Interactive Powerpoint_How to Master effective communication
Professor Andrew Fearne
1. Building
B ildi sustainable value chains:
t i bl l h i
The importance of being … relevant!
Professor Andrew Fearne
a.fearne@kent.ac.uk
Centre for Value Chain Research
Kent Business School, University of Kent
2. Outline
The challenge
g
Value chain design
Value chain management
The Power of consumer insight
Conclusions
4. Remember this...
Assumptions are the mother of all f*** ups!
Looking at the market in aggregate leaves us
blind to the realities of ‘people’ and ‘products’
5. Remember this...
The blind are leading the blind... into the
commodity trap!
Organisations must change the way they
think,
think the way they take decisions and the
way they behave
Consumer insight
is the essential
missing ingredient
8. Today
Sustainability
• Quality
y
• Size, Colour, Taste, Texture, shelf-life…
• Who knows?
• Service
• Fullfillment!
• How high should I jump?
•V l
Value
• Cost
• To whom?
• For what purpose?
• How much did I lose?
11. Sustainability
Education
Ed ti
Corporate Values
Ethical Labour
Health Social
Communities
C iti
Succession
Planning Labour
Climate
Transport Change Soil
FOOD
Corporate Ecological
Ethics Footprint
Supermarkets
Economic Environmental Energy Sources
Waste
Profits Land Use
Consumers
Market
M k t
Biosecurity
Access Water
12. Adapt or Die
It is not the strongest of We only have two sources of
the species that survive, competitive advantage:
nor the most intelligent
intelligent, • The ability to learn more about our
but the one most shoppers faster than the competition
responsive to change • The ability to turn that learning into
action faster than the competition
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Charles Darwin Jack Welch
13. Key Shopper Trends
Sustainability
The Paradox of Choice: Increasing choice wanted but it fosters
confusion and indecision .. Macro desire for simplicity and orientation
p y
more important now for shopping than we think
Time Stealers : Breakdown in routines and structures has led to
Time Stealers : Breakdown in routines and structures has led to
ineffective use of time and increasing demand for ‘more time’.
Shopping is under threat as an enjoyable activity
Complex Convenience : Convenience increasingly means different
things to different people, increasing desire for personal, bespoke
solutions, fuelled by innovative brands & new shopping channels
fuelled by innovative brands & new shopping channels
The Rise of the Smart Shopper : Knowledge is becoming the new
currency and being savvy when shopping has become a desirable
currency and being ‘savvy’ when shopping has become a desirable
trait, price is no longer the easy signal of quality
Source: Dynamic Reasoning
14. Money is not the only currency... BUT
Empty nesters –
self-indulgence
Young
mothers –
food safety
Young adults &
pensioners – diet
& h lth
health
15. What is your value proposition?
•The more relevant the product or
service the greater the demand
17. Segmentation and differentiation
Variation in demand within
and between customers
Design from th ‘ t id i ’
D i f the ‘outside in’
Source: Accenture (2009)
18. Design from the outside in
• Different customers pursue different strategies and
p g
have different needs at different times
• Defend/grow market share
• Build loyalty
• Extend product range
• Reduce risk
• Th i consumers are i
Their increasingly h t
i l heterogeneous and
d
unpredictable
• The value chain must be responsive and ‘fit for
fit
purpose’
• This will not happen without design, commitment,
pp g
resource allocation, management and control
• Design needs to embrace strategy, structure and
process
Value Chain Design (3-10)
20. VCM – Principles
Allocation and utilisation of resources that is hard for
others to contest and even harder to replicate
Add more value (effectiveness)
( )
At lower cost (efficiency)
Faster (responsiveness)
Sustainably
Economic
Environmental
Social
21. Paradigm Shift
Area ‘Conventional’ Approach Value Chain Approach
(Introspective)
(I t ti ) (Outward looking)
(O t d l ki )
