Retailers Connecting at the Product Level

September 18, 2005

The leverage is shifting in the consumer products world -- away from products and manufacturers toward retailers and consumers. Traditional CPG brand-building activities have lost their utility for consumers, while retailers increasingly are making connections with them.

To shed some additional light on the subject, CoreBrand conducted a study to evaluate the leading CPG companies and general merchandise retailers. We asked over 12,000 respondents how well they know these companies and about their perceptions of reputation, management effectiveness, and their propensity to invest in or buy from each. The results are surprising in a number of ways, demonstrating a clear trend and shift in perception toward retailers, away from manufacturers.

Today, consumer products, one of this country’s great industries, looks more like Big Oil than Big Mo(mentum). Perhaps this is because retailers have stolen consumer products companies’ mojo, with the customer now more interested in where they buy than what they buy because that’s where they see the value, instead of in mostly parity products.

Contrasted with the doldrums in the CPG industry, there is quite a bit of brand action among general merchandise retailers. People are seeing many general merchandise retailers, even the largest and strongest, as changing for the better, year after year.

In consumers’ minds the pendulum of change, innovation, and momentum is moving from consumer product manufacturers to retailers. This can only help to ring up sales.

What will it take for manufacturers to see the pendulum swing back in their favor? From our reading into the data, it will be about bringing better products to the consumer based on better ways of understanding them, solving problems, and emotionally appealing to them. There is nothing new in that, really. The problem is that the leading CPG companies have stopped doing it well and must find new ways of connecting with consumers.

If current trends hold over the medium term then retailers will dominate CPG companies in the all-important eyes of the consumer – cementing the dominance of place over product in the marketing mix.

- James R. Gregory
for more information email: Tom Nadolski

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