Off the Shelf: The Retail & CPG Blog

When Larry Page and Sergey Brin started Google, it merely was a search engine. For years, Google focused ruthlessly on its core functionality which was the mathematics that drove the algorithm, which produced the most relevant search results. Their success started producing all the traffic they could handle. But the noticeable thing was that they didn't sell anything. Then in 2002, it happened. Keyword based text ads started appearing along the right column of search results and then they launched the game changer Google AdWords program. Suddenly lots of traffic was getting converted into lots of revenue. This was a landmark event and the whole marketing world realized the potential of 'Online Display Advertising'.

If we see today's display advertising - the banners ads, blog ads, rich media ads, content sponsorship, email newsletter sponsorships, pop ups etc. may sound like an ancient way to get noticed, but that is not all. Now online display advertising is becoming far more interesting due to 2 important trends -

One such trend is localization, in which companies do a better local ad targeting. Today more and more prospective clients are searching for local businesses online. They have realized that it makes more sense to target those in their geo-specific area, than to target on a broader spectrum of terms. Targeting local specific terms is only creating more targeted leads, for their business. Many companies, such as Facebook, LinkedIn and Local.com, have announced that they're getting into the local targeting game by offering geography-based advertising along with the standard demographic or keyword targeting the customers would expect.

Local targeting is already prevalent in search engine marketing lead by Google and it is good to know that display ads are heading in the same direction. The chart shows the exponential growth of 'US local online advertising spending' as the total such spending has almost become 4 times of what it used to be 5 years ago.

The only problem for such a localized business is the size and scope of the Internet. Today internet is been dominated by large multinational sites and these smaller localized businesses are first of all have very less presence and even if they there at all they often get buried up somewhere in the search engines. Therefore such a localized marketing probably needs a different approach all together for becoming effective.

The other noticeable trend to get excited about is the movement towards ad pricing based on cost per action (CPA) rather than cost per click (CPC). Paying for ads based on cost per action means that one does not pay the publisher until he/she gets the action desired from the ad. For example, if an advertiser wants its banner ad to drive someone to an online store to buy the advertised product, then the company won't have to pay until someone actually clicks the ad and completes the purchase. CPA is a means of controlling advertising spend. So, if the advertisers want to be sure that they are not indiscriminately spending money on terms that aren't driving business, CPA offers an opportunity to control the ROI. Now companies (such as Hydra, Commission Junction, Performics etc.) are not just blindly going to follow the eye balls, but they will follow the conversion as well. Jellyfish.com was the Internet's first comparison shopping search engine to operate exclusively on a Cost per Action (CPA) ad model and the same is being replicated by others.

It is going to be a Win-Win situation for both the customers and the advertisers. The customers will now be equipped with more relevant information about the products, offers, options available etc. than they used to have when the advertising was generic and not localized. On the other hand the advertisers can have better visibility and better communication with their customers. Also the companies focusing upon CPA rather than CPC can bring down their marketing costs (which might have been going in vain earlier as they were not very sure about the conversion rate). This cost reduction may be forwarded to the customers with price reductions.

Posted by Arun Singh at 6:22 AM | Permalink | Comments (0) | TrackBacks (0)

If Social media were a human, it would barely be 5 years old. A child, really.

Now imagine beating a 5 year old child with a stick demanding him to grow-up faster. Not a pleasant scene to visualize, is it?

But that's exactly what we, the marketers, are really doing to Social media. Beating it senseless with an 'ROI' stick!

Not that I don't understand the dilemma that the marketers are in right now. Really, they are not in an enviable position right now. It is quite natural for marketers to spontaneously ask for ROI estimates and approximate conversions the minute one utters the word - 'Social Media'. After-all, we have just about escaped the clutches of one of the most dreaded recessions after the great depression of 1920s. Marketers across the board have been left struggling to manage decreasing consumer spending while scrambling to meet the growth numbers and targets.

However, let's take a step back, and look at some facts:

-          Average corporate spend (%) on Social Marketing, GLOBALY, is around than 3.5% of the marketing budget. (Source: http://www.socialmediaexpress.com/social-media-spend-double-2010/)

-          The remaining 96.5% of the budgets are allocated among the traditional media - with print & Television taking a lion's share. Who gets how much money, depends mostly on the following criterion:

o   Print - Circulation figures of publications; which have been proved to be easily manipulated and an incorrect representation of the reach. Readership numbers shared by any publications come with numerous fine prints and are 'estimates (guess work)', at best.

o   TV - TAM numbers based on a few thousand boxes placed in houses across the country.

So where do the above facts leave us?

It would not be too reckless if we were to thus assume, that we are spending most of our money on the basis of 'Sample' data that can no way give a complete and accurate picture of the consumer sentiment. After-all it's highly improbable, if not outright impossible, that a few thousand people will be able to correctly depict the feelings and behavior of millions of others.  

No wonder the average consumer response has been sliding for new product and service launches last couple of years! Barring a few exceptions off course - iPhone! But no one seems to be complaining, surprisingly.

