The Growth Solution: Strategic Relevance
Presented here for discussion is a summary of a current article from the About Marketing Solutions blog. See the full article for Ms. Soto’s recommendations on “connecting corporate America’s disconnect.”
Companies continue to think and operate with a limited view of today’s marketplace even as the “core” market on which they focus continues to shrink and age. Is it really possible to win with companies’ current approach in markets like California, Texas, Arizona, Illinois, Florida, New York and others states where over 300 counties are already majority minority counties?
In general, it can be said that corporations’ strategic assets are mostly relevant to two-thirds of U.S. consumers. As a result, companies are finding it hard to achieve established growth goals because their strategies, operations, technology, innovation, people and marketing don’t consider, speak to or deliver on the specific needs of the remaining one-third of the U.S. population.
Few companies are planning, developing and implementing strategic assets with acknowledgement, understanding and the competence to be “relevant” to the total U.S. consumer marketplace.
I’ve spoken to companies losing market share or where growth is stunted in the above markets, with many just now realizing they may need to do things differently. All the while, their category managers, merchandisers and retail operations teams either have no idea how to be relevant and/or they outright refuse to adapt to the marketplace around them for fear of alienating their “core” customer when the core customer profile has changed dramatically in these markets.
I’ve talked to other companies that, in their quest for growth, are innovating and testing new products and services in the country’s largest markets where Hispanics, African American and Asians represent more than half of the population. Yet, when asked about how the market tests and research results turned out among Hispanics, Asians and African Americans, they respond emphatically that their R&D tests and market research wasn’t an “ethnic” project.
This is the kind of disconnect at work in corporate America today. In this age of globalization, is it really possible that companies are successfully taking steps to expand into foreign markets when they haven’t yet cracked the code on the largest multicultural market within its own borders? Fifty million Hispanics or 100 million multicultural consumers are big numbers, no matter how you look at it.
Discussion Questions
Discussion Questions: What is preventing a broader market view and strategic integration across brand organizations? How should brands be stepping up relevancy through internal strategies and cross-functional expertise to realize their full market potential?
The biggest hindrance to relevancy is the lack of a focused target market. If your store or brand is trying to be “all things to all people,” you are sending different messages into the marketplace. Further, the lack of focus will impede your brand’s effort to develop a targeted format and sustainable competitive advantage.
Every retailer and CPG company ought to aspire to four goals: Being strategic, consistent, responsive and relevant. The concept of relevancy goes far beyond the issue of our multi-ethnic culture, to the very idea of targeted marketing.
The issue here is not about offending a “core” customer. The issue is that the retail operating model has, over the last 30 years or so, enabled by technology, has become a “push” model, where centralized offices make merchandising decisions based on aggregate information, then buy and distribute one assortment as if they had one giant store located right next to the central office. The reality is that the stores are continuing to become more and more diverse: geographically, demographically, and ethnically. The only way to succeed in this environment is use technology to return to a “pull” model, where analysis, buying, and distribution is driven by local preferences. Look at the initial successes of My Macy’s.
I can not see where core customers will be pulled in another direction unless there is a significant cost savings. Then it might be a one time occurrence. If/when we come out of this economic recession, I can’t see this being a long-term successful venture.
Terry Soto offers superb points to guide marketers’ thinking. Start by putting the consumer at the center of the equation. That positions them to think through how they can effectively segment both their audience and enhance their various strategies.
Too often, companies leave the consumer on the fringes as they work to develop plans on distribution, pricing, promotions with retailers, product innovations, etc. It is useful to have expertise in specialization in selected disciplines. It is vitally important for each of those disciplines to think through the impact and reaction of the consumer.
Terry’s coaching on “Establishing the need in the CEO-suite” is spot on.
I don’t think the focus is on ethnicity as much as it is age. Key growth markets are young. Developed markets are old. Innovation is more difficult when leaders are much older than the target market and do not understand how they operate.
I agree with Mr. Emerson’s points on this discussion, but I struggle with how adept the CPG companies can really be in serving a complex and very diverse pull-based marketplace without adding significant costs. The CPG manufacturing and supply chain model supports the age old retail model of “stack it high, watch it fly.” When disrupted by the reality of a post-modern consumer world, the changes to both retail and manufacturer operation models are so significant that it takes very bold and gutsy leaders to implement change.
The climate of short-term measures that drive shareholder value prevent most leaders from acting bold and implementing a costly yet much needed reinvention of their businesses. Even visionary retail and CPG leaders get stuck in this quicksand. I don’t have the answer, but feel more willing than ever to sacrifice short term gain for long term innovation in the business models. It’s time to get over the siren song of what analysts demand of leaders as being the only measure of their success.
