Companies do not need to reinvent the strategies and tactics that have worked in developed markets. They need to reimagine them and apply them in extreme settings. In-store execution rests on three building blocks:
Understand the habits, patterns, and preferences of shoppers.
Design a point-of-sale execution strategy.
Create an effective way to monitor and reward sales and promotional personnel.
Understand the habits, patterns, and preferences of shoppers. It’s not enough to be aware of the types of goods and services that customers desire in various markets. Brand companies also need to understand how and where they shop, who they trust, and what they expect from a store. In developed markets, many brand companies understand the retail environment and the way that various types of consumers shop. They have a segmented and nuanced understanding of the entire shopping process.
Companies need to develop a similar understanding of shoppers in developing markets. These consumers represent the future of global retailing and ought to be understood on their own terms.
Deep insight in these markets, especially in small towns and rural locations, can be costly compared with the disposable income of many consumer segments. Companies will have to be creative, perhaps combining quick research with trial-and-error approaches or educated hunches about what will work. This is especially true in the traditional-trade sector, which will continue to be the largest retail segment in most developing markets for the foreseeable future.
This research should heavily influence product assortment and service strategies at the regional and even the store level. A consumer electronics company in India, for example, appealed to customers by creating 90 planograms—diagrams of product placements and displays within stores—on the basis of income distribution, demographics, and traffic of retail outlets.
A mobile-device manufacturer that wanted to increase sales in India and Southeast Asia segmented stores by type —specialists, electronic chains, mass merchandisers—and size. It then created different offers based on the types of shoppers that frequent each store and the needs of the retailer.
What companies cannot do is make blanket assumptions about the shopping experience in developing markets. Even though modern-trade retail stores in China, for example, are starting to resemble those in the West, consumer behavior inside the stores can be very different. And across China, shoppers in smaller cities and tier 1 cities are not the same.
Design a point-of-sale execution strategy. Armed with this understanding of customer segments, companies can create activities, displays, promotions, product mixes, and staffing arrangements that will help make customers comfortable and lead to higher sales. Brand companies may not have traditionally emphasized point-of-sale activities in many of these markets because of uncertainty over whether the returns would justify the investment, especially in traditional trade. In fact, as the surveys cited earlier show, consumers are receptive to in-store promotional activities. The challenge is in creating compelling shopping experiences in a diverse retail environment.
There are few hard-and-fast rules, so companies need to experiment and adapt to what works. A telecom operator in India, for instance, generated surprisingly successful returns simply by upgrading the quality of its promotional material from cheap paper to laminated posters.
Create an effective way to monitor and reward sales and promotional personnel. Traditional sales-force-effectiveness strategies need to be rethought in developing markets. Brand companies are working through a collection of third-party representatives to reach the traditional-trade segment and will frequently have an unfamiliar retail presence in modern formats.
But despite these differences, companies should insist on a level of rigor, standardization, monitoring, and measuring when going to market. Many of the traditional metrics, such as trade spending as a percentage of revenues, still apply. Ensuring compliance with pricing, inventory, and other standards is also critical. Mystery shoppers—individuals sent by companies to investigate the retail environment—can help provide qualitative insights that brand companies are accustomed to collecting, but they can also generate quantitative metrics in these markets.
A consumer products company developed a program to monitor the retail performance of its product line in Southeast Asia. It sent representatives into stores to track product positioning, compliance with planograms, and inventory levels. High-scoring stores received discounts and free merchandising material. The representatives were equipped with portable electronic devices that allowed them to input scores, take pictures, and upload results.
Multinationals should also study the practices of local companies in developing markets. Many of the most successful food companies in India forego spending on advertising and marketing in favor of ensuring prominent in-store placement of their products. They design bright and colorful packaging, offer incentives to retailers, and provide them with display racks, bins, and other devices.
Going to market in developing markets can be richly rewarding for companies that take the time to understand their shoppers and stores and create tailor-made programs. Three questions will help determine where you stand.
Have you invested in creative, intensive, on-the-ground shopper research to understand the local retail context and shopper and retailer needs in each of your key markets?
Are you actively working with local retailers to create an inviting environment and build credibility in the products?
Have you designed systems to track performance of and reward the people responsible for building share in these markets?
Companies need to approach developing markets confident that they will be able to capture share. While the rules are the same, the playing field is completely different. Fortunately, the game has only just started.