roland berger shaping the future sales 2015 e 20110224

2010-11-17_Markenverband-RB_Vertriebsstudie_Ergebnisse_E.pptx

Munich/Berlin, November 2010

Results of the study conducted by Markenverband and Roland Berger Strategy Consultants

Shaping the future – SALES 2015

1

2 Participants and structure 9

Background of the study 3

Page


3 Selected results 13

2 Participants and structure 9

4 Contacts 40


1 Background of the study

The smaller playing field for branded products and the driving-force retail trends will influence the future of selling

What does this

"SMALLER PLAYING FIELD"

EUR -20 bn

PLAYING FIELD FOR BRANDED PRODUCTS

1


What does this

mean for the

future of

Sales?"DRIVING-FORCE RETAIL TRENDS"

Source:Roland Berger

EUR -20 bn

2

Undifferentiated brands are losing ground

Manufacturer

brands25%

Manufacturer

brands

60%

15%

TODAY FUTURE 2015

1


Private

labels

Other food

retailers

20%

80%

Discounters

75%

Source:BBE; BTE; Roland Berger

Private

labels

Other food

retailers

40%

60%

Discounters

85%

EUR -20 bnPLAYING FIELD FOR BRANDED PRODUCTS

FMCG total, sales (volume)

10 major retail trends are driving this development

Efficient price-oriented formats are on the rise

2Bargaining power is increasing

1

From bargaining to bargaining "plus"

Less is more6

7

2


Retailers want to become brands

2

3

increasing

4Retailers are learning to understand shoppers better and better

Professionalization and growth of private labels

5

Managers are moving from manufacturers to retailers

7

8

Selective backward integration

New services and business models

9

10

Source:Roland Berger

The resulting challenges for Sales …

Management organization

> Is there a "real" organizational structure?> Is a constant willingness to adapt needed?> Is the customer a management issue?

Key account > What is ideal international customer support?> How can one best deal with discounters?


Key account management

> How can one best deal with discounters?> What new forms of cooperation are needed in addition to

terms and conditions?

Field organization> Does the field organization justify its existence

(POS impact vs. costs)?> What is the best organizational model?> How important is it to further develop skills?

Trade Marketing> How far advanced is the development (in terms of tasks)/

upgrading of the function?> Which structural foundation is being pushed?

Source:Roland Berger; Markenverband

… especially with a view to marketing

"When Sales and Marketing work well together, companies see substantial improvement on important performance metrics:


Philip Kotler

important performance metrics:sales cycles are shorter, market entry costs go down, and the cost of sales is lower"

Philip KotlerEnding the War between Sales and Marketing,

Harvard Business Review, July 2006

Source:Business Review


2 Participants and structure

The issue is highly relevant, so many top players took part in the study

COMPANIES (extract)PARTICIPANTS

CEO 10%

46 top FMCG managers in Germany


Other (e.g. Business

Development)17%

Head of Key Account

Management5%

Head of Sales/

Sales director40%

Marketing/Sales

director28%

The study covered 30% of German FMCG sales


It encompassed a wide range of company sizes and categories

Characteristics of participating companies

BACKUP

SALES [EUR m] CATEGORY COVERAGE

500-1,000 13%

>1,000 11%Beverages 18%

112010-11-17_Markenverband-RB_Vertriebsstudie_Ergebnisse_E.pptxSource:Roland Berger; Markenverband

SALES GROWTH [%]

<100 28%

500-1,000

48%100-500

13%

>10% 13%

0-5%

15%5-10%

63%

<0% 9%

Oral/personal

hygiene11%

Frozen foods/

ice-cream8%

Confectionery/

baked goods17%

9%

37%

Fresh meat/

sausage

Other

The cogent structure of the study led to high response levels

> COMPREHENSIVE 55 detailed questions,interviews integrated

> SIMPLE Modular, can be filled outboth on and offline


> SIMPLEboth on and offline

> FORWARD LOOKING

Integration of trends,challenges, etc.

25% response rate



3 Selected results

Summary of the main results


> Real structure?> Constant willingness to adapt?> The customer a management issue?

> Matrix organization!> Never stagnation in the organization> Clearly a management issue

> International customer support? > Great dissatisfaction, the future is in

CHALLENGES RESULTS


> Further development (of tasks)/"upgrading"?

