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For producers of consumer packagedgoods, the road to sustained growth still
passes through emerging markets. Despite some softening of enthusiasm for investment
in the so-called BRIC marketsBrazil, Russia, India, and Chinaover the next 15 years
nearly three-quarters of the worlds GDP g rowth will continue to come from emerging-
market countries, including Ethiopia, India, Kenya, Mexico, Nigeria, and Vietnam.
Growth in these parts of the world is b eing driven by forces that dont show any signs of
weakening: steady population expansi on, rapid urbanization, a proliferation oftechnology, and gradual opening up ofeconomies and adoption of market-oriented
policies.
Global packaged-goods producers can gain significant foothold in these markets if they
manage talent shortages, infrastructure gaps, and the highly fragmented trade
landscape. There is no one-size-fits-all approach to doing this. Our research
demonstrates that outperforming consumer-packaged-goods (CPG) companies use a set
of standardized practices or tools across markets to determine their priorities for growth
in eac h country. They cl early define their value propositions for customers, ach ieve
optimal distribution, and continually strive to build sustainable operations and
organizations. However, to be successful, these companies customize the standardized
practices and tools based on the scale and strengths of their companies in particular
regions, and local market dynamics and operational conditions.
And, no matter the levers they use, the outperformers consider the use of information
technologies and capabilities in advanced analytics and big data to be critical to theirsuccess. Digitization has taken hold in many emerging markets, even as other areas of
infrastructure in these regions lag behind. In some African countries, for instance, poor
roads and travel systems can make it difficult for consumer-goods producers to physica lly
deliver goods to 80 percent of customers ina regionbut these same customers can still
pick up a mobile phone, operating on a 3G network, and use mobile-payment platforms
that dont even exist in some Western countries. The challenges are great, but so are the
opportunitiesand technology-enabled approaches ca n reveal them.
In this article, we outline the obstacles to growth in emerging markets and the potential
actions that sales organizations can take to get over these barriers.
Obstacles to growth
Our research shows just how tough it is for global CPG giantscompanies with more
than $25 billion in global revenueto compete with regional players. In Latin America,
for instance, regional producers are 2.7 times more likely than global giants to growahead of the category, achieve above-average earnings, and get high returns on their
trade investments (Exhi bit 1).
Exhibit 1
P DF P rin t E -ma il
includes:
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Achieving customer-management excellence inemerging marketsWinners ask four critical questions about market-by-market growth, then tailor their channel-management
approaches accordingly.
September 2015 | by Cr istina Del Molino, Pavlos Exarchos, and Felipe Ize
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There are a number of reasons why its been difficult for multinationals to gain ground in
emerging marketsperennial issues for global sales and marketing executives. For one,
there is typically limited visibility into point-of-sale (POS) information: the small
independent players that dominate the retail industry in most emerging markets,
collectively known a s fragmented trade, rarely have the modern POS systems that most
developed-market retailers h ave. Global players often need to invest in creating new
information sources, or else risk being unable to spot clear growth opportunities.
Second, consumer heterogeneity and income in equality are the norm in many emerging
markets: because of the ethnic, cultural, demographic, and economic differences across
or even within countries, there is a greater need for companies to customize products an d
distribution strategies for loca l markets.
Third, unstable supply-chain infrastructures hi nder consumer-goods producers from
providing seamless s ervice throughout a country s econd- and thi rd-tier markets are often
ust too hard to reach.
And final ly, companies often face a shortage of ski lled sales talent, both internally an d
among their dis tribution partners. They typically fin d that they need to invest more time
and resources in field capability-building programs than initially expected.
Varying roads to excellence
Following a decade of work with leading fast-moving consumer-goods companies
around the world, we have codified a set of customer- and channel-management best
practices that allow CPG companies to address the challenges cited above and capture a
disproportionate share of g rowth in emerging markets.
Specifically, the best-performing companies as k themselves four fundamental questions,
the answers to which collectively make up a menu of approaches for achieving customer-
and channel-management excellence: What are our growth priorities? What is our
distinctive value proposition? How will we deliver on our value proposition? How will weenable change? Companies can apply various tools and technologies to address these
four key considerations (Exhibit 2). As the following examples show, the chosen levers
and approaches will be different for every company, and even for different business units
within a company, depending on strategic i ntent and local context.
