The fastest moving turtle. The least dirty shirt in the laundry basket. Call it what you want, but these days the U.S. economy is looking attractive, at least in relative terms.
Not long ago, international and emerging markets promised bountiful sources of untapped growth, but today’s political unrest, floundering commodity prices, and health crises have placed a large question mark over many of those areas on the map.
While the U.S. is gaining in relative attractiveness, the prospect of low single-digit economic growth is still nothing to get overly excited about. So for well-established consumer products (CP) companies operating in a saturated market, the question becomes: How can you take more than your fair share of the pie?
For CP companies, there are four primary opportunities that can help drive sustainable, profitable organic revenue growth in the United States. Successfully tackling each requires a blend of art and science, coupled with analytics helping to identify and inform the right strategy and deliver the tactical opportunities to execute.
The opportunities include:
- Set more targeted pricing and assortment strategies. The increasingly transparent, multi-channel, hyper-informed consumer, and locally focused retail environment has placed added stresses on upstream CP companies. Where product line extensions coupled with uniform pricing and assortment decisions were once enough to drive organic revenue growth, CP companies must now deliver targeted micro-market product and pricing decisions. Managing this dispersion requires the right analytics to guide smarter, more responsive decisions. Those that master this ability will help ensure they are delivering the right product to the right customer at the right time and at the right price.
- Deploy trade promotion dollars more effectively. Promotions continue to be a central component of CP and retailers’ plans to win over fickle consumers. Deployed correctly, promotions can be an effective growth lever, but today’s overreliance on them begs the question: At what point will more promotions no longer yield more organic revenue growth?
In many situations, we have already hit this point. While breaking the overreliance on promotions may not happen anytime soon, the best first step is ensuring the capital that companies do invest in promotions delivers the best possible result. This starts by scientifically measuring the true effectiveness of promotions and quantifying the promotional attributes that did and did not work well. Armed with this information, companies can then more strategically deploy future trade funds to best drive profitable growth and improve customer value perceptions.
- Account for customer tradeoff decisions. Pricing decisions are often made in isolation – what should the price of this item be? However, consumers usually make choices relative to their alternatives – which brand or package size should I select among all those on the shelf? Bridging this gap requires the right analytics, with the end goal of informing better price architecture to ensure each product’s relative position reflects the desired price position. Finding this sweet spot can drive significant profitable growth without the need for steady price increases.
- Manage the long product “tail”. Increased demand for localized assortments, channel expansions, strategic efforts to maintain and expand shelf space, and attempts to be innovative are just a few of the drivers that have led to extensive SKU proliferation at many CP companies. The reality is that most products are relatively unprofitable but still require resources to maintain – the dreaded product tail. Classic approaches to SKU rationalization oversimplify the process, can put customer relationships at stake, and dampen growth prospects. Yet no action is not the right action. A more active total portfolio optimization approach is needed.
While the attractiveness of the U.S. market is growing for CP companies, at least in relative terms, it remains a saturated market with a mature set of competitors vying for share. That means the next chapter of U.S.-led growth for CP companies will be awarded to those who are best prepared.
This can be best achieved with a holistic data and analytics-driven approach, which will enable the dynamic strategies and tactics needed to win in this complex market. Are you ready to capture more than your fair share?
To help you capture more than your fair share of the market, stay tuned for future posts that will delve more deeply into each area of opportunity.