In part one of this series Jack de Wet, a business development associate at Frontline Market Research and a route-to-market (RTM) specialist gave a thorough description of route-to-market and what it entails. In part two he explained that a solid fact-base is a vital requirement for route-to-market insight and strategy development and he explained how to develop this fact base.
In this section, part 3, we look at how to use the information gathered in the fact base and how to go from market insights to a route-to-market strategy and its execution for your business and brands.
The benefit of this strategy is that it identifies space to grow for your brand and business and informs you on how to do better in trading and operations.
What “good” looks like in taking RTM insight into execution
Jack says that embarking on a Route-to-Market ‘adventure’ can be both game-changing and daunting.
“It is potentially ‘game changing’ because the results can be spectacular – from generating value growth, as well as to limiting value destruction, says Jack.
Generating value growth: RTM initiatives can grow sales value in several ways, namely by extending the distribution and market reach of your products; by meeting consumers where they want to buy on certain occasions; by getting the right product assortment into the channel; by making investments in the right places; and by improving profitability in distribution and logistics, to name a few.
Mitigating value destruction: RTM initiatives can reduce costs and control risk by identifying where the cost and price pressure-points exist within the value chain; by dropping unprofitable customers into a lower-cost RTM; by ensuring line-of-sight of your products along the outbound supply chain; by rationalizing intermediaries such as distribution partners, transporters and dealers, amongst other measures.
Jack explains why RTM can be daunting.
“For “good” RTM analysis and execution to be realized, some ground rules need to be followed. These require a level of discipline and rigour that, at the very least, match up to the requirements of solving the problem – often RTM initiatives are too simplistic, or too limited in scope, to make a true impact in finding solutions. RTM projects need to be designed to meet the scale and complexities of the problem at hand,” says Jack
So, what are the most important rules for arriving at effective RTM solutions?
Evidence Based: route-to-market (RTM) plans and executional decision-making must be based on real, robust data from both external and internal information sources (as previously outlined in Part 2 of this series).
Holistic Approach: RTM analytics should consider all aspects of getting to the market: i.e. the competitive structures, the cost-to-serve attached to each channel, the customers’ needs, distributive partnerships, supply chain realities, organizational capability and the resources available.
Advanced Analytics and Processes: Analytics and methodologies are required to identify insights, discover opportunities, create channel blueprints, develop roadmaps for action and apply resources – all to yield a profitable route to market structure.
Cross-functional Involvement and Buy-in: RTM is not confined to the sales force (or, to the marketing department) – preferably the following functions should also involved, depending on the nature of the company and the market: distribution and logistics, supply chain, finance and customer accounts. In some cases, production and quality control are also involved, especially when products and processes need to be re-engineered. The role and involvement of external partners and service providers should also be considered – distributors, agents, dealers, marketing agencies, etc.
Jack stresses that it is vital that these entities and functions (and the people involved) believe in, and cooperate with, the process.
The three main steps in setting up a route-to-market system
Jack explains that RTM is a system and, as such, should be approached with a ‘systems-thinking’ mind-set. In this case the system is a framework within which RTM activities and processes operate. We dealt with the RTM framework (or structure) in Parts 1 and 2 of this series.
The RTM process is the sequence of actions or steps that occur within our constructed system. By following the process, we arrive at a viable and workable RTM solution.
We have broadly divided the RTM process into three steps:
Insight – essentially, this is the analysis of the fact-base (as outlined in Part Two of this series) to produce the required outputs (‘deliverables’) of the project. Advanced analytics and tools are applied e.g. for segmenting the universe into channels, estimating market sizes for the products, and calculating the cost-to-serve the channels. These enable the identification of market gaps and opportunities.
Strategy – having identified the opportunities and having calculated their potential impact in sales and profit growth, it is necessary to prioritize the opportunities and set sales and profit growth objectives. Having done this, plans (“roadmaps”) should be developed for securing these objectives – with these plans “rolling up” to match the overall strategic requirements of the business.
Execution – this covers all of the activities, work-streams, roll-out processes and monitoring mechanisms that must be formulated and implemented in the selected markets, with a view to executing the roadmaps.
Jack says that we need a thorough understanding of each of these steps
INSIGHT: Guidelines for using the Fact-base to develop Insights
The goal of route-to-market (RTM) insight is to identify ways to get products or services to markets in a way that increases efficiency, sales and profits. The most important guidelines for this are:
Understanding Product Flows: Identifying and quantifying the existing and potential routes-to-market for the category – “from the factory gate to the shopper’s basket.” This is vital in developing strategies and tactics for the distribution, logistics and supply chain operations required for the category.
Holistic Approach: The project should take a holistic approach, identifying key developmental, commercial, and operational factors along the entire journey of the product to the market – incorporating the distributive apparatus and partners, the channels, the points-of-purchase and the shoppers.