Interesting article. Can’t remember who the quote is attributed to…but organizations are perfectly organized to deliver the results they do. Retail, with its week-to-week or even day-to-day scrutiny of financial numbers is a good case in point.
The focus on the micro, and the fact the data often isn’t or can’t be resolved to different customer needs means there is rarely an ability to do “sense and respond.” The best that many retailers can achieve (and CPGs for that matter) is in a micro product-centric way or at a very vague level based on market research, with leaps-of-faith galore between the insight and the execution.
Ms. Soto is an excellent demographer, and her observations shed light on how wrong merchants can be when we assume uniformity across the marketplace. She’s thinking digitally; her target audience is mostly mired in an analog mindset.
Marketing to the “big middle” is a failing strategy when there is no big middle left. Let’s be real: we do business in an all-niche world.
Relevance in this context is way more than demographic. Americans vary in behaviors and attitudes that frequently transcend ethnicity, age and economic status.
Operationalizing these insights presents massive challenge, however. Legacy buying, distribution and store systems are geared toward analog decision-making. Marketing programs are evolving from mass to mobile, splintering the media buy. Store level implementation must innovate too – toward mass-customization that reflects this innate variability.
Connecting disconnects. That used to be the phone phactory’s job. I quickly disconnected from Soto’s assertion that “In general, it can be said that corporations’ strategic assets are mostly relevant to two-thirds of U.S. consumers.” Sez who? Saying it doesn’t make it true, and this article seems to be based on this unverified assumption.
What’s the beef? (Apologies to Clara Peller.) Soto’s beef seems to be that U.S. manufacturers haven’t “cracked the code” sufficiently enough to serve America’s minority populations. And yet, those populations don’t import their purchases. Instead, they buy right here from U.S. manufacturers. “It can be said” that the code has been cracked for assimilated minorities. Unassimilated minorities, however, expecting manufacturers to adjust to their population pockets where they’ve tried to re-create their home countries’ cultures inside our borders may have a long wait. Canada may require manufacturers to print labels in two languages, but this isn’t Canada.
I’m not surprised by Dr. Banks’ response. Many business leaders get caught up on personal, political, and philosophical principles about the desirability of the demographic change happening around them and question companies’ role in adapting to meet evolving consumer needs and requirements.
I suppose the questions one could ask include, can retailers afford to stand on principle while they lose these consumers to competitors which are responding relevantly? Though the bigger question might be, are leaders being compensated to stand on principle and opinion or to grow shareholder value?
I would tell you the line of Marketing and Operations executives who clearly see their companies’ marketing strategies as under-optimized and are losing share because of it is a long one. I speak to at least one such company at least weekly. The code has not been cracked–not by a long shot.
Richard, I absolutely agree that defining the target market is critical and I think we can agree there are several layers to defining and understanding target market profile and needs, 1) behavior and consumption, 2) values, 3) geography, 4) demographics and 5) culture.
While not all consumers fall into the target definition for any one company, I think we can all agree that as different as they are across the above criteria, Texans and Bostonians can both be likely consumer targets for retailer X. However, I think any marketer worth his/her salt can develop marketing strategy to be relevant to both. The relevancy I propose in Multicultural markets requires no less and no more forethought and execution.
Additionally, it is possible to have a single marketing strategy which can be executed differently depending on geography, culture, usage behavior and so forth. Take Corpus Christi, Texas-based Susser Holdings Corp.’s Stripes LLC, the 500+ store convenience chain. They target their messages around a single core position, but adapt execution for relevancy. In other words, Stripes puts out two completely different campaigns that run side by side. “If you are English-dominant one would be relevant to you, and if you are Spanish-dominant the other would be relevant. Because so much of our audience is bilingual, they stand side by side as separate campaigns, but they really back up the same idea,” according to Rod Martin, vice president of marketing. The company also adjusts signage, deli items, and employee mix to deliver on the relevancy they communicate through their marketing messages.
Ed, consider that in more than 300 US counties, the 1/3 of the population is actually the majority. So, it is possible that current irrelevant retail and CPG practices MAY IN FACT be alienating the “core” consumer, but not the group you might think. But this is just the symptom.
Ted’s point about there being a generational disconnect with the country’s increasingly diverse and younger cultures speak to the cause. The 2010 Census indicates that almost 1/2 of Gen Y and Gen X are multicultural whereas 2/3 of Boomers and 80% of those 65+ are non-Hispanic white. Think about that — almost half of Gen Y and Gen X is Multicultural.
Given what we know about the age of those behind the desk, do we really think retailers are being relevant to half their shoppers nationally and to the majority in key U.S. markets? Recession or not, a long term relevant approach to capture and retain these consumers is what will result in an enduring strategy.