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Customer Data Challenge

Consumer-goods companies have to learn to work closely with China's traditional wholesale/agent channels if they want to reap the rewards of better understanding their customers.

Pepsi is sold in every grocery store in China. That's a good thing, but it has its drawbacks, too. Analyzing sales with an eye to understanding differences in consumer buying habits across product lines and different regions of the country becomes a complex process, especially given the workings of China's traditional wholesale/agent channel.

Most agents aren't large-scale operations, with their average profit being only about 2% to 3%, meaning that they measure their investments in technology quite carefully. Also, they typically deal with products from a variety of consumer-goods companies, and only a few famous brands represent over 30% of sales for the top agents' operations. More likely a particular brand accounts for no more than 20%. Therefore, agents aren't very dependent on a single consumer-goods company, which affects their attitudes toward investing in terminal-data-management systems that could help consumer-goods businesses improve insights into customer buying habits. In addition, many franchises are very small and may not even use a computer, never mind a full-blown terminal-management system. Lack of data from such a system or distortion of that data can result in companies failing to make rational distribution plans based on market demands. Both IT and relationship management can help consumer-goods companies improve their chances at getting things right.

Most consumer-goods companies operating in China already have internal information systems that support data about basic production, suppliers, and clients. Now they want to embark upon applying IT to solve and analyze channel issues in China, including buying reports on consumer buying behavior, trade, sales information and important features such as product safety requirements, and drilling down on the data of purchase analysis reports, deals, promotions, and security requirements.

Zang Hongming, CIO of Shanghai Pepsi Corp., says that its IT system records details of every activity, recording the basic situation of different regions, primary price levels, products, distribution channels, and behaviors of different consumer groups. It expects to garner enough data to analyze key operational behaviors and factors such as purchasing, deals, and promotions--to understand, for instance, why one product aimed at a certain group reached its peak sales in one region five days after the same product aimed at a similar group reached peak sales. "Thus," Zang says, "diversity of terminal operation and rational distribution plan based on market demands are no longer dreams." However, Zang reminds everyone that not all terminal data is useful. In the process of data dig-up and use, the relationship between data should be established. There are some logical relationships among distribution, inventory, and accounts payable. Data from different systems and resources should have the function of checking and examining each other. That said, some other companies are still working on getting their agents to buy into systems for terminal-data management that can help them achieve what Shanghai Pepsi plans. "The key to rapidly acquire terminal information is to shorten the cycle and distance of information transfer, which needs a 'penetration channel,'" says Huber Hsu, VP of the Great China Region of Boston Consultation Corp. But agents often lack a reason to cooperate with consumer-goods companies on this front: System installation, and uploading a client's data and order form will take time, and agents don't see what's in it for them. They are also concerned that financial and some other confidential data could easily become transparent after system installation.

Hsu says it's important for consumer-goods companies to establish long-term cooperation and win-win relations with channels. They can do so in a number of ways, starting with helping agents to gradually enhance their IT infrastructures. The easier a consumer-goods company can make its terminal-management system, the better. "It just needs to include some basic data such as inventory, goods location, prices, and important client data. And certainly, the cost of system maintenance must also be relatively low," Hsu says.

He points to Procter & Gamble as a company that has had great success in this area, because it supported its agents in a number of ways, from supplying computers to cars to training. "P&G established long-term and friendly cooperation relation with these channels through these modes," Hsu says. "How can agents provide [data] as soon as they are expected to? The majority of them do not know how to collect [data]. The major fast-moving consumer enterprises should provide agents better training and corresponding equipment."

Even companies that are on track to do that, however, face IT challenges as they want to expand channels from the main cities to second- or third-level cities. Primarily, communication is poor, Hsu says, because of slow network speeds, and not cost efficient.

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