Focus Narrow focus on material Wider strategic focus linked to
procurement and logistics future growth
Make‐buy Reactive, cost minimisation Pro‐active, linked to core
competence
Design Suppliers ‘build to print’ Key suppliers have major design
responsibility
Quality Inspect quality in Certify supplier processes
Business
Business Adversarial, short‐term contracts
Adversarial short term contracts Co‐operative, long‐term
Co operative long term
Relationships partnerships
24. Value Chain Management – Zespri Style
Grower/Supplier Customer
g
Partnerships nin Relationships
os itio
P
er
om
C u st
Core Distribution Consumer
Value Design Products
Competencies Channels Segments
ngthening Core
e
Co petencies
Consumer Positioning
n
io
e at
Cr
om
e
lu
Stren
Va Costs
C t Revenue
R
Success/Failure
Innovation
Securing Shareholder & Grower Returns
Adapted from Osterwalder & Pigneur 2005
Pigneur,
27. Strategic alignment
Tesco Sainsbury’s
Appeal to all customers
Breadth before depth
Stock unique lines
q
Competitive in the market
Simple and logical
First f customers
for
Relevant for customers
28. How aligned are you?
• In-depth
In depth knowledge of your customers • Know your product but not your market
• Product ranges for all store formats • Duplicate the range
• Innovation exclusive to customer • Stifle NPD with process
• Speed to market with new products • Devote shared resource to the category
• Dedicated resource (account manager) • Keep information to yourself
• Openness and honesty • See change as more work
• Willingness to change • View investment as risk
• Investment to grow the business • Are unable to segment your market
• Promotions th t grow the category
P ti that th t • Promote for short-term category share
• Resources to deliver projects/plans • Require customer to deliver your plan
• Market expertise • Manufacture product with no real skill
p
Value Chain Thinking (2-23)
29. Value Chain Visibility
CREDIT CARD
1234 5678 9012
VALID FROM GOOD THRU
XX/XX/XX XX/XX/XX
XX/XX/XX
PAUL FISCHER
PAUL FISCHER
Supplier Manufacturer Distribution Retailer Consumer
Dem and
Dem and
Dem and
Dem and
Dem and
Time Time Time Time Time
Reduce uncertainty in projected demand
R d t i t i j t dd d
32. Consumer Insight
Consumer insight is an essential ingredient for
success, no matter how good the product is
, g p
Differences in purchasing
behaviour between segments may
be significant and should not be
assumed
Heterogeneous segments
require differential treatment
The more limited the (marketing)
resources the more
important it is to target them
34. Shopper insight Vs Consumer Insight
Insight = Who + What (shopper behaviour ) + Why (consumer behaviour)
Purchase Shopper Consumer In Home
Driven by Shopper Marketing:
Path to Purchase &
Point of Purchase activity
Without a link or trigger to drive
consumption products can sit in
cupboards/ fridges/ on shelves
shelves..
35. dunnhumby Data
Weekly supermarket purchasing behaviour
y p p g
17 million shoppers (40% of UK households)
Over 30,000 food products
Segmented by:
Geo-demographics (Cameo) Region (TV) Retail Channel Lifestage
Detailed Lifestyle Simple Lifestyle Retail Format
36. Who buys avocados?
180
160
140
120
100
80
60
40 Older Adults Older Families Young Adults
g Young Families
g Pensioners
20
0
Medium Avocado Each Tesco Medium Rrte Tesco Baby Avocados Tesco Finest Large Tesco Large Fairtrade Tesco Perfectly Ripe
Ps Avocado Each (C) Pack Avocado 2Pk Avocado Each Avocado Pack
Source: dunnhumby (2010)
37. Who buys avocados?
450 Convenience Finer Foods Kids Choice Mainstream Price Sensitive Traditional
400
350
300
250
200
150
100
50
0
Medium Avocado Each Tesco Medium Rrte Tesco Baby Avocados Tesco Finest Large Tesco Large Fairtrade Tesco Perfectly Ripe
Ps Avocado Each (C) Pack Avocado 2Pk Avocado Each Avocado Pack
Source: dunnhumby (2010)
38. Who buys avocados?
Young and Affluent Singles Wealthy Retired Neighbourhoods
450
Affluent Home Owners Smaller Private Family Homes
Comfortable Mixed Neighbourhoods Less Affluent Families
400
Less Affluent Singles and Students Poorer White and Blue Collar Workers
350 Poorer Family and Single Parent Households Poorer Council Tenants - Many Single Parents
300
250
200
150
100
50
0
Medium Avocado Each Ps Tesco Medium Rrte Tesco Baby Avocados Tesco Finest Large Tesco Large Fairtrade Tesco Perfectly Ripe
Avocado Each (C) Pack Avocado 2Pk Avocado Each Avocado Pack
Source: dunnhumby (2010)
39. What do they buy?
% Change (Yr on Yr)
% Change (Yr on Yr)
Description Share of sales Sales Distribution Average Price Penetration Repeat rate
Market Value Avocado Each 1.2 ‐86 ‐33 ‐16 0.8% 17.2%
Baby Avocados Pack
Baby Avocados Pack 14.4 ‐9
9 16 ‐8
8 3.4% 38.9%
Finest Large Avocado 2Pk 2.2 ‐91 ‐15 ‐1 0.6% 18.3%
Large Fairtrade Avocado Each 3.7 ‐8 11 3 1.0% 22.9%
Medium Avocado Each 16.5 ‐58 ‐4 20 4.6% 36.0%
Medium Ripe & Ready Avocado Each (C) 5.2 23 18 4 1.6% 35.8%
Perfectly Ripe Avocado Pack 37.7 ‐ ‐ ‐ 5.1% 42.3%
Perfectly Ripe Large Avocado Each 15.6 ‐ ‐ ‐ 3.2% 40.8%
All Products 100 2 7 0.3 12.8% 55.0%
Source: dunnhumby (2010)
Annual sales = £13mlln
Prices range from £0.5 to £1.84
Only 12% of shoppers purchased avocados and almost half never came
back!