Social Media could provide the solution - Only if we let it!

There is no denying that Social has its own set of problems. Not the least of them being the overall penetration especially in the BRIC countries that are the markets of tomorrow. However, like I mentioned earlier, the medium is barely a few years old and what it needs is for the marketers to work with it rather than against it.

Unlike the traditional media, Social Media has the capability provide actual, useable and real-time data. Data that is not based on sample populations but holistic, integrated and meaningful. Social is the only medium that really puts us directly in touch with the consumer, so that we can understand them better. (And there is no dearth of analytics and listen solutions that could help us make sense of all the reams of data. The analytics landscape is only going to improve as we go along).

The possibilities in terms of business applications are phenomenal - consumer engagement, co-creation, customer service, collaboration...you name it. Returns will come but only when we have invested enough time and efort nurturing the medium.

But that's only if our constant beating does not kill it first!   

Posted by Amit Handa at 8:18 AM | Permalink | Comments (1) | TrackBacks (0)

No other technology or phenomenon changed the way we work, live or play, the way internet and specifically social media did. It quite literally erased boundaries of all kinds - geographic, interpersonal, corporate...

People across demographic profiles took to the internet and social media for 'Instant everything' - connections, music, movies, information, shopping. The age of 'instant Gratification' has set in.

And the march of Social has only begun...

With 500 million people using Facebook and Twitter seeing more than two billion tweets per month, social media usage is skyrocketing.  This trend is clearly visible not only among users accessing the internet through PCs but also amongst mobile users, who spend 1.4 times as many hours using social networking sites than reading and responding to e-mail, according to a recent study by research company TNS.

The study, which tracked the online activities and behaviors of nearly 50,000 subjects between 16 and 60 years of age in 46 countries, cited "the increased need for instant gratification" as well as "the ability to offer multiple messaging formats, including the instant message or update function," for the popularity of social networking platforms on mobile devices. More consumers, both in the U.S. and abroad, expect to spend even more time accessing social media on their mobile devices in the future, rather than their PCs.

Consumers are spending more time on social media than on television. Facebook, linkedin, Orkut, hi5, blogs, youtube, twitter...you name it. Consumers just can't seem to get enough of Social Media.

How to Measure the Index of Instant Gratification

All this hoopla is attracting marketers' attention and they are loosening the purse strings. A February 2010 survey by Duke University's Fuqua School of Business found that survey respondents were devoting 5.6 percent of their marketing budget to social media -- up from 3.5 percent six months prior.

While all this buzz social media in general is creating a lot of interest that has led to a slew of campaign/application launches by brands across verticals, the measurement of the resulting impact and consumer engagement has, so-far, been hazy at best.

This might just be about to change as some innovative analytics solutions enter the seen. The leader among the pack so far is the social media analytics service Klout. Well-known for its Twitter influence measurement scores, Klout, has finally launched a version of its platform that determines your influence on Facebook.

Klout currently uses various data points from Twitter to figure out your "Klout Score," a representation of your influence and ability to compel action by others online. Its Twitter analytics platform takes into account metrics such as re-tweets, follower counts, list memberships and unique mentioners to calculate everything from who influences you to your "true reach" on Twitter.

Klout's now trying to do the same thing on Facebook. Once connected to a Facebook account, Klout will pull in data such as likes, comments and your friendship network in order to determine your influence on Facebook. Moreover, instead of representing Facebook and Twitter with different scores, Klout has decided to integrate them into a single Klout Score.

This opens a whole new chapter in online analytics and consumer engagement as marketers (or anyone using Klout) begin to get a broader view of the consumer response and engagement on social media.

It's Social Listening on steroids!

Posted by Amit Handa at 6:15 AM | Permalink | Comments (1) | TrackBacks (0)

Posted by Stephen Alan Potts at 1:09 PM | Permalink | Comments (1) | TrackBacks (0)

During my recent visit to India, there were a host of things that stuck me positively.

-          The ever growing infrastructure - at any point of time, there are at least a dozen fly overs being constructured in any city to improve traffic. Also, the new quadrangular national highway is a driver's dream and a boon to the economy

-           improved quality of public transportation - I have never dreamt of seeing a Volvo bus being used by the government run public transportation system

-          Booming auto industry - the choice of cars that is available for the end consumers will be comparable most of the developed countries

There were so many other things that I was very pleasantly surprised. But the one big thing that had my jaw drop was the growth of retail chains. Ten years back, we had very few retail chains that were spread across a state, leave alone the country. But today, if you see the growth of organized retail sector is amazing with every retail segment boasting of big time players

Before 1980, the country's retail consisted only of mom and pop retail stores who catered to the nearby consumers. The only organized retail chain was the "ration" shops run by the government that used to sell groceries to the general public. 80s saw the emergence of retail chain, mainly apparel, like Raymond, Grasim, etc. When the economy opened up in the 90s, we saw chain departmental stores like Food World, Subhiksha and Nilgris; also there were other chains like Music World. Titan was the first chain store to go big by opening up hundreds of stores across the country to market their premium watches.