Exhibit 2
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What are our growth priorities?
CPG companies can use a range of tools to collect the information required to gain a
comprehensive view of the potential POS opportunities and a reas for operational
improvement.
One fa st-moving consumer-goods c ompany used prioritization mapping to uncover
growth opportunities at the regional, neighborhood, and outlet levels in Latin America.
In a pilot study, the company started with a data-driven hypothesis of how various cities
in emerging markets w ould grow over a 20-year period. Sales a nd marketing leaders
worked with internal data a nalysts to l ook at ag e profiles, gender and household
behaviors, soci oeconomic levels, and other demographics to better understand where and
how consumption of its products could change over the next two decades. They also
anal yzed the consumption of various product categories and s aw that, for every category,
an increase in purchasing power didnt necessarily translate into increased consumption.
For some products, consumers did not trade up to premium lines as their income
increased.
The company cross-referenced these city and category perspectives to get a detailed view
of those Latin American cities and even those neighborhoods where there was potential
to sell more of the companys products, as well as those pockets where growth had
slowed. In addition, the company relied on geospatial analytics technologies to see, store
by store, the sales of its products, its on-site sha re of market for these products, and,
therefore, the growth potential. As a result of these findings, the company was able to
determine the trade packages, investments, pricing schemes, a nd product mix tha t would
yield the best results in c ertain stores and neighborhoods (bas ed on factors such a s store
size and format, and local consumer income and population). The company was able to
boost its sal es in the pilot outlets by 40 percent. The n ew approach al so all owed the
company to increase penetration by 25 percentage points and its market share by up to 4
percentage points i n the pilot outlets.
Once the company identified its highest-priority categories, cities, and outlets, it was ableto alloca te resources more effectively and make decisions relating to distribution, sa les-
force effectiveness, and change management more easily.
What is our distinctive value proposition?
Despite not having the breadth a nd depth of retailer and consumer data that theyre
accustomed to having i n developed markets, innovative CPG companies are finding ways
to tailor their retail and consumer value propositions in ways that will enable success in
emerging markets.
One major multicategory food producer was looking to increase its market share in
Mexico. The company had been using basic outlet-segmentation strategies to define its
service levels a nd product ass ortment in various l ocations, but it had li ttle information
about retailers and consumers behaviors and purchase triggers: which occasions and
offers prompted which purchase decisi ons? Without this data, sa lespeople struggled to
optimize returns from the large number of food categories they managed and from theinstallation of in-store materials.
The company instituted new IT systems for collecting retailer and shopper insights.
Using the newly available data, the company was able to develop a detailed
understanding of outlet economics and, c onsequently, a more sophisticated outlet-
segmentation strategy. It was thus able to customize its retailer value propositions, with
7/24/2019 McKinsey & Company - Achieving Customer Management Excellence in EMs
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clear directives a nd differentiated incentives for outlet owners. For each category or
location, the company provided certain customer investments, or givessuch as
refrigeration, discounts, or trainingand it required certain commitments, or gets, from
the retailer, such as pricing compliance or exclusivity. The specific gives and gets varied,
depending on wha t the retailer valued most and on the potential returns for the company.
In certain outlets, the company installed coolers, which ultimately allowed it to sell 20
percent more beverages an d other refrigerated goods in those venues. In other loc ations,
the data prompted the company to invest in developing retailer loyalty by visiting stores
more frequently or advising them on remodeling and finance issues. In still other
locations, the company invested in exhibiting price labels more prominently.
For each category or location, CPG companies should have a list of demand-generation
and loyalty offers companies can provide to retailers, and a list of commitments thatcompanies can require from retailers. Insight analysis and other tech-enabled
approaches can help companies find the ideal investment situation that will support the
desired retailer and consumer value propositions.
How will we deliver on our value proposition?
Global producers of consumer goods often cite unstable supply-chai n in frastructures and
sourcing conditions as an obstacle to providing seamless delivery and high levels of
customer service. Th e best-performing companies in emerging markets are meticulous
about distributor segmentation and view a ccount management from a holi stic
perspective.