> Structural foundation?Trade Marketing


> International customer support?> Dealing with private labels and

discounters?> New forms of cooperation vs. histories?

> Great dissatisfaction, the future is in "International Lead KAMs"

> Ever more focus on discounters> Fix the basics

Field organization

> Justified existence (POS impact vs. costs)?

> Organization model?> Future skills?

> Many field organizations lack the critical size

> New cooperation concepts are needed> Traditional visit concepts and KPIs> Develop skills!

> Almost no further development> Great potential not yet being exploited> Further development toward integrated

planning, shopper insights


General conclusion: Individualized solutions are needed – Ideas have to be embedded in the category context

What does that

mean for


mean for

MY company and the future of

OUR Sales unit?


> FROM historically grown structures, characterized by

> TO individualized and effective solutions, adjusted to the

> Slow processes> Little understanding of the

retailer> Little knowledge of shoppers> Historically grown

organizational structures> …

> Brand positioning> Category drivers> Customer and retail structure> Corporate culture> …


3 Selectecd results – Detailed

Organizational changes must lead to a better understanding of the customer


1. Matrix organization is replacing functional organization

2. Organizational development never stops.


2. Organizational development never stops. Constant adjustment is needed if growth is to be achieved

3. The cost component of Sales varies greatly

4. Sales is being recognized as a CEO management issue

5. Manufacturers still have too little understanding of retailers


Matrix organization is replacing functional organization

1

Management organization – Structure of Sales [%]

> The choice of organizational structure is independent of how the

TODAY

Functionalorganization

FUTURE

70 35


independent of how the FMCG categories are covered

> In particular smaller companies(< EUR 100 m in sales) today have function-based organizational forms

organization

Divisional organization

Matrix-organization

International customer-business teams

Other


4

0

13

13

7

14

33

11

Organizational development never stops – Constant adjustment is necessary for growth

Management organization – Organizational changes [%]

2

FREQUENCY MAIN REASONS

Fundamental, major change 35 18 59

2 17 17 759Drive growth


Reduce costs

Speed up realization

Sales excellence at POS

Sales excellence at the customer

Internal excellence of Sales

Category excellence

major change

Fine tuning

No change

Every year Every 1-2 years Every 2-3 years >3 years

35

27

18

4

2

394 4

594

17

46

39

33

44

39

35

17

26

23

28

34

7

9

9

4

7

2

20

24

35

26

30

46

Essential Important Less important No response

The cost component varies greatly, due to varying category coverage and market penetration

14>10%

SALES COSTS

3

> The share of sales costs

Management organization – Cost component [% of sales]


16

11

21

27

11

5-7.5%

7.5-10%

No

response

<3%

3-5%


1) FTE = Full time employees

> The share of sales costs varies greatly across all company sizes. No surprise because of respondents' varying category coverage

> Sales costs account for more than 5% of total sales revenue at half the companies

Sales is being recognized as a management issue –CEO is "CCO"

4

Management organization – Customer orientation (industry viewpoint)

Orientation of the company toward customer needs

Role allocation/clear separation of tasks

ROLE OF THE CEO …


… Feels responsible as the "Chief Customer Officer" (75%)

… Delegates tasks/ customer responsibility to the Sales Manager (25%)

Clear mirroring of customer structure/allocation of contacts

Clear definition of roles, which arethen also realized accordingly

Clear definition of the roles, but these are not lived out accordingly

91%87%

Less clearly defined

13% 9%


Manufacturers do not understand retailers well enough yet – Good cooperation at operational level, less knowledge of their strategies

5

Management organization – Customer orientation (retail viewpoint) [positive net value]1)

EVALUATION OF FMCG MANUFACTURERSSTAFF ORGANIZATION

-1Understands our specific 6

16

Business relationships

Overall evaluation

222010-11-17_Markenverband-RB_Vertriebsstudie_Ergebnisse_E.pptxSource:Advantage Group; Markenverband; Roland Berger

1) Evaluation of 20 leading makers of brand-name articles by German food retailers in 2009. Difference between positive and negative evaluations

CATEGORY DEVELOPMENT

25

-1

5

11

Understands our specific strategies/goals and reacts to them

Visits are productive

Makes objective category recommendations

Offers category development plans that help us achieve our growth/revenue goals

18

18

7

47

16

11

6

Customer service

Logistics/Supply chain

Trade marketing

Consumer marketing

Category development

Staff organization

Business relationships

Great need for improvement in KAM

1. KAM is highly relevant for sales

2. Satisfaction with international customer support is very low



support is very low

3. "International Lead KAM" is today seen as the solution for the future, with clear responsibilities as the main challenge

