Effective RTM For FMCG Companies Recipe For Success - RTM Series 1

One of the greatest challenges most FMCG companies face in today’s competitive environment is: how to deliver its product to target customer segments in a cost effective manner. It may sound very simple but the designing and implementing a robust ‘route to market’ (RTM) requires a focused approach in accordance with market realities. Therefore, the stake-holders need to understand the significance and utility of a comprehensive route to market in order to ensure that business objectives are achieved. Before understanding the elements of a robust and comprehensive RTM, we need to have clarity about RTM itself, particularly for fast moving consumer goods companies. The concept of actionable RTM is extremely critical for FMCG companies since its proper implementation not only ensures sales volume growth but it also significantly improves their ability to deliver the proper levels of customer service in a cost-effective manner. However, the fact of the matter is that very few FMCG companies particularly in South East Asia have implemented a comprehensive RTM as evident from their market performance including untapped areas.

Conceptual Platform for RTM:

In one of research papers published by well renowned consulting firm Booz & Co, four qualities of a conceptual platform for RTM have been identified which optimize the way FMCG companies move their product to the final consumer. Although the research findings were published some seven years ago, the qualities identified therein remain relevant particularly in our part of the world where primitive practices viz-a-viz market execution are still in vogue.

A wide-ranging route to market with right ingredients and focused approach enable the companies to have accelerated sales growth, gain competitive edge and market share increase. It is pertinent to mention here that right RTM not only results in sales growth, it also leads to profitable revenue growth because of customer focus and service excellence. An effective RTM also manages to get an optimal level of customer engagement at the market place which ultimately leads to strong brand building and customer loyalty.
One of the pillars of a strong conceptual platform for RTM, as outlined in the above-mentioned research paper, is market driven strategy. Many companies formulate RTM strategy based on internal considerations instead of market related aspects. RTM strategy based on internal factors like ease of implementation, current distribution set-up etc. do not yield the desired results. Customer and market centric factors should be the foundation of an effective RTM platform. Second important pillar of an effective RTM is its being coherent/aligned with overall corporate goals and strategy. An RTM strategy which is not in sync with corporate vision is bound to create anomalies in the general direction of the company. It is also essential that RTM strategy is backed by corporate capabilities; an RTM strategy formulated without considering the internal capabilities, both current and potential, is likely to fail at the very beginning.

Win-Win Approach & Flexibility:

Balanced approach towards RTM development is another important pillar which necessitates a well-adjusted and stable (read sane) method for aligning apparently conflicting goals. Companies strive for accelerated sales growth, higher profitability and cost-effective route to market. The stake-holders, both within and outside the company, are preoccupied with their own version of goals which, at times, results from lack of clarity about the final destination. In a typical situation, the Finance Director is looking for a ‘healthy’ bottom line while the Sales Director is seeking lavish sales promos. Further, the Marketing Director may not be willing to forego any portion of his ‘approved’ marketing budget despite poor business performance. One also finds companies asking for more from distributor partners with complete disregard for the latter's ROI. Simply put, one cannot come up with a win-win RTM model without a ‘give-ntake’ approach. Another important pillar is the flexibility while developing the RTM model for the company. The team entrusted with the RTM development assignment should know the universal truth that one size does not fit all. While coming up with complex segmentation may not be an easy task, we cannot expect one rigid model to work for all customer segments and give us the same results. An FMCG company, for instance, cannot have the same call frequency for high volume outlets or key accounts which it has for low volume general trade outlets in its routing plans. A flexible RTM model provides enough space to make necessary changes once market dynamics and/or corporate priorities change.

Need for RTM Strategy for FMCG:

Companies:

A closer look at the way FMCG companies operate in our part of the world clearly reflects the lack of realization about the need for and importance of effective RTM strategy. Local companies operating in our country as well as neighboring ones hardly pay any attention to devise an effective RTM strategy encompassing the required elements. We should realize that RTM, or GTM as sometimes called, is a continuous journey towards excellence. It does not represent a tool box consisting of a few tricks; it represents instead a continuous journey towards excellence moving from one level to another.

One should not consider RTM merely as a certain methodology which enables the companies to move their products in the most effective manner. Some professionals in the field call RTM a way of thinking that is executed through data-based tools. We should not assume that only a certain set of people within the organization are responsible for executing effective RTM.
All stake-holders, both inside and outside the companies, play their role in effective execution of RTM strategies. One may think that only sales and marketing people are to execute RTM strategies; functions like HR, supply chain, production, quality assurance and even Finance have to play their role for effective RTM. Let me re-emphasize: RTM is not about tools only; it represents the overall culture of the organization which ultimately ensures an effective route to market.

Final Word:

The subject of RTM/GTM is so wide that it cannot be captured in one article. While we plan to cover other critical aspects of RTM in subsequent issues, we need to realize that only a pragmatic approach, and not mere lip service, would help companies to come up with a robust and comprehensive route to market. Such effective RTM requires a well-thought-out strategy formulation, capability building (both human resources and systems), channel segmentation, value proposition, continuous performance improvement and win-win approach for business optimization. In today’s global village where one is quickly learning from others, companies in developing markets lag behind in terms of understanding and implementing a winning RTM primarily due to poor situation analysis and self-defeating targets.