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"Single-channel planning really is actually more harmful to us than it is good in this new world of retail." — Chris Perry, Chief Learning Officer at firstmovr
The pandemic has completely upended how ecommerce organizations think about growth and the strategies they use to achieve it.
At least that’s what Molly Schonthal, founder of the Digital Shelf Institute (DSI) Exec Forum, and Chris Perry, chief learning officer at firstmovr, discovered after hearing the same anecdotes over and over again from executives across the industry.
Schonthal and Perry pooled these insights from members of the DSI Exec Forum into compelling new research, “The Shift to Total Growth Accountability.”
They both joined a recent episode of The Unpacking the Digital Shelf podcast, “How We Drive Maximum Growth Needs to Change,” to share what they unearthed about how companies are shifting to drive growth, connect with customers, and build their advantage in this ultra-competitive ecommerce environment.
In their research, Schonthal and Perry break down the core ecommerce challenges brands now face into three main buckets:
Perry says brands have traditionally “operated in a more physical finite and fixed brick- and-mortar world” where there was limited transparency into who their competitors were.
Today, that’s all changed in a digital world where the competition isn’t just next door or on the next shelf, but online, or even across the globe.
“We could go to market through classes of trade — the right channels of business. We had this world where channels were following this code of conduct,” Perry says. “That code was kind of made up. It wasn’t real.”
Perry says there’s increasingly a blurred line between channels, and between brands becoming retailers, and retailers becoming brands. In essence, everything affects everything and brands must operate with a new playbook.
With obscured lines between channels and new ecommerce platforms emerging, brands also need to break down their traditional functional silos.
Collaborating has to increase between marketing, sales and ecommerce teams, in particular, and brands need to nurture more enterprise-wide collaboration. Perry says companies now must go to market with an omnichannel approach.
"Single-channel planning really is actually more harmful to us than it is good in this new world of retail." — Chris Perry, Chief Learning Officer at firstmovr
“It doesn't make a difference whether or not your department is marketing or commerce. These two things are required to work together in order to show up and grow your business,” Schonthal adds. “Functional lines shouldn't exist anymore, and looking at your digital shelf growth in terms of a single functional view is entirely insufficient.”
The third key challenge brands now face is more technical than organizational: algorithmic pricing.
Amazon has ushered in a new world where brands and retailers have to compete on price in a way they never had to before. It’s dynamic, real-time, and constantly shifting — even at the expense of margin, profitability, and brand equity.
Though the shopper wins because they get the value, Perry says this leads to a host of challenges for brands and retailers.
“The retailer who owns that wins for a period of time until they realize they're losing money, but then brand equity is suffering because now maybe your premium isn't so premium and it would be hard to go back,” Perry says.
“Retail margin suffers from the person who matched, but is now at risk with the person who the retailer feels they need to match. Then, at some point, Amazon automatically also delists you or a human retailer decides no longer to carry you because they can't carry you competitively, and you may not be willing to fund them down to the level of margin required to be competitive," Perry says.
“There are a whole bunch of issues that come out of that [online] transparency and a world where we sell a lot of the same things everywhere, and price being the only thing we can compete on,” Perry adds. “And now we've outsourced that to a machine who can do it really, really fast.”
But Perry and Schonthal say there’s a solution to all these challenges: total growth accountability.
Total growth accountability is “simply the practice of measuring and making holistic decisions and investments to drive overall business growth and performance versus separating out strategy and goals by marketing, sales or retailer, [whether] online or offline,” Schonthal says.
Brands can achieve total growth accountability by focusing on four key strategies to solve their current ecommerce challenges:
“It shouldn't be surprising that if we're facing algorithmic-driven pricing, then we need to have new price matching proactivity in our go-to-market strategies and approaches,” Perry says.
To make this shift, brands must now “assume the lowest price you allow in the marketplace will be the new price everywhere,” Perry says, adding that companies can employ a new proactive pricing strategy by focusing on exclusivity, portfolio and strategic differentiation.
Schonthal and Perry say brands can craft different deal structures and alternative values to incentivize consumers to shop — without spurring price matching.
