Making ‘Growth Mapping’ Work for CPG
By Chris Enger
Cost cutting is a crucial value driver for consumer goods companies, but its impact is finite. What do you do when all the cost is out of the system? Most industry analysts agree that volume-driven earnings growth is the key to future prosperity and independence.
Many companies seek to boost sales by increasing trade spending, especially in highly contested categories such as processed food and beverages. But in most cases, even dramatic increases in trade spend fail to bring about substantial, sustainable market share gains. In effect, an increase in trade spending is just an indirect price reduction. It may help consumer goods manufacturers steal market share from competitors temporarily, but when competitors counter the investment with their own promotions, the pendulum will swing back. In the long term, such price wars damage everyone’s brand equity. Consumers become trained to buy a brand only when it is on sale. Nobody wins.
So, if trade spend doesn’t do the trick, how do you find the treasure trove that will help you outgrow an ever more fragmented market? Growth Mapping is the answer.
Essentially, Growth Mapping is about aligning what manufacturers make with what consumers want. It combines different types of segmentation – of people (attitudinal), their choices (behavioral), and their underlying needs – to detect and unlock new sources of volume-driven growth, be it from existing, neighboring, or new categories, channels, markets, and brands.
Consider the case of a maker of premium pet foods. The company was looking for growth opportunities. It used Growth Mapping to discover an unmet need: snacks that help clean and strengthen dogs’ teeth. In the past, various competing manufacturers had claimed that their products improved canine oral health, but the teeth of dogs were rotting anyway, resulting in cumbersome and costly trips to the vet. The pet food company in this case invested in the development of a product that worked in clinical trials. The product exceeded all expectations and quickly became the company’s biggest growth driver.
Growth Mapping turns big data into a fact base for the entire organization to rally around and prioritize growth initiatives according to their prospective payoff. According to recent McKinsey analysis, companies that use Growth Mapping outperformed their category average by a factor of ten in the five-year period ending in 2016. While the average revenue growth for the world’s top 100 consumer goods companies was 1.4 percent (CAGR) for that period, users of Growth Mapping achieved a revenue uplift of 15 percent (CAGR) in targeted categories.1
Questions Growth Mapping Answers
Consumer goods companies use Growth Mapping to integrate big data from diverse sources and distill relevant insights for their business. It helps them answer two crucial questions: Where should we play? And how should we allocate our resources to specific opportunities? Our own clients apply Growth Mapping in three principal areas: to redefine and expand their relevant market, to fuel insights-driven product innovation, and to improve the alignment of their portfolio with consumer needs.
How Growth Mapping Works
Consumer goods manufacturers sit on a growing heap of data, but not all of them use it to fuel future growth. Growth Mapping leverages machine learning to mine consumer data for insights and derive concrete actions for better performance. It cuts across consumer segments, categories, channels, brands, and markets to pinpoint the most promising intersections of supply and demand, including demand that may as yet be dormant and the supply of products or variants that do not yet exist. By creating an understanding of what consumers really want, and why they behave the way they behave, Growth Mapping enables consumer goods companies to re-align core value levers from market definition and product innovation to pricing and promotions for sustainable volume-driven growth within and beyond their core business.
There are three key steps to using Growth Mapping:
1. Clarify the Challenge
How ambitious are your growth objectives relative to the market average? Is your primary goal to defend market share? Do you simply want to hold top-line growth while increasing profit? Or do you hope to achieve double-digit revenue growth? The answers to these questions will help you pick the most relevant tools from the Growth Mapping toolbox of data sources, research methodologies, and analytical approaches.
2. Create the Treasure Map
Assume your ambition is to defend market share. In this case, your primary objective would be to get consumers to pick your brand over a competitor in the store. Growth Mapping lets you take those resources and model consumer behavior in stores to optimize the way your products are positioned, displayed, and promoted on the shelf. This is your treasure map!
3. Start the Hunt
Once you have employed the tools that are optimally suited to the size and type of your business challenge, Growth Mapping that is executed properly enables the creation of a prioritized set of recommendations that you can execute against, enabling you to focus limited resources on the areas with potential for the most impact.
With so much competition in the market, it is nothing short of crazy not to use the information already at your disposal to inform how you manage your portfolio, innovate your products, and achieve market growth. Growth Mapping is a way of creating a fact-based environment that you can act on to achieve business results. It’s your chance to hear the voice of your business, customers and the market, and achieve first mover advantage.
1 Euromonitor, McKinsey. While the focus of this document is on consumer goods, Growth Mapping has also successfully been deployed in other B2C industries, such as banking, insurance, and telecoms.
Chris Enger is Senior Expert at Periscope By McKinsey.