41. What else do they buy?
Product Name Number of Baskets Significance
Chef N Vibe Avocado Slicer 1,430 29.1%
Chevington Mild Cheddar Cheese
Ch i t Mild Ch dd Ch 1,720
1 720 17.7%
17 7%
Charedi Whole Milk 1 Litre 910 17.6%
Chevington Grated Mild Chedcheese 400G 1,630 17.3%
Osem Israeli Toasted Couscous 250G 1,180 17.3%
Yutaka Sushi Rice 500G 9,230 16.9%
Yutaka Sushi Nori 11G 12,770 16.8%
Yarden Houmous & Tahina500G 2,690 16.7%
Charedi Semi Skimmed Milk 1 Litre
Charedi Semi Skimmed Milk 1 Litre 1,080 16.6%
Gefen Classic Marinarapasta Sauce 737G 840 16.4%
Telma Chicken Stock Cubes 45G 3,470 16.3%
Chevington Light Cheese 950 16.0%
Yarden Houmous Extra 250G
Y d H E t 250G 4,340
4 340 15.9%
15 9%
Yarden Mini Turkey Kabanos 250G 2,060 15.9%
Tivall Veg Slce Roast Chicken Style 100G 1,410 15.7%
World Harbours Teriyaki Sauce & Marinade 510G 720 15.7%
Yarden Red Cabbage Mayonnaise 250G 2,760 15.6%
Chevington Grated Light Cheese 400G 1,510 15.4%
Chevington Cottage Cheese Low Fat 227G 630 15.4%
Prince Tehina Concentrate 500G
Prince Tehina Concentrate 500G 810 15.1%
Source: dunnhumby (2010)
42. What magazines do avocado shoppers read?
Product Name Customer Count Product Penetration
Hello ,
16,870 0.3%
Closer 16,650 0.3%
Grazia 14,770 0.2%
Take A Break 11,760 0.2%
Heat 14,440
14 440 0.2%
0 2%
Ok! 14,220 0.2%
Now 13,230 0.2%
Womans Weekly 9,420 0.2%
Woman
W 11,350
11 350 0.2%
0 2%
Look 12,250 0.2%
Womans Own 10,280 0.2%
Best 8,330 0.2%
Woman And Home 10,420 0.1%
New Magazine 8,540 0.1%
Bella 7,610 0.1%
Good Housekeeping 9,350 0.1%
Reveal 7,990 0.1%
Bbc Good Food 7,900 0.1%
Ok Bumper 7,900 0.1%
C at aga e
Chat Magazine 5, 30
5,130 0 %
0.1%
Source: dunnhumby (2010)
43. How can consumer insight help you?
• Input to overall business planning
• Input to the development of new propositions
• Input to the development of a marketing plan
• Catalyst for changing relationships with the buyer
y g g p y
44. Buyers have one common goal: profitable growth
ales
Value sa
Current category performance
Time
45. Simple approach to margin growth
Driving
Max
M no. units sold x O ti
it ld Optimum RRP value
l
sales
Lowest realistic cost to sell Low cost
through
supply
chain
46. Different ways drive value sales
Create new
Encourage Encourage
Encourage new consumption
shoppers to
shoppers to shoppers to
shoppers to
people to shop occasions, new
buy more/trip, spend more/
the category reasons for
larger packs trip, trade up
people to buy
Frequency of Vol Weight of £ Weight of
HH Penetration
Purchase Purchase Purchase
Who knows what these are?
47. Ideal scenario for retailers and suppliers
Want
Eat
Buy
again
Enjoy Eat
And the faster the better!
49. Conclusions
Assumptions are the mother of all f*** ups!
Looking at the market in aggregate leaves us
blind to the realities of ‘people’ and ‘products’
50. Conclusions
The blind are leading the blind... into the
commodity trap!
Organisations must change the way they
think,
think the way they take decisions and the
way they behave
Consumer insight
is the essential
missing ingredient
51. Conclusions
Look more closely, listen harder, speak more clearly
52. THANK YOU!
Prof. Andrew FEARNE
Centre for Value Chain Research
Kent Business School
University of Kent
Canterbury
CT2 7PE
01227 82 48 40
a.fearne@kent.ac.uk