4. More focus on supporting discounters

5. Fixing the "basics" is still a challenge. Companies try to overcome their past instead of being future- and shopper-oriented


The high sales revenue relevance of KAM is driven by retail consolidation

1

National key account management – Structure

NATIONAL REGIONAL

Structure [%]

87

Existence of regional KAM [%]

70Independent KAM YES


13

87

Coverage [% of sales]

10

10

9

28

43

30

70

Organizational foundation [%]

Regional KAM is part of a national KAM team

Regional KAM reports to the head of the field organization

Other/no response


40

7

53

Interdivisional KAM

Independent KAM

90-100%

70-90%

50-70%

<50%

No response

YES

NO

Great dissatisfaction with international customer support – Very few have found the best model

2

International key account management – Structure [%]

Support of international business

Satisfaction with the organizational foundation of the international KAM activities

59


41

52

7

Not satisfied

Satisfied

Highly

satisfied

59

41

YESNO


"International Lead KAM" is seen as the future solution – Clear responsibilities are the main challenge

3

International key account management [%] – Organizational structure

One KAM for both the national 23 15

> International Lead KAMs will

TODAY FUTURESupport of international key accounts


One KAM for both the national and the international business

One KAM for international business

One "internat. Lead KAM" in charge of a team of nat. KAMs for the international business

18

17

19

23

23

7

15

15

48

15

International KAM team

Other


> International Lead KAMs will increasingly take over the management of international customers

> A purely international perspective from one single KAM is becoming less relevant

> Responsibilities have to be clearly defined between countries, divisions and customers

TODAY FUTURE

Discounter support is more in focus – Specific management of the customers and the format

National key account management – Responsibility for discount [%]

Support of discounters (multiple resp. possible)

4


> Specific management of discounters

> Discount support either by single KAMs or format KAMs depending on the size of the discount customer

One KAM for each discount customer

One KAM for the discount format

One KAM for each retail group, across all formats

7

13

44

48

4

22

48

37

Other


Basics are a big problem – One key challenge is learning to understand the customer better (1/2)

National key account management – Challenges [%]

5

Responsibility/competence Customer and shopper orientation

More empowerment ofKAMs

45 2233 0

Improved understanding of the customer and clearer 22

474

0


KAMs

Ensuring category competence in cross-category teams

More responsibility for managing the agreed activities from beginning to end

45

38

41

22

28

22

4

37 0

30

33 0 the customer and clearer mirroring

Clarifying the own role with customers

Building up internal skills for the customer

Focus off conditions and on shopper orientation

50

59

23

37

15

8

4

67 2

26 0

13 0


Basics are a big problem – The focus is still on overcoming the past, rather than on shopper-oriented cooperation (2/2)

National key account management – Challenges [%]

5

System of conditions Incentives/Internal efficiency

Reducing the growth of the share of terms and 2670

0More incentives/ performance orientation 41 2633 0


share of terms and conditions in sales

Optimizing the terms and conditions system through customers

26

20 8

4

70 2

70


performance orientationand cost transparency

Standardizing processes, tools and KPIs

More support of KAMs by IT, stricter control

54

65

20

15

422

20 0

More impact can be achieved at the POS

1. Many field organizations lack the critical size

2. There is more confidence in external

Fieldorganization


2. There is more confidence in external service providers than in intercompany cooperation

3. Traditional criteria determine the visit concept

4. Little formulation of variable incentives

5. The focus is on developing skills


Many field organizations lack the critical size

1

Field organization – Structure

Own field organization within the unit

Travel time per sales rep [minutes]

Yes 80%


No. of sales reps [#]

Greater efficiency!