Commercial Viability: It is important to arrive at a solid financial and commercial diagnosis for each of the growth spaces identified.
Customer Feedback: The RTM initiative should include feedback from customers and channels to understand their preferences and needs – this plays vital role in developing channel service models.
Emerging Trends: The RTM team should take emerging trends in the market into account, such as the growth of e-commerce, digital wallets, crypto currency payments, new channels, and consider how they may impact distribution and channel service.
Actionable Insight: Insights should provide clear and actionable recommendations for the route-to-market or channel. Otherwise, they are not really insights.
Relevance: The insights should be up to date with developments in the category and market and be able to identify how to adapt to these.
“By incorporating these best practices, one can produce a rigorous route-to-market process that provides valuable insights and recommendations to help the company reach their target market more effectively,” says Jack.
STRATEGY: Guidelines for using Insights to develop RTM plans
According to Jack a robust, or ‘good’, route-to-market strategy will inevitably incorporate all or most of the following aspects:
Distribution Focus: The goal is to expand distribution to its fullest potential for each product in the portfolio. Distribution operations and product availability are integral to achieving this. The underlying objectives would be:
- Finding the ‘sweet spot’ in direct service to customers versus indirect service via wholesalers.
- Expanding the availability of each product in the portfolio to its optimal limit in the market.
- Constructing profitable channel service models and delivery routes.
- Making the right levels of investment in logistics, warehousing and supply chain.
- Establishing tighter controls over distributors via service-level agreements (SLAs) and by setting sales or commercial targets.
Priority Channels: It is one thing to know which the most suitable distribution channels are for your product to reach the target market. It is another to understand which can be ‘switched on’ for game-changing growth. One needs to prioritize ‘where to play’ and decide ‘how to win’ across the whole spectrum of channels e.g. direct sales, retail channels, online sales, wholesalers, distributors.
Geographical Coverage: Just as it is important to prioritize channels, it is important to prioritize cities, regions or districts where the new or revamped RTM strategy will yield the best results.
Sales and Marketing Investment: This considers the sales and marketing objectives and action steps for winning in RTM and covers what this will require in terms of investment and resourcing.
Logistics and Supply Chain Impacts: It is necessary to address the logistics and supply chain requirements for the new RTM strategy, to ensure efficient movement of products from production, through distribution points, to resellers (customers); and, ultimately, to shoppers and consumers.
Pricing Strategy: Creating or renewing RTM strategy requires some wizardry in balancing sales growth expectations against the cost of executing the strategy while, at the same time, remaining competitive in one’s pricing. The pricing must also align with market demand, the competition’s pricing, and the company’s value proposition.
Customer and Partner Relationships: RTM revitalization requires that one must decide how the company will engage and manage relationships with distributors, retailers, or other intermediaries.
“A well-crafted route-to-market strategy helps companies maximize their market presence, increase sales, and build stronger relationships with customers and partners. It requires ongoing monitoring and adaptation to market changes, consumer preferences, and evolving business conditions,” says Jack.
EXECUTION: Guidelines for Executing the Plan
The outcomes from executing the RTM strategy should include any combination of the payoffs listed below:
Improved Market Reach: by identifying and exploiting untapped or underdeveloped markets and channels the company reaches more customers, more consumers, and stimulates more frequent usage of their products.
Increased Sales: by choosing the most effective distribution channels, the company increases its sales and reaches its revenue goals.
Cost Savings: by implementing the most cost-effective route-to-market, the company reduces its distribution costs and increases its profits.
Better Customer Service: by fulfilling the needs and preferences of its target market, the company provides better customer service and increases customer satisfaction.
Competitive Advantage: by deploying a well-designed distribution strategy, the company gains a competitive advantage over its rivals.
Improved Brand Awareness: by reaching more customers through effective distribution channels, the company increases brand awareness and recognition.
Data-Driven Decision Making: by more insightful analytics the RTM project enables easier and better decisions.
Performance Metrics: by establishing key performance indicators (KPIs) one is able to monitor progress and adjust quickly.
Process Steps for Developing Insight-based RTM Strategy and Execution
Jack says, “Developing good RTM strategy is not rocket science, but it does require a process that makes sense, yielding decisions that are evidence-based and realistically achievable. In my experience, a very effective way in going about this is to ask the ‘five key questions’, as a guide. How these questions are answered, in effect, governs the RTM strategy process.”
Five key questions in route-to-market strategy and execution
- What do we know about our markets?
- Where are we winning and losing?
- Where do we play?
- How do we win?
- How do we keep on winning?
“At Frontline Research Group we have expressed these questions as a process called ‘SCORE’ which is our solution-driven approach to ensure that solid insights will inform a coherent strategy, i.e. a strategy with clear goals, and with a realistic roadmap to get there,” says Jack.
