Collaborative Marketing

Dairy Foods, April, 2000

You don't need me to tell you: If you think the dairy industry is consolidating rapidly, look at the implosion going on in the retail grocery industry.

One of the speakers at International Dairy Foods Assn.'s SmartMarketing Conference last month introduced an obviously ad agency-born concept, but one that seems to hold some potential for the dairy industry and its retail partners. He called it "collaborative marketing," a philosophy that aligns the strategies of packaged goods manufacturers with the pragmatic goals of their retail customers, and ultimately can lead to jointly developed advertising and other forms of promotion.

Retailer consolidation carries a two-edged sword. On the one hand, the bigger the retailer, the more the bean-counters look only at bottom-line cost figures. But on the other hand, when you're a multi-state, multi-billion-dollar organization, you start getting concerned about corporate brand awareness, the corporate image (look at those WalMart ads!) and the cost-effectiveness of programs, not just their cost.

According to Mel Korn, CEO of a Saatchi & Saatchi division called Collaborative Marketing, cost has already been driven out of the system by the very economies of scale that come with consolidation, not to mention the past decade of efficient consumer response. "The news now is that growth, not just cost reduction, is paramount for today's retailers," Korn said at the conference.

Retailers' top three priorities, according to a Saatchi & Saatchi study, are increasing store traffic (81.5%), increasing register ring (78.5%) and increasing market share (58.4%). "The trend is toward greater balance between cost efficiency and marketing effectiveness-with more emphasis on the top line of the business," Korn said.

The same retailers in the survey were asked how manufacturers could help. The top three roles for manufacturers were improving category performance (61.8%), increasing register ring (48.5%) and increasing store traffic (45.3%).

Collaborative marketing is the convergence of these priorities and what both sides can do to satisfy them. Korn defined it as "a strategic planning process in which manufacturers and retailers collaborate in developing consumer-driven marketing programs that are retail-centered and consumption-focused."

It all sounds a little vague until you see examples. Korn showed Kellogg's-developed TV commercials that had the cereal company in tandem with a local retailer talking of support for certain community programs. Charitable causes are a natural for this approach. The retailer provides the local connection, bringing that far-away manufacturer into the community. But in this joint expression of concern or support of a charity, consumers are driven to buy a very specific product at a very specific store.

There were other examples that showed, in a more commercial appeal, a co-branding approach between the food manufacturer and the retailer. And ones in which consumer insights were solicited by both retailer and food processor. In all cases, the images of both retailer and processor are enhanced by the process.

While Korn's examples involved large, branded goods manufacturers, there s no reason that regional or even local dairies cannot do the same. In fact, for the local dairy there already is familiarity and a lot more home-town connection. But the approach is enhanced and actions are better directed when a particular retailer is involved.

Food for thought, anyway. Korn's phone number is 212/463-2555.

Dave Fusaro

Chief Editor