Getting Routes to Market Right

In the intensely competitive consumer goods sector, consumer packaged goods (CPG) companies must have a comprehensive, conceptual platform to enable them to design optimized go-to-market (GTM) models. These models—the designs for the routes to market that companies use to sell and deliver their products and service their trade accounts—are essential for enabling profitable growth, service excellence, and consumer engagement at the point of sale, says a new report by Booz & Company.


Getting Routes to Market Right

The more diverse a company’s customer base and product portfolio, and the more competitive its markets, the more challenging it is to design effective and efficient GTM models. For example, one company’s trade customer base had expanded to hundreds of thousands of outlets and the company’s brand portfolio expanded four times, while its number of SKUs more than tripled. Furthermore, competition for retail shelf space continually intensified. However, the company was still selling and servicing most of its custom base using a pre-sales and direct store distribution (DSD) model, in which sales and delivery personnel visited each account at least once per week.

There were two inherent problems in applying the same model across a diverse customer base. First, to maintain a reasonable cost-to-serve across a large customer base, the field sales and service staff could not devote too much time to any customer and therefore found it difficult to sell and service the company’s growing product portfolio. Second, the model was expensive and time-consuming for certain customer segments.

“Because virtually all of the company’s trade accounts were being managed via the same route to market, some accounts were underdeveloped and underserved, while others received more attention than necessary,” explained Gabriel Chahine, a partner at Booz & Company. As a result, the sales potential of existing accounts was not being fully captured, cost-to-serve was higher than necessary, and resources that could have been deployed to establish, maintain, and develop new accounts were not available.

“This scenario is faced by many CPG companies. By reevaluating and redesigning their GTM models, companies can right size their sales and service forces and better allocate their talent,” added Chahine. They can bolster product presence and customer experience at the point of sale, and devote greater effort to strategic and high-profit SKUs. They can also reduce their overall cost-to-serve; in short, they can cut costs and grow stronger.

Because analyzing and designing GTM models can be a complex task, a consistent and comprehensive platform for rethinking GTM models across the customer base is required. Such a platform must be capable of producing a clear vision of desired route-to-market outcomes, a comprehensive understanding of the roles and functions of the employees staffing the routes, and a systematic approach to GTM model analysis, design, implementation, and management. A well-structured conceptual platform offers several key benefits:

  • It provides a process for analyzing and constructing routes to market that properly balances effective execution with cost-to-serve.

  • It ensures a comprehensive and aligned understanding of the elements contained in GTM models.

  • It facilitates the sharing of best practices related to sales, customer service, and GTM model designs across the system.

  • It encompasses the tools and methodologies to model the effects of different GTM design alternatives on the revenue potential, cost-to-serve, and customer satisfaction.

  • It is a vehicle for the continuous improvement and systematic updating of GTM models and processes.


The Four Pillars of a Powerful GTM Platform

An effective GTM platform must be built on four pillars, which represent the qualities of effective, efficient routes to market, and include design principles by which GTM models are constructed.

Market-driven: The most effective and efficient GTM models are designed from the market back, ensuring that they are properly aligned with customer and consumer needs. “The structure of a GTM model should therefore have a foundation of quantitative and qualitative characteristics of customer segments, including growth potential, customer needs in a segment, geographic footprint and location, sales volume, and profitability,” explained Chahine. This process forces GTM model designers to properly identify and define their companies’ customer segments.

Coherent: Effective GTM models must be properly aligned and integrated with the company’s overall customer service framework. This framework could be seen as a pyramid where decision and design parameters flow down from the top, and support flows up from the bottom. From the peak of the pyramid, strategic goals flow downward, giving shape to customer value offerings. Value offerings also cascade downward, suggesting specific GTM models, which can be designed to deliver a specific value proposition for each customer segment. Finally, GTM models help define the company’s operating models, dictating elements required to enable and support the GTM models. The resulting coherence within the customer service framework ensures that GTM models support the achievement of corporate goals, as well as receive the support they need to operate successfully.

Balanced: An effective platform must enable identification and balancing of competing priorities in the design and operation of GTM models. Three sets of priorities must be considered: customer needs and preferences, revenue growth, and total cost-to-serve. “In analyzing their GTM alternatives, managers must be able to balance the consequences of design alternatives and decisions on all three priorities, determine the proper trade-offs among the priorities, and build an optimal GTM model accordingly,” commented Chahine.

Flexible: Because CPG companies must manage an increasingly diverse customer base with differentiated GTM models, a high-quality design platform must include a method for understanding GTM routes in functional terms, a full palette of design alternatives for constructing them, and a method for determining which alternatives are best suited to individual customers and customer segments. Once a design is chosen and implemented, managers also need a means of improving it or adapting existing models as conditions change.


A Functional Perspective on Go-to-market Models

“The design and operation of an effective GTM model depends on a holistic analytic view. This should be based on the model’s main activities and the functional steps, or tasks required to execute those activities,” said Chahine. Using such an approach ensures that managers consider all of the activities necessary in the execution of the sales and service value chain for each customer segment, and provides a sound foundation for constructing profitable routes to market.

Typically, a CPG company’s routes to market encompass three major activity types: growing activities by establishing and expanding customer accounts; sustaining activities through servicing and maintaining customer accounts; and value-adding activities through brand building and enhancing the customer experience at the point of sale.

It is the tasks executed in a route to market that serve as the basic units for GTM model analysis, design, and management processes. “A model cannot be considered optimal until the execution of each functional step within it supports the achievement of the company’s objectives and increases the value delivered to each customer segment by better addressing that segment’s needs and preferences,” Chahine continued.


A Modular Approach to GTM Design

The ability to analyze and define routes to market at the task level lays the foundation for an orderly and structured approach to GTM model design. This approach will provide the flexibility needed to respond to complexity in customer bases, product portfolios, and marketplace competition with routes to market that can economically fulfill customer needs, that are better aligned with customers’ preferences, and that ensure more efficient and effective delivery of value offerings for each customer segment.

“This approach acknowledges that there are different alternatives for accomplishing any given task in a route to market and it recognizes that each alternative has different implications for corporate goals, customer satisfaction, and cost-to-serve,” Chahine noted. The ability to construct routes to market using discrete alternatives supports the creation of differentiated GTM solutions, as well as enabling consumer products companies to respond quickly and effectively to changes in corporate strategy and marketplace conditions.

A modular GTM model design process gathers and organizes all of the major activities and their potential solutions in one place. “GTM designers can then assess which solutions are best fitted to each activity in a route to market based on strategic, customer, and cost considerations and can be applied to a single customer or a complete segment of customers,” continued Chahine.


A GTM Platform Is a Competitive Advantage

When CPG companies adopt an optimized GTM platform, they can construct routes to market and redistribute their sales and service resources in ways that serve customers in a differentiated and effective fashion, while controlling costs and complexity. The benefits that the consumer products company can gain are significant, including increased revenues, a better consumer experience, an increase in trade customer satisfaction, and increased efficiencies. The same rewards are within the reach of any CPG company that embraces a comprehensive platform and structured approach for GTM analysis and design.