5 Keys for Creating an Effective Demand Chain

Consumer packaged goods (CPG) companies, retailers and their business partners often tout the ways they put customers at the center of their strategies. But while many companies do a good job of understanding their customers, many fail to maximize demand because they don't adequately coordinate across marketing, sales and innovation functions.

The demand chain is a concept that integrates the activities and stakeholders that drive consumer interest in a company's products and brands. Often, however, there's fragmentation both inside of a company as well as among its external partners. Creating successful customer interaction, efficiency and growth requires a center of gravity with all of the demand functions pulling in the same direction.

In order to better understand the consumer and truly drive breakthrough innovation, companies should embrace new operating models rather than simply making minor improvements to their existing supply chains. Marginal innovations, while productive, will not always spur sustainable growth. A truly effective demand chain is one that embraces innovation that closely aligns it with the supply chain, weaving best practices into the fabric of the company and its products. Successful companies will create and commercialize breakthrough innovations to fuel growth over time and sustain a competitive advantage, as they deliver a 25 percent or more improvement in cost, performance and customer value.

Since the demand chain touches every customer-serving function, it's also important for companies to redefine their core business while looking internally to find the right people and talent that can forge links to all business units. CPG companies and retailers should consider shifting their focus from product development to combined product and service innovation, as this may help complement product offerings, thus enhancing consumer value.

With these building blocks in place, creating an effective demand chain requires companies to focus efforts on five key areas:

1. Create a consistent experience. The majority of shoppers use at least two channels to research, shop and interact with brands. Manufacturers and retailers need to deliver an omnichannel shopper experience from start to finish, across physical, digital and mobile channels.

2. Gain a better picture of the customer. Understanding customer behaviors and preferences is key to the success of the demand chain. A successful organization should bring all customer-facing personnel to the table to review a wide range of data with the goal of identifying valuable information that can drive sales and maximize work flows.

3. Deliver a top-notch customer experience. A significant variable in determining the success of any product comes down to how it's delivered. Companies often