IRI CHAIRMAN CALLS FOR COLLABORATION

ELLIOT ZWIEBACH

SAN DIEGO -- Consumer packaged goods companies need to work more closely with retailers to maximize each other's business performance, Dr. Romesh Wadhwani, chairman of Information Resources Inc., Chicago, said here.

CPG companies often lack an understanding of what consumers are thinking, but collaborating with retailers to gain that knowledge will make it easier for both, he said. "What's been missing is the ability of CPG companies to take insights gained from retailers' knowledge of consumers, competition and neighborhoods, and to integrate that with their own knowledge of marketing, sales, operations and finance," Wadhwani said. "By sharing that information to explore new marketing opportunities, you'll actually be able to collaborate in meaningful instead of superficial ways."

Wadhwani spoke at Reinventing CPG Summit 2004, a conference sponsored here last month by IRI. He said building long-term bonds with consumers was critical. "Think about selling consumers solutions, not just products, to bond them as partners to your companies."

He also urged manufacturers to look at retailers on a store-by-store rather than a chainwide basis. Toward that end, he suggested CPG companies change the approach of their trade programs "by trying to optimize them at the store level instead of the retail chain level."

"For example, admit that less affluent customers are more interested in promotions than upscale shoppers and begin to measure trade programs on the basis of return-on-investment rather than emotions," Wadhwani said.

He also urged companies to use real-time data as much as possible. "Much of the sales data available is outdated by the time companies get it," Wadhwani said. "Companies need daily point-of-sale data, and as radio frequency identification becomes more prevalent, the whole notion of real-time data signals can evolve seamlessly into RFID."

He said real-time data will also help reduce out-of-stocks, "which continue to suck away 8% to 10% of revenues -- a situation that hasn't changed in the last 10 years despite huge investments. The reason is that 50% of out-of-stocks are caused by retailers doing a poor job of planning and forecasting because they lack the information they need."