RETAILERS ADVISED TO THINK LINKAGE

JAMES TENSER

SAN FRANCISCO -- As leading brand marketers move toward "second-generation" category management, their analyses must evolve to understand "linkages" between categories.

"We see most manufacturers making a mistake in looking at their individual products and how they fit together within the category, but not looking at what we call category linkages," said Wallace Buran, a partner at Deloitte & Touche.

Speaking before a conference on Multiple Trade Channel Marketing here, Buran explained that cross-selling opportunities, such as a soft drink purchase and a snack food purchase, have been largely ignored in brand marketers' category management efforts so far. The conference was sponsored by the Institute for International Research, New York.

A key to stronger ties with supermarket accounts is to "understand whether my product has linkages throughout my retailers' operations," he said. The brand marketer who can bring his trade partner knowledge of how to use these category ties adds value to the relationship.

"Category management means some of you will be very much focused on consumer value, not just on 'How do I create a slight advantage over my competition?' " Buran said. "The important question should start to be, 'How do we provide a real value?' "

He continued, "What has been going on up until now is, 'How do I get a better position? How do I get a better shelf space? How can my specific brand do better?' "

Buran warned such an internal focus by brand marketers might ultimately prove inadequate, as supermarkets begin to pursue brand-building efforts of their own.

"People who have Presidents Choice [controlled-label products from Loblaw International Merchants, Toronto] in their store are using it as a brand and using it to differentiate their own brand. So we are seeing retailers getting into what we would call horizontal branding," he added.

Buran said he also sees the trade beginning to invest heavily in not just information, but the insights from the information. "If you don't get there first in the ability to provide real information, the retailer can get there on his own," he said.

He enumerated three key knowledge areas where brand marketers should seek mastery.

"One factor says you had better understand the changing consumer value proposition and changing consumer access points. That is the major point that everybody is struggling with: 'Who are my consumers? How are they accessing my kinds of products?' " Retailers are asking "exactly the same set of questions," he added.

"Secondly for manufacturers, you had better understand what I would call the customer value proposition: Why does the customer value your product? Why might they value a competitor's product or a substitute product?' Understand the role your product plays in your marketing mix."

"Third is what we call the ruthless elimination of non-value-added costs." If you are not adding value to the consumer or you are not adding value to the customer, you had better find someone else who can. "We are watching a number of people starting to outsource to third parties for logistical services."