IS CO-MARKETING THE 'CURE' FOR ECR?

JAMES TENSER

Among vocal proponents of co-marketing, Chris Hoyt stands out as a man with a mission.

The president of the customer marketing division of Ryan Management Group, a Westport, Conn., consulting firm, Hoyt has put more than a few noses out of joint with his persistent questioning of Efficient Consumer Response and everyday low pricing.

In public and private, Hoyt has questioned the sense of major industry initiatives he says are focused on cost-cutting rather than revenue generation. Co-marketing, he will tell any retailer or manufacturer who will listen, is the real future.

"Merchandising is selling more to customers who already shop in a store," he says. "But marketing is aimed at all of the consumers who live in the area of a store. Its function is to attract new customers."

Hoyt explains that food retailing has evolved from mass marketing through regional and category marketing to the present period dominated by micromarketing. While the mass-marketing era was characterized by consumer pull and manufacturer control, the consolidation of the trade and advent of scanning beginning about 1980 led to fact-based selling and, by the end of the decade, to greater trade control.

In the 1990s, an awareness of micromarketing has led to more store-specific approaches and much talk of "partnering," which in reality has mostly meant "milk the manufacturer," he says.

In the co-marketing future, which Hoyt contends will arrive by 1995 or so, leading manufacturers and retailers will develop brand and category marketing plans together.

"What we will see is an emergence of a strategic vs. an ad hoc approach to retailing, in which retailers become marketers rather than price merchandisers," he says.

Hoyt cites a University of Chicago study on "Data-Driven Micro-Marketing," published last July by professors Xavier Dreze, Stephen J. Hoch and Mary Purk, which he said "just nails EDLP." The results of testing in Dominick's Finer Foods supermarkets show that demographic marketing is far better, he insists.

Hoyt says he has "run the numbers" on ECR, too. By his analysis, efficient replenishment will likely save 3% to 4%, while efficient trade promotion will yield maybe a 1% cost saving, not 4%-plus as predicted.

"Continuous replenishment, which by the way has been around since 1973, will drive some costs out of the system," Hoyt maintains, "but it will take 10 years to make the transition to EDLP, not 'best practice in two years,' as ECR proponents say."

For efficient assortment to be effective, he adds, retailers must organize for category management, "which requires a complete cultural change in the stores," a transition he says will also take time.

On the manufacturer side, Hoyt warns that the traditional separation between classic marketing and classic sales will not be easy to bridge, although he concedes that "trade promotion is bridging the gap somewhat."

Not surprisingly, expressing these views has made Hoyt a magnet for criticism from ECR's strong proponents. In private conversations following a recent conference, two executives told Brand Marketing in clear terms that they felt Hoyt's critique of ECR was irresponsible and destructive.

Other critics are more tempered. Richard Alt, vice president of national accounts and trade relations for Dial Corp.'s consumer product group, also takes a dim view of the argument that ECR demands too much too quickly.

"I think that's a smokescreen," he says. "Whether every step is implemented has nothing to do with whether ECR will benefit retailers and manufacturers. You can find some area to work on with nearly every one of your customers."

Indeed, in Alt's view, co-marketing "fits well with the efficient promotion operating strategy of ECR."