CPGs Scrutinize In-Store Marketing Supply Chain

While a ratings-style metric for in-store marketing remains just over the horizon, almost all CPG companies readily acknowledge that retail merchandising is an increasingly important part of the marketing mix. Many have made public statements to that effect. Many others, more importantly, are quietly backing up their words with boosted budgets.But with increased visibility comes greater accountability. More and more CPGs are now conducting internal reviews of how in-store efforts are organized and departments are structured. A few, such as Dial Corp., Miller Brewing Co., Sherwin-Williams, Rand McNally and Broan-NuTone, are going even further and re-thinking their entire in-store marketing supply chains. According to some experts, this effort is long overdue. Many brands allocate dollars haphazardly, says Pete Brawerman, partner with BrawermanMarsh Consulting, Chicago. In-store marketing efforts are rarely as efficient or strategic as they could be, nor are there clear lines of accountability for return on investment, Brawerman says, whose firm works with senior management teams to implement such restructurings."Ask, 'Who pays for it?'" he says. "It's a question that rarely gets answered with any accuracy or confidence. Or, ask, 'How much are you spending?' They're even more bewildered." Some companies have given ranges of $20 million to $30 million. "That's a pretty big gap. How does this not get their attention?"Whit Allen, another partner at BrawermanMarsh, says in-store marketing costs add up from different budgets -- sales, marketing, operations, finance and more. "They're not linked together. Ultimately, this is a supply chain. If you're not managing this as a supply chain, you're setting yourself up for inefficiencies."What BrawermanMarsh typically recommends is the creation of an executive-led cross-functional team, empowered as a new in-store marketing department.That was the recommendation, after a four-month review, for Dial Corp., Scottsdale, AZ. This centralization cut Dial's typical 20- to 25-week turnaround time to market in half for new in-store materials, says Scott McClain, director of in-store merchandising for the company."We wanted to understand our operations internally, see if they were aligned correctly, and then learn what our real costs were," he says. "Our primary goals were to increase our revenue, [and] we wanted to decrease our delivered costs, which were the hard costs of the displays as well as all these other process costs."Brawerman and Allen inter-viewed numerous personnel in various Dial departments, including department heads and senior executives, before presenting their findings. "The level of cost was greater than we expected," McClain says, "things like inventory obsolescence, carrying costs and warehousing expenses for components."Another insight: Dial executives decided that delivering in-store displays to the marketplace was neither a core function nor competency, so rather than continuing to try to manage 17 different display vendors internally, the company is moving toward centralizing its supply chain with one outside vendor, Alliance, a div. of Rock-Tenn Co., Winston-Salem, NC. McClain and one other top Dial manager oversee the effort."The net result is that we can push a lot more work through the pipeline faster," he says. "It gave us the ability to have resources on the back end that would allow us to go to market much quicker."Fear of ChangeImplementing a departmental change of this magnitude doesn't come without some fear and pushback, however.McClain's colleagues at Dial are now "very supportive" of the initiative, although he declined to comment on their initial reactions and strategic moves. "Change management is very difficult," he says. "But if people can see the benefits of changing and moving in a different direction, people get on board."Rand McNally, Skokie, IL, streamlined its supply chain more than two years ago when it centralized functions previously handled by a hodgepodge of marketing people, salespeople, brand managers, field staff and others, says Jon Boeve, hired then as manager of merchandising and promotions to become what he calls the "hub in the wheel."Boeve says his transition was great but he understands that resistance happens a lot at companies. "You're taking responsibility, sometimes away from people. They view you almost as a threat. It can get kind of sticky."BrawermanMarsh's Allen says, in his experience, change management toward integrating the in-store supply chain has rejuvenated employees. "Employees find new growth, new life," and by focusing on strategic goals rather than individual work load, it's much easier to elevate in the company, he adds.Still, Allen acknowledges that people are concerned about losing their jobs, but he says centralizing the supply chain isn't about a head count reduction, and none of the CPGs the firm has worked with have cut jobs.Another fear is that higher-level managers will get blamed for the previous inefficiencies. Allen says this can't become an issue; people need to honestly look at the situation."People already know it's pretty screwed up," he says. "This initiative pulls the elephant out of the closet. Everybody knows he's there, but this is the first time they have to face him." More Brands CentralizeOther companies have taken similar steps to streamline the supply chain. Cleveland-based Sherwin-Williams saw a need to centralize and strategize its in-store marketing efforts about a decade ago when it established its marketing services department, says Mary DaRif, who directs a cross-functional team that has grown from five to 19 people during the past 10 years. "We're able to buy better, source better and build long-term relationships with our suppliers," she says, and that helps iron out inefficiencies in the supply chain.Sherwin-Williams senior management holds the marketing services department responsible for doing its work, although not necessarily for ultimate sales, DaRif says. "We're accountable for procuring, producing and implementing correctly and within budget, and on time," she says. "Are we accountable for sales impact? Not really. We're part of that. We're accountable for our part of the equation."Miller Brewing Co., Milwaukee, created a retail marketing department in the fall of last year led by vice president Laura Hackett. The effort brought together the local marketing, customer marketing, channel marketing, and merchandising and display teams, who previously all spent time and money on P-O-P without any centralized coordination."We have really built out the team to customize and build the resources for those classes of trade," she says. Previously, "every brand had 12 standard pieces of point-of-sale; there really isn't a need for that. We weren't able to develop the best pieces because we were spreading so thin."Miller also has been better able to track spending and return on investment, Hackett says. "It was difficult for us, either on an account or a class-of-trade basis, to understand our investment and what it was doing for us," she says. The company has put a metric into place ("still in its early stages") that Hackett believes will help her department better understand how well promotions work within different classes of trade, and why they impact consumers the way they do.At Rand McNally, Boeve was brought in to focus on the strategic side of marketing in-store, he says. "All these different functions in the company -- marketing, field staff, supply chain, in-house design group -- all feed into me. I've been able to pull everything together and form much tighter, more streamlined communication lines to all areas of the company."Boeve's position was created when he joined the company. "They've given me some responsibility that had never been here before," he says. "When we have an opportunity to go into Wal-Mart or The Home Depot, my sales reps will bring me along to be the in-house expert from Rand McNally to talk about what [in-store] opportunities we currently have. I can ask the questions that maybe my salesforce wouldn't have the background to ask."Broan-NuTone, Hartford, WI, has changed its outlook as well, although Karen Formico, manager of marketing services, would not characterize the company's efforts as a full-scale restructuring. "It's more of a renewed look, or an analysis, of how we spend the money on P-O-P, and what it means to our business." As a relatively small company, Broan-NuTone has less of a need to undertake full re-engineering, Formico says. "We're not as big as somebody like Coke or Miller, who's buying millions and millions of dollars of P-O-P every year," she says. "With lots of smaller displays, most of our P-O-P is getting more and more dictated by the chains. They are involving their purchasing departments in it."Still, Formico says, the company has taken more of a cross-functional team approach, and in-store has more attention from the top. "Now that we've recognized how much of an impact, good or bad, that merchandising has on the sale, it goes right up to the corner office," she says. "There are so many avenues where you can save money and become more efficient. Doing a display is a company-wide project now."

CPGs Scrutinize In-Store Marketing Supply Chain

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