CPGmatters: P&G Collaborates with Kroger to Focus on Mutual Customers
At the recent In-Store Expo hosted by the In-Store Marketing Institute in Las Vegas, executives at Procter & Gamble and Kroger spoke together about their fruitful collaboration that puts the customer first over issues such as margins and volume.
"If we're going to grow, we also had to agree to share our data and our insights," said David Ciancio, vice president of loyalty marketing at Kroger. "I can't describe the terror and the fear of the paradigm shift that took place when we thought about the implications of sharing what we thought was our most precious asset - the very shopping lives of our customers - with manufacturers and suppliers. But what an interesting place that was."
During the presentation, a contrived conversation between the two executives gave the audience an entertaining look at the fundamental issues that have confounded trading partners during traditional negotiations.
Kroger: I'm really looking forward to this category review today. And I know we'll talk about the ad placement and the 20 thousand bucks to be on the front page, and the end cap stuff. But before we do that, listen. We've taken a look at the category and I have a list of items that we need to discontinue in your category.
P&G: This is helpful, but there are just a couple of things I'd like to ask you to consider. I know that distribution is the sole discretion of the retailer, but we're really kind of deep in that. We've looked at a lot of complexity and we're trying to work on efficient product assortment. And this does include a fair representation of my items. I'm a little bit concerned about that. So I've actually done some pre-work for today's meeting. I'd like you to consider another list. It goes a little bit deeper than what we're going to work on. Don't be concerned that there are no actual P&G items on that list because we know that they really do meet shopper needs.
Kroger: Well, back to my list. I used the best data that I had from category management, and this is driven by margin. This is what I really need you to collaborate on.
P&G: Margin is over-rated. What we really need is market data. The truck is in the back and I'm bringing out the binders. We've got all the market data in the world to justify that these are really the right recommendations for you.
"Happily, that really wasn't how our [real] conversation about SKU rationalization went," said Victor Bellino, associate director of customer business development at P&G. "We did collaborate and got together on a handful of categories. We looked at a 26-week database, so we really were thorough. We did look at volume and we did look at margin. But we also looked deeper. We looked at the shopper action. We looked at loyalty and penetration and reach. So we looked at the full picture of what was really right for the store."
Added Mr. Ciancio: "The significant and transformational action that we took was to put the shopper at the center of our thinking and action. When we did that together, we found the right items to discontinue. We reduced SKUs by about 10 percent."
Discussion Questions: What needs to be done to move conversations and negotiations from issues such as volume and margin to ones around shopper behavior and customer retention? Should the conversation be moved in that direction?