer base, beyond the demographic and psychographic data they've collected for years," she said.
While the concept of collaborative CRM is still new, it's poised for growth because retailers are now not only receptive to it, but also proactively pursuing it, said Dadi Akhavan, president and chief operating officer, E-centives, Bethesda, Md., a provider of interactive direct-marketing technologies.
The reason for this is largely due to Wal-Mart, which has been stealing market share from supermarkets.
"Since supermarket retailers can no longer compete on price alone, they're exploring other areas," Akhavan said.
To survive, supermarket retailers need to create consumers experiences that are unique and different from Wal-Mart. Efforts that focus on specific consumer needs will have the most success, Overby said.
While retailers have an abundance of consumer data generated from loyalty cards, and manufactures have direct-marketing knowledge, more synergy is needed between the two, Overby said.
"It all gets down to understanding at a local level what consumers want and what motivates them," he said.
Manufacturers have been good at this on a national level, but need improvement on a local basis, she said. One of the ways they can do this is to ask the right consumer questions in e-mail and other Web initiatives. What's necessary are behavioral questions, like "How do you use our product?" ZIP codes can also be requested, but home phone numbers aren't necessary, she said.
"We've found that a lot of manufacturers ask a laundry list of questions, including personal information that consumers don't want to give," she said.
Finding out what consumers want will help manufacturers deliver products and services that are of value to them, said Barton Goldenberg, president and founder of ISM, Bethesda, Md., a CRM consultancy.
By providing products and services that meet consumer needs, manufacturers will be in a better position when it comes to retail shelf and display space.
"If a retailer sees a manufacturer as a partner in optimizing revenues through value-added services, it will increasingly turn to that manufacturer," Goldenberg said.
True collaboration entails changing the mind-set that manufacturers have had about the retail store. It requires viewing the store as a marketing medium, not just a passive facility to merchandise goods, said Mel Korn, of Collaborative Marketing Worldwide, New York, part of Publicis Groupe that develops collaborative-marketing strategies.
Collaborative marketing, which Korn said has emerged as one of the most potent go-to-market strategies, means looking at consumers not only as "consumers" but also as "shoppers." It calls for a commitment to sharing resources, responsibilities and information in efforts to grow categories and brands.
Holdouts could be reluctant to get involved with retailers for several reasons, including the perception that manufacturer-retailer initiatives won't reach enough consumers, said Peter Leech, a managing partner of Equilum, Chicago, a consulting practice focusing on consumer-centric marketing.
"Many marketers believe that if they're not sending a message to 50 million doorsteps, then there's not much value. And if it gets below 10 million, they think it's a waste of time," he said.
What these marketers fail to realize is that, while the reach may not be as high as a mass-market approach, it's more effective in terms of targeting the right consumer at the right time, Leech said.
Others may steer away from the concept after being burned in cases where the retailer agrees, but fails to provide enough attention to the program or real access to information. It is partly that retailers don't have the service mentality that marketers have. But Leech expects this to change.