Some of these strategies include cause campaigns where a company will make a donation with every consumer purchase above a certain threshold.
Another example is a promotion Johnson & Johnson ran where it gave shoppers a free first aid kit after buying three other first aid products from its brand, a strategy that’s effectively price bundling.
“It's really trying to understand the dynamics of who's matching what in real time, what offers aren't being matched, and looking for ways that, maybe in all honesty, build value for the retailer, as well,” Perry says.
Along with strategic differentiation, portfolio differentiation is another option for brands. With this strategy, a brand would have a different portfolio for every major retailer.
Perry says this could be in the form of:
It could be, “I've got my brand sold everywhere, but I'm going to give these three retailers of choice something special each that can be my Prime Day promotions SKU or my rollback SKU or my Target Deal Days SKU, so that when running no one [promotion] prompts the whole brand to go down collectively,” he says. “Once those earn a certain level of credibility internally, it starts making the case for more.”
Minimizing or demolishing functional silos and creating shared KPIs and incentives will be critical for brands to thrive in today’s ecommerce environment.
“In the past, there were two relatively clear and defined commercial functions in CPG. Marketing, which owned the consumer and brand equity, consumer experience and longer-term, brand-building accountability, and sales, which owned the shopper, owned trade partnerships and retail activation in market, with shorter-term sales accountabilities. The two kind of collaborated, but more in a baton handoff-y way,” Schonthal says.
“Nowadays, that kind of loose collaboration at the periphery of those two teams no longer makes sense,” Schonthal adds.
Schonthal says the practices that work well to bring these two functions together include having marketing and sales report to a common boss, marketing reporting into sales, or sales reporting into marketing.
If this organizational structure isn’t possible within your company, another approach is to organize around the total share of voice per channel — a tactic a member brand of the DSI Exec Forum has used successfully to unify sales and marketing.
“This is the practice of looking at the percentage of inventory, both paid and organic on a given channel, and trying to figure out what are those opportunities you need to capture to maximize your share of voice versus the competition,” Schonthal says.
“Then, working across tactics that we wouldn't traditionally define as brand building or marketing and practices we’d traditionally associate with trade, putting those together and looking at the total share of voice outcome of employing all kinds of strategies.”
The best approach to eliminate functional silos will differ by organization, but what’s critical is to also define shared KPIs and align them across these functions. This will create mutual buy-in and could foster the level of collaboration brands need to move from a single-channel, siloed view of consumers to a true omnichannel approach.
Budget fluidity or flexibility is also vital to achieve total growth accountability.
With the growth of retailer ad platforms, in particular, brands will need to be more agile about how they move money around.
Schonthal says this means “moving away from this idea of traditional planning timelines that are more similar to your old media TV timelines, seasonal timelines, and trade negotiation timelines, and looking at both a long-term value outlook and a short-term bet outlook.”
Schonthal adds that to maximize their share of voice by channel, brands will constantly have to test and adjust their investment by channel.
“One month that may be different from another month. The same amount of money may look like over-investment one month and under-investment another, and you need to have fluidity in your budget to account for that. This is no longer a matter of filling the top of the funnel cheaply. It's a matter of looking at the true ecosystem of tools at your disposal,” she says.
As an example, one DSI Exec Forum member brand creates longer-term horizon budgets for large upfront technology investments and shorter, flighted investments for budgets that must be reallocated month-to-month or week-to-week.
Schonthal says it’s crucial to have “flexibility against a common goal. Without that, you may gain security and predictability but you'll miss efficacy.”
Perry and Schonthal say brands now must look more closely at their internal operations, identify what works, pinpoint what doesn’t and bring old and new tactics together to formulate an effective long-term total growth and accountability strategy.
By doing so, brands can radically shift the beliefs and approaches that have driven growth for decades within their companies and adopt new, more effective strategies that actually meet the current moment — and movement — within ecommerce.
To learn more about how your organization can achieve total growth accountability, check out Perry and Schonthal’s episode of The Unpacking the Digital Shelf podcast, “How We Drive Maximum Growth Needs to Change."