That's about it. But what we are seeing looks like a retail revolution. Every segment of retail industry, be it apparel, departmental stores, electronics, sports goods - anything, you have various corporations set up chain stores across the country. The amount of choice today's customer has in terms of different retailers or the kind of items that were not available 10 years ago, is just tremendous.

While I was happy to see this development, I was very concerned about the street corner grocer who used to sell us our day to day grocery for many years. But I was surprised to see that most of the mom and pop retail stores also exist and are still being patronized by their regular loyal customers.

-          While consumers prefer chain stores for unique items (like Broccoli) and large volume which they stock for weeks, they still prefer the street corner shop for their day to day needs. The shopping pattern has not changed significantly where people are still doing their grocery on a daily basis

-          The size of retail industry has more than doubled in the last 10 years. So, everybody has a share of the pie

-          Loyalty is big when it comes to street corner stores. The relationship that they share with their consumers goes to the extent where they get invited for their customers' family occasions. These customers will never go away for these street corner stores

Though it was encouraging to see the co-existence of both mega retailers and street corner retailers, it is increasing challenging for the street corner retailers to compete with the big fishes.

Posted by Prasanna Ramaswamy at 3:38 AM | Permalink | Comments (1) | TrackBacks (0)

In many organizations, indirect procurement has been a low priority compared to direct procurement. Reducing costs and managing a large number of suppliers are the factors considered as challenging to control indirect procurement costs.

But we first need to understand the basic difference between direct procurement and indirect procurement. While direct procurement is a process by which an organization buys materials that directly go into the finished product that they sell to their customers, indirect procurement process helps the organization to buy operational items that help sell the direct procurement items. An example of indirect procurement item will be the fuel that an organization buys for its fleet of trucks that help move the end products to its customers.

According to NelsonHall research, the major indirect procurement challenges for organizations are as follows:

• A strong corporate requirement to reduce the cost of indirect goods and services
• Difficulties in managing large numbers of suppliers in the absence of adequate breadth of internal category management expertise
• Difficulties in managing large numbers of suppliers in the absence of common indirect procurement systems, processes and interfaces
• Lack of indirect spend visibility

As a key step to reduce indirect procurement costs, lots of organizations are resorting to centralizing the indirect procurement operations to a shared services model. And some of them have extended this concept by outsourcing these. And if you look at the companies that have outsourced the indirect procurement operations, 70% of them took the internal shared services route before outsourcing part of or the entire operations.

What does it bring?

-          Centralization of processes helps bring greater visibility of the spend. Knowing the problem completely is half the problem solved, isn't it?

-          Outsourcing companies bring the best tools that are available as well as best practices from across the industry, which will result in continuous improvement

-          Improved ability to manage suppliers - thru centralization, the company can rationalize its supplier base and thereby making it more manageable

One has to say that in spite of all the talks, the focus on indirect procurement is still not there to the extent that it has to be. Businesses should realize sooner than later that there are no significant advantages to focus on indirect procurement

Posted by Prasanna Ramaswamy at 2:09 AM | Permalink | Comments (0) | TrackBacks (0)

At the outset, we need to understand the difference between sourcing and procurement. Procurement is the process by which one gets the required materials from the suppliers. But sourcing precedes that; it is a process by which an organization scrutinizes the data available and makes the following key decisions:

-          What to buy?

-          How much to buy?

-          When to buy?

-          From who to buy?

Till not long ago, people were using sourcing and procurement interchangeably. Till World War I, procurement was considered to be a clerical job. Over the last few years, organizations have made a clear distinction between sourcing and procurement. While sourcing is considered as the strategic part, procurement is the process which operationalizes the sourcing decisions. I guess that explains it clearly.

Coming to the main question of this blog: Is sourcing just a cost-leverage initiative? If the answer happens to be "Yes", then one would question the need to distinguish it from procurement processes. Because all along, the merchandisers were the ones who would ensure that the organizations source the materials at the lowest possible price points. So, the answer has to be a "No". Sourcing is a tool that an organization can leverage to enhance its competitive advantage.

Most of the large sized companies carry an enormous number of SKUs. But there is no clear cut process to determine the item profitability and decide which items derive maximum profitability and which are not the ones. Sourcing helps an organization to do that analysis and gives a periodic report on the profitability of the items that they carry. This helps the management to decide to discontinue some SKUs that are less profitable, thereby focusing on profitable items and increase their volume. I do understand that item profitability is not the only criteria to decide whether to discontinue an item or not. There are other factors like customer preference, status, etc. But surely, having the item profitability in their hands gives the management to have a deep look into their item portfolio

Strategic sourcing is itself a benchmark. It relates to getting the best products and services at the best value. It is designed to segment external spend and ensure that procurement resources are focused on the most important categories. What sets strategic sourcing apart is its continuous attention to improving and re-evaluating the purchasing activities of a company, thus enabling organizations to adapt to changing market forces.

Posted by Prasanna Ramaswamy at 1:49 AM | Permalink | Comments (0) | TrackBacks (0)