Human Capital Alliance senior advisor Somboon Prasitjutrakul explores key routes-to-market optimization strategies.

Manufacturers hoping to conquer Asia’s routes-to-market must address numerous strategic and operational challenges.

In Thailand where modern hypermarkets and supermarkets dominate with more than 55 per cent of retail sales, manufacturers can still unlock much potential with well-constructed strategic routes-to-market.

In their McKinsey Quarterly article From Oxcart to Wal-mart: four keys to reaching emerging-market customers, Alejandro Diaz, Max Magni and Felix Poh said to successful attract Asia’s burgeoning consumer, manufacturers should consider addressing four key rules.

1. Embrace duality of emerging markets
2. Segment and conquer
3. Balancing cost and control in routes-to- market
4. Arm front-line with skills and technology

Embrace the duality of emerging markets

Although much of Asia’s retail markets are quickly evolving to modern retail markets, successful route-to-market strategies, McKinsey said requires engaging both traditional and modern-trade outlets.

“…. and be prepared to live with that reality for the foreseeable future.”

Companies that successfully craft nuanced strategies that include traditional retailers, McKinsey said can raise emerging market revenues by five to 15 per cent and profits by 10 to 20 per cent.

Large format retailers – pros and cons

Global manufacturers normally enjoy dealing with large-format
retailers because they are familiar and easy to deal with, and can free them to focus on strategy, product development or recruiting.

These retailers, however, command high listing fees and big discounts, and impose many stringent conditions and also quick to weed out products that don’t sell briskly.”

Prantalay Marketing

In some cases, manufacturers have focused on large retail chains to build strength and then gradually developed capacity to work with traditional outlets.

Thai seafood processor, Prantalay Marketing increased it ready-to-eat meals launched in 2004 to more than $US30 million within six years, in part by concentrating on large retail chains, including Siam Makro, Big C and Tesco Lotus.

“The focus on modern retailing made sense because Prantalay’s prepared meals were frozen and required a reliable cold chain. Now the company is turning its attention to traditional channels and expanding its product lineup to include offerings, such as instant noodles, that do not require freezing.”

Segment and conquer

Sophisticated segmentation strategies are also critical for targeting traditional trade channels because some countries such as China and India may have may have millions of outlets.

When mapping routes-to-market in emerging economies, manufacturers should initially focus on a geographic region or cluster of cities and achieve complete coverage at outlets with significant potential before going on to the next market.

They should also look beyond the current sales in priority traditional outlets.
“It’s far better to estimate potential sales by using forward-looking parameters, such as store size, proximity to workplaces or schools, traffic volumes, neighborhood wealth, or shelf space.”

An additional critical element is precisely determining the combination of service, support and incentive each outlet segment requires.
Question such as “what should a store look like?” or “how should a product be displayed, stored, priced and promoted” should be addressed.

Balancing cost and controls in routes-to-market

The authors warn that even the most sophisticated segmentation strategy can be undone by flawed transportation and service models.
Although direct delivery with a manufacturer’s own trucks and trained employees is the preferred option for modern trade, such costly support however must be confined to outlets that really matter.
“Often, “basic availability”—with products delivered, say, by wholesalers—will suffice.”

In many of these markets, companies must deal with thousands of distributors and wholesalers, which often struggle to realize the manufacturer’s brand goals or strategies for influencing the behavior of retailers.

Arming front line with skills and technology

An additional critical success factor is continuously upgrading the front-line’s skills and technology.
“The many moving pieces in these sales and distribution networks demand a relentless focus on frontline execution.”

Somboon Prasitjutrakul, Human Capital Alliance Senior Advisor looks at efficient route-to-market strategies.

Urbanization throughout Asia in the past decade has drastically changed how consumer products are marketed. The ability to develop effective and efficient holistic route-to-market strategies and platforms are now critical success-factors in today’s highly-competitive markets.

A route-to-market process is a how a company reaches its target audience or where consumers buy its products.

In today’s fast-moving global business environment, companies must now be imaginative in extending market reach, through a well-balanced mix-of-channels.

Well-formulated routes-to-market can be competitive advantages. More and more Asian companies now realize that if they formulate and select the right routes-to-market, today’s hyper-competitive market can be conquered.

Pre-sale and direct store distribution models – no longer efficient

Two decades of economic growth has dramatically changed how consumer products are marketed through Asia, especially in Thailand.

In the past, consumer goods were predominantly sold through tens of thousands of mom-and-pop retailers. Today big box global retailers have now become significant players.

Globalization, has also resulted in huge brand-portfolio and SKU expansions that require effective new holistic route-to-market strategies and platforms.

Online shopping and smart phones have also developed many new distribution channels that successful companies must effectively and efficiently address.

Two inherent problems have made traditional pre-sales and direct store distribution models, wherein sales and delivery personnel visited accounts weekly, no longer efficient or effective.

Initially, companies are unable to maintain reasonable cost-to-serve ratios across larger and more varied customer bases. Field sales and service staff often spend the same amount of time with all customers and the model becomes too expensive for servicing small-independent and low-volume retailers.

More importantly, because some important accounts remain underdeveloped and underserved, sales potential is not fully captured. Higher unnecessary service costs also reduce resources available to establish, maintain and develop new accounts.

Well-designed holistic route-to-market models

To succeed successfully in today’s fast-moving consumer products’ markets, companies must develop route-to-market platforms that are able to regularly reevaluate individual go-to-market models.

Well-designed models must be strongly customer-focused and aligned with the company’s strategic goals and product-value offerings. These attributes must also be supported by strong operational capabilities.

These go-to-market models must also balance customers’ needs, revenue growth targets and cost-to-service for each customer channel. Most importantly, all models must be flexible enough so that they can be easily adapted to changing strategic goals and inevitable competition.

Any successful route-to-market platform must also enable managers to easily identify key activities and tasks required to best serve individual customer segments and provide managers with the tools to test design-alternatives in their quest for more efficient and effective routes-to-market.

Critical model elements

Effective go-to-market models must include several critical elements. They must be market-driven and be designed from the market back to the company to ensure proper customer and consumer alignment.

Too many go-to-models fail because companies take the easy way out by using their own strategic goals and current operational framework as an initial design basis.

At the same time, however effective go-to-market models should also be properly aligned with the company’s overall customer service framework. These coherent go-to-market models support overall corporate goals and most importantly receive support from important stakeholders.

Perhaps, most importantly, high-quality go-to-market platforms must provide management the flexibility to effectively service a diverse customer base with differentiated go-to-market models.

The ultimate benefit

Consumer product companies in Asia that successfully design and implement holistic route-to-market platforms can expect to have right-size sales and services forces and better allocation of critical human resources.

With effective cost-to-service elements, they should also be able enhance the funding of critical point-of-sale product presence and customer experiences. More time can also be spent on promoting and developing high-profit SKUs.

In the end, lower and more effective cost-to-service will result in a much stronger and sustainable corporate consumer product presence.