A gl obal spirits company looking to grow its business in As ia con ducted an end-to-end
transformation of its route-to-market model. The company sought to capture a
burgeoning middle class of c onsumers wi th a desire for better product access by providing
them with a wider selection of whiskies, rums, and vodkas. But the company had to
contend with outdated road and rail n etworks and cong ested seaports, making product
deliveries and sales visits difficult. The companys sales in this region were inconsistent
promotional displays were often not visible, opportunities for bundling spirits with other
beverages were mostly missed, and there were pricing cha llenges due to regional trade
regulations and lax retailer compliance.
The companys solution was to refine elements of its route-to-market model. Its previous
one-size-fits-all structure gave way to a model tha t encourages differentiated distribution
according to customer needs. The company was able to extend its coverage to small or
hard-to-reach stores by developing a portfolio of route-to-market optionsfor instance,
continuing direct store delivery with large trucks to critical accounts, while convening
recon teams with motorized han dcarts to visit between 500 and 7 00 more remote stores
per week and validate POS data, inspect promotional displays, a nd perform price checks
as needed.
The company al so systematically studied and refined elements of i ts third-party
distributor management. It evaluated distributors based on criteria such a s w arehousing
and logistics capabilities, financial strength and infrastructure, and willingness to
partner. Th e company ranked distributors based on an aggregated score an d developed
programs in which trade terms were more explicitly lin ked to the distributors
performance. Rather than partner with many distributors, i t narrowed its relationsh ips to
only a few. For these few, the company created plans to address capability gaps. Under
this model, partner distributors are managed as an extension of the global spirits
company, with standard operating processes, shared sales expertise and incentives,
common systems and metrics, and tight performance mana gement.
How will we enable change?
By purposefully embracing and incorporating new tools and technologies, such as
geospatial tools, into their organizations, consumer-goods producers may be better able
to streamline their sales and distribution processes, train and motivate staffers across the
globe, and improve sales results and general performance. Particularly in emergingmarkets, where the use of mobile technologies is rising rapidly, IT has a central role to
play in ensuring standardization and rolling out new and faster ways of working.
Sensor and scanning technologies are already helping many companies improve their
sales-force effectiveness i n emerging markets: field representatives can use handheld
devices to scan coolers in even the most remote outlets, collecting data that can be
monitored (via tablets and smartphones, in some cases) and used to forecast sales,
demand, a nd other relevant metrics. As mentioned previously, companies are also using
geospatial analytics to create comprehensive outlet and distribution plans.
On the horizon are corporate gaming apps that can be rolled out to sales forces across
international locations, even in the most fragmented markets. Imagine a multiplatform
gaming program in which sales representatives are challenged on every call to go on a
designated number of missions they are given the sales route they need to follow, the
tasks to be completed at each outlet, and the time frames in which those tasks must be
completed. If they ach ieve the requisite number of missions, they are rewarded with a
certain number of virtual points that can be traded in for both financial and nonfinancial
rewards. In thi s w ay, s ales representatives may be motivated to perform even those tasks
that are usually considered uninterestingfor instance, checking competitors price lists
in certain outlets. Missions are tracked using a common software application and
website that salespeople can a ccess through l aptops, smartphones, tablets, an d social
media. A graphic interface allows users to see at a glance, and in real time, not only their
own status and productivity levels but those of their colleagues they can quickly give and
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Through these and other technologies, companies can develop new in-house capabilities
as well as a mechanism for continuous learning and development. These capabilities can
be reinforced by having a dedicated in-market operations unit to, for ins tance, h andle
analysis of local data and redesign regional sales routes on the fly. Technology is a
powerful a llybut the best-performing c ompanies are thos e that commit sufficient time
(at least three years) and resources to their initiatives in emerging markets.
The companies mentioned in this article systematically and intensely considered the four
key questions. But the actions they decided to take to create change or competitive
advantage were not fixed or rote they were based on the local trade environment and on
the companys strategic intent. These companies focused on building partnerships in
emerging marketscreating relationships on the ground that could serve as extensions of
the organization. They continually monitored their progress against stated goals as well
as changing market conditions. And they focused on technology as a means to deal with
the channel fragmentation found in emerging markets.
Our research suggests that by asking each of the four critical questions and developing a
tailored approach to customer channel management, companies can capture a
disproportionate share of g rowth in emerging markets.
About the authors
Cristina Del Molino is a specialist in McKinseys London office, Pavlos Exarchos is a director in the
Athens office, and Felipe Izeis a principal in the Mexico City office.
The authors wish to thank Simon Land and Matteo Zanin for their contributions to this article.
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