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Published: August 26, 2005

 
 

Getting the Most from the “Feet on the Street”

A strategic approach to the often-overlooked field of outsourced merchandising can cut costs and transform a company’s presence on the shelves.

Since the early 1990s, the world has grown much more challenging for consumer products manufacturers. Consumers no longer respond as readily as they once did to conventional advertising and marketing; research shows that they make more and more decisions at the point of sale, while facing a retailer’s shelf. Needing to keep the price of their goods at the lowest possible level and burdened by the rising expenses of promoting and marketing their brands, many sales managers have turned to field merchandising as a place to cut costs.

Field merchandising refers to the marketing done by the “feet on the street” — sales force members who travel to individual stores to place products and to negotiate for better display presence. Many consumer products companies have outsourced most or all of their merchandising force — a cost-cutting move that often reduces merchandising costs by 50 percent right off the bat. But frequently this initial benefit is frittered away, because these manufacturers do not manage their new merchandising forces strategically.

When companies do not take a strategic approach to the decision of whether and when to outsource, they pay outsourcing vendors more than they need to pay and they fail to build the capabilities needed — in both themselves and their vendors — to support high standards of retail marketing effectiveness. As a result, they lose marketing wars to competitors. In contrast, the more adaptive, responsive, and intelligently deployed the sales force, the lower the costs and the higher the sales and profitability the company can achieve.

The optimal sales force mix depends on the company’s unique combination of retail channels and product categories; a company selling large numbers of cigarettes through convenience outlets would merchandise them differently from a company producing detergents for supermarkets or shampoos for boutiques. Some manufacturers will do best with a merchandising model based entirely on outsourcing; others with an in-house merchandising operation; and many with an approach that integrates in-house “hands” with outsourced “feet.” There are three steps to creating an optimal sales force mix:

1. Develop a thorough understanding of the requirements of each retail channel. Typically, the allocation of field merchandising resources depends not only on an account’s strategic importance, but also on its control structure (i.e., the degree to which the retailer’s decision making is centralized) and shelf execution (how attentively the product is restocked and how effectively pricing and promotions are communicated).

Industry dynamics or channel characteristics often enable companies to separate selling from sales execution, creating a two-tier sales structure that maximizes the time available for in-depth sales calls by highly skilled salespeople, while allowing less-skilled salespeople to conduct basic merchandising and audit activities. One successful consumer products company, for example, divided its merchandising force between a highly paid “selling” group and an outsourced “execution” group. The selling group targeted independent accounts, going to mom-and-pop convenience stores and independent community-based stores. The execution group focused on more rote selling activities at chains.

2. Choose wisely from among three outsourcing models. The three principal outsourcing approaches are:

• Syndicated or “continuity” coverage: A manufacturer hires a single outsourcing vendor, one that handles services for many manufacturers, for multiple projects.

• Project or retail coverage: A manufacturer purchases the vendor’s services for one project at a time.

• Dedicated or exclusive resource coverage: A manufacturer contracts with an outsourcer to manage merchandising solely for that manufacturer, which increases focus and flexibility but comes at a higher cost.

One consumer company built a powerful and highly efficient merchandising force by combining “dedicated” coverage in the mass-merchandiser channel, “syndicated” coverage in the grocery channel, and “project” coverage in lower-impact channels such as drugstores.

 
 
 
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