Increased collaboration can drive more effective business results, of course. And more collaborative retailers and manufacturers have been able to cite tangible areas of progress beyond “soft” benefits.

Undoubtedly, we know the importance of supply chain management and its benefits. We may have great relationships with all the business-to-business members of the supply chain, but just how well do we understand where the thoughts of a customer’s customers are headed?

The Trade Promotion Collaboration Survey, a recent joint survey from on-demand optimization solutions provider DemandTec and global consultant Booz Allen Hamilton, provides some thought-provoking data. The study, which focused on grocery retailers and their consumer packaged goods manufacturers, found that 87 percent of manufacturer respondents “are not satisfied with their return on trade promotion events, compared with just 50 percent of retailer respondents.”

The respondent set included 54 unique, qualified respondents from retailers and consumer packaged goods manufacturers representing 40 percent and 55 percent of domestic United States grocery volume, respectively.

“Brand-centric manufacturers need to pay more attention to the role retailers play as the advocate for the consumer,” Booze Allen Vice President Hans Van Delden said in a statement. “The survey also shows that retailers are interested in the customer and the category, while manufacturers are interested in events and brands; and this can cause a disconnect that results in less than optimal promotions.”

Nonetheless, manufacturers who can offer a product with a unique selling proposition, rather than a commodity, can benefit from promotion. Moreover, manufacturers who don’t do their own research into the mind of the ultimate consumer can take advantage of the retailer’s understanding of what consumers are thinking and how their needs are changing.

Other statistics show similar “at-arms-length” closeness to the ultimate consumer. The following are some key benefits of collaboration cited by manufacturers and retailers:

• More effective and efficient planning was cited by 83 percent of retailers and 68 percent of manufacturers;

• Share growth was important to 58 percent of retailers and 37 percent of manufacturers.

The survey authors drew some conclusions:

• Manufacturers and retailers are becoming increasingly interdependent;

• Retailers rate the quality of their interactions with market research well below that of other functions, and manufacturers had significant concerns about the data they receive from retailers.

Among retailers responding, 92 percent said collaboration was “very important” and 8 percent said it was “important.” Manufacturers rated collaboration as “very important” 56 percent of the time, and “important” 39 percent of the time.

More collaborative retailers and manufacturers were able to cite tangible areas of progress — such as increased sales and profitability — beyond “soft” benefits like better working relationships or more effective planning, according to the DemandTec/Booz Allen Hamilton statement.

One area not covered by the collaboration study but equally worthwhile to consider is the difference in retailers’ and manufacturers’ marketing styles. For instance, the retailer, in its promotions, will understand and respond to consumer emotions, marketing to one or at most several family members. In contrast, the manufacturing company, familiar with the business-to-business world, relies on rationality, fear of making a bad choice and buying groups as well as far longer selling cycles.

What this means for manufacturers is that the promotion to the consumer has to take some psychological aspects into consideration in addition one or two rational appeals. Thus, in planning new products, manufacturers can — and, more often than not, will — benefit from taking retailers’ comments about satisfying consumer emotional needs seriously.

“While advertisers and marketers know the importance of understanding — and appealing to — the emotions and whims of their audience, economists and many others in the business community tend to view all consumers as economic rationalists,” explains management consultant and “global strategy boutique” Corporate Value Associates.

Yet “reading the hearts and minds of ever more diverse customers” is something altogether more slippery, “especially when we are trying to divine information that only could or should exist in the future,” BusinessWeek once aptly noted.

Resources

Trade Promotion Collaboration Survey
DemandTec/Booz Allen Hamilton, October 2007

Collaborative Trade Promotion Optimization Drives Improved Business Results for Retailers and Manufacturers
DemandTec/Booz Allen Hamilton, Oct. 9, 2007

Trade Promotion
AllBusiness.com

The Value of Understanding Customer Emotions
by Sandra De Castro
Corporate Value Associates

Understanding Why People Buy
by Darrel Rhea
BusinessWeek, Aug. 9, 2005