0-80

80-120

>120

No response 11%

16%

3%

70%

Size of the field organization [# sales reps]

Yes

No 20%

80%

External service providers are trusted more than intercompany cooperations

2

Intercompany cooperation

Alternative organizational models for the field organization[Share of companies without their own sales reps]


14%

86%

0%

Other

Outsourced to an external service provider

Intercompany cooperation

of field organizations


Traditional factors dominate the visit concept

3

Field organization – Management [%]

Relevant criteria for defining the visit concept

KPIs for managing the field organization (multiple responses possible)

61Assertion of

serviceFormat type 26 13 2239


36

36

39

43

55

57

Speed of

implementation

Adherence to

the planogram

Shelf share

Out-of-stock/

availability of

space

Distribution

Number of

customer visits

service


Format type

Revenue potential

Category driver

Levels of freedom at the outlet

Support of the outlet

26

26

37

33

30

13

28

17

39

22

22

20

20

22

15

39

250

9

30

Essential Important Less importantNo response

Often inadequate variable incentivation for sales reps – There is upward potential here

4

Field organization – Management

Share of variable remuneration for sales reps

9%0%


0%

0%

9%

38%

44%

60-100%

40-60%

20-40%

10-20%

0-10%


> Little incentivizing of sales reps through variable remuneration

> Little use of KPIs that have a major influence on the impact at the POS

The focus is on developing skills

Field organization – Challenges [%]

Responsibility/competence Efficiency/benefit Management/incentives

5

Further develop the sales reps' skills

Increased need to justify the use of sales reps

Improved management of the 28 2250 0 30 15 2430 37 15 2226


sales reps' skills justify the use of sales reps

management of the activities at the POS

Separation into “simple" and “complex" skills

Focus on raising efficiency

Better support through IT systems

More incentive through less/more simple KPIs

22 242224

50 0

33

41

15

17

22

2220

30

30

41 13 2422

26


Further potential can be realized in Trade Marketing

1. Hardly any development beyond classical category management and Trade Marketing

Trade Marketing


Marketing

2. The great potential of this function is seen but not yet anchored in the role

3. Commercial planning and shopper insights are the key challenges


Hardly any development beyond classical Category Management and Trade Marketing

All grouped in one

1

Trade Marketing – Structure [%]

STRUCTURE OF THE DEPARTMENTTasks within the org. unit under consideration(multiple responses possible)

Category 67

TODAY FUTURE


All grouped in onefunction

3

15

32

50

8

10

23

59

Divided up between two functions

Divided up between more than two functions

Other

CategoryManagement

9

2

28

35

50

67

67

Trade Marketing

Shopper insights

Channel management

Integrated commercial planning

Other

None


65%

75%

Great potential is seen in the function, but it is not yet anchored in the role

Trade Marketing – Role

CUSTOMER

CATEGORY Developing category know-how and category trends

Designing and evaluating retail-related

2


35%

50%

53%

63%

65%


PLANNING

TOOLS

CHANNEL

SHOPPER/CONSUMER

CUSTOMER Designing and evaluating retail-related customer analyses

Developing and evaluating insights and anchoring the knowledge of consumers/ shoppers

Developing channel-specific know-how and deriving retail strategies/tactics from it

Developing tools, guidelines, manuals, etc.

Integrated planning of channel, shopper, category and customer objectives

Commercial planning and shopper insights are key challenges

Trade Marketing – Challenges [%]

3

Role of the function Responsibility/competence Systems/personnel

Clear role definitionas link between division, country,

Putting together the commercial plan

Improved use of tools/

318

5011

46 2815 1150 22 1117


as link between division, country, customer and brand

commercial plan tools/IT systems

Anchoring and introducing the function

High level of planning precision

Developing shopper insights

Reducing the no. of promotions (fewer, bigger, better)

Establishing overarchingcareer paths

31

29

28

41

28

17

15

11

8

5011

11

28

50

30

46

37

28

30 1320

15 11


50

37

22

22

11

13

17

28


4 Contacts

Don't hesitate to contact us if you have any questions

Contacts

PATRICK MANNSPERGER ANDREAS GAYK

Roland Berger Strategy ConsultantsPartner

MarkenverbandHead of Sales Policy/Retail

E-mail: E-mail:


E-mail:[email protected].: +49 89 9230-8798Mobile: +49 160 744-8798

E-mail:[email protected]. : +49 30 206 168 30

MARIA CONZELMANN MARIA FÜRNHAMMER

Roland Berger Strategy ConsultantsProject Manager

Roland Berger Strategy ConsultantsSenior Consultant

E-mail:[email protected].: +49 89 9230-8590Mobile: +49 160 744-8590

E-mail:[email protected]. : +49 89 9230-8488Mobile: +49 160 744-8488


Shaping the future –SALES 2015

roland berger shaping the future sales 2015 e 20110224

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