In action: Nestlé/ Sainsbury's
Real-time marketing is becoming a new corporate imperative. Companies of all sizes are looking to use collaborative technologies to get an up-to-the-minute picture of customer demand – and to react instantly as that demand changes.
Nestlé, the $50 billion consumer goods giant, is at the forefront of thinking in collaborative commerce. The company is embracing the model right across its operations. Moreover, it is encouraging its vast network of partners to do likewise.
"We now have the tools to reengineer the consumer industry itself," says Nestlé executive Bernard Teiling. "But at this stage in the adoption of collaborative commerce, there are only certain areas in the e-supply chain where organisations can expect to derive significant value – one being in collectively managing the customer relationship." With the aid of Internet-based collaborative marketing tools, manufacturers can now work with distributors of their products in order to establish a timely and accurate picture of changing customer demand – and respond accordingly.
"Historically, it has been a painful exercise to communicate with the multiple companies that might be involved in an individual product promotion," says Teiling. Take the example of an Easter egg campaign. "You will have five or six departments involved in a fixed-time period – marketing to decide about the promotion, manufacturing to produce it, logistics to forward it, planning people, sales people, accounts – and that is just within one company," he says. "A distributor who you want to collaborate with, say a supermarket, will have an almost mirror image of those departments. And, to insure the success of the promotion, all these people, on both sides, have to communicate rapidly with each other."
For the past two years, Nestlé has been working with UK supermarket chain Sainsbury's on its Easter egg campaigns to assess just how effective collaborative marketing technologies can be. At this stage, the technology that Nestlé and Sainsbury's use to collaborate is nothing too sophisticated – essentially, the two companies share promotional information on an extranet. The different departments in each organisation are able to see each others' data on how the campaign is progressing, and where products sit in the supply chain.
Within hours of Sainsbury's stocking its shelves with a certain Easter egg, it is able to tell from early sales data if the product is likely to sell well. That information is fed into the extranet and Nestlé can react swiftly. So if there is a poor consumer response to, say, a Harry Potter Easter egg, then Nestlé may quickly repackage the same chocolate in a Lord of the Rings packaging, hopefully ensuring that neither company ends up with a huge inventory of unsold chocolate eggs the day after Easter.
In the scope of what some companies are planning – or indeed have already implemented – for collaborative commerce, this is a relatively simple collaboration. But the benefits to Nestlé have been substantial. "Such collaborative promotional activity can dramatically reduce cost and increase efficiency, with a return on investment of more than 1,000%," says Teiling.