The SCORE dimensions are:
Situation Analysis: What do we know about our markets?
Competitive Assessment: Where are we winning and losing?
Opportunity Discovery: Where do we play?
Roadmaps and Plans: How do we win?
Executing: How do we keep on winning?
S Situation Analysis
What do we know? (about our markets, our performance, our competitors; and how we get to market). Here we are integrating and triangulating different data sources and survey methods. Depending on the problem that the market research and data analytics need to cover:
The market landscape: an important and necessary first step is to define and measure the market within the context of the overall outlet universe. The market landscape provides a comprehensive scoping of a particular market, or channel, including universe and market size, growth potential, and who is competing in the market. All the stages and methodologies required to yield RTM insight, strategy and execution are dependent on this view of the landscape. Without knowing the market size and structure you cannot plan.
Category insight: one needs to understand how the market works and how products reach the end user. The key issues here are – market coverage or reach how products get to the market how customers, dealers and agents buy the category.
The purchasing environment: this deals with what happens at the point-of-purchase, or the point of service, and how one can influence the buying choices of the shopper or consumer at these points.
The shopper and / or the consumer: here one wants to understand who is buying, what they buy, where and when they buy, and why they buy.
C Competitive Assessment
Where are we winning and losing? Assessing category and brand performance and competitiveness across the value chain. We deploy our RTM tools for market insight in the following areas:
Performance analysis: the measurement of competitive performance in channels and against competitors in availability sales growth market share product range and in-outlet execution.
Commercial diagnosis: the focus is on beating competitors in margins and value growth in channels, routes and customers; and enhancing this by leveraging ROI from executional workstreams..
Operations assessment: This is about beating competitors as a supplier to trade – the key operational elements being distribution, sales and service to channels & customers: efficiency of operations inventory technology point-of-buying shopper engagement.
O Opportunity Discovery
Where do we play? The key task is to identify the sources of value growth and value destruction. Value growth sources are about finding market gaps and opportunities, and scoping these out i.e. financial, resource and organizational impacts are calculated for each opportunity. Value destruction sources are about identifying where inefficiencies and losses occur in routes to market, the value chain and in servicing channels. The key task is to turn these weaknesses into opportunities.
Identifying opportunities: Identifying profitable growth opportunities from expanded coverage optimizing the portfolio streamlining routes to market eliminating operational inefficiencies exploiting channel, customer and shopper needs and preferences.
Prioritizing opportunities: It is useful to organize these into short-, medium- & long-term opportunities. Quantifying the value at stake for each opportunity is a necessity for prioritizing which ones to act upon. Priority items should be supported by a viable business case be channel-specific and involve the optimal product portfolio. This is where the company’s internal customer and sales data comes into play.
R Road-mapping
How do we win? The focus here is on building the strategy and formulating action plans.
Developing RTM blueprints: one starts with formulating the overall RTM vision, and then one cascades this to the individual channels. From there one can draw up RTM plans for each channel – the contents of a channel’s RTM plan would (broadly-speaking) ensure the right product and brand portfolio for the channel and spell out how it should be serviced.
These RTM elements can be integrated with the other channel plan elements, e.g. business objectives and targets category management and demand stimulation in store investment in the channel and marketing support.
Aligning the organization to the RTM plan: Sometimes there are internal process and management changes required. Some of these are: realignment of the supply chain distributor service-level agreements routes & territories recalibrated operations re-evaluated tooling up technology upskilling of personnel.
E Execution
How do we keep on winning? Resources are allocated and the mechanisms for successful execution are built. Action steps and roll-out process are formulated, and monitoring mechanisms are implemented. There are two factors that you have to put into place, for success:
Resourcing, whichcan involve mapping key tasks drawing up financial plans establishing executional teams capability development drawing up activity schedules
Monitoring implementation, which is a necessity for maintaining momentum. This entails market and performance tracking by the implementation of monitoring and feedback mechanisms.
In closing
Jack says, “Re-engineering one’s route-to-market requires strategic analysis that evaluates the ROI yielded by the various channels that the company uses to distribute or re-sell its products or services to end-users.”
In this series of articles, Jack has shown that good RTM strategy is a process that requires a logical sequence of steps to achieve success. These steps help to instill discipline and rigour in the process, to make sure that all bases are covered. The process looks to expand the business footprint, streamline the product flows, make operations more efficient, maintain favourable cost structures, and reduce risk – with all of these combining to develop an optimized plan for reaching the market more effectively.
“Ultimately, the goal of a route-to-market project is to identify the most efficient and effective way to get products or services to market and for this to increase sales and profits,” concludes Jack.
Please feel free to contact Jack de Wet for more information on email jack.dewet@frontlineafrica.com or call tel +27 (0)86 999 0407 or mobile +27 (0)78 422 9479
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