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Published: June 16, 2005

 
 

Making the Most of "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” — the 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 in many cases, this initial benefit is frittered away, because these manufacturers do not manage their new merchandising force strategically.

When companies do not take a strategic approach to the decision of whether and when to outsource, they experience two unfortunate outcomes. First, they pay outsourcing vendors more than they need to pay. Second, they fail to build the capabilities needed — in both themselves and their vendors — to support high standards of retail marketing effectiveness, and as a result they lose shelf space and other forms of marketing ground 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 is different for every company, and conceivably for every product line. The best model for any company 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.” The trick is to design and implement a merchandising model that reflects the manufacturer’s own circumstances and requirements.

There are three steps to creating an optimal sales force mix:

1. Develop a thorough understanding of the requirements of each retail channel. As many companies know intuitively but cannot prove analytically, different channels and accounts require significantly different retail coverage. 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 decision making is centralized) and shelf execution (how attentively the product is restocked and how effectively pricing and promotions are communicated). Field forces are most effective when they can influence how their products are ordered, priced, and merchandised in each store.

Understanding the channel and account requirements, and the appropriate mix of selling activities, is also a prerequisite for determining the right merchandising force model and the skill set that members of the force need. Whereas certain channels demand a highly skilled, dedicated in-house sales force, others can thrive with an outsourced sales force. In addition, 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.

 
 
 
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Resources

  1. Paul Hyde, Edward Landry, and Andrew Tipping, "Making the Perfect Marketer," s+b, Winter 2004; Click here.
  2. Steffen M. Lauster and J. Neely, "The Core's Competence," s+b, Spring 2005; Click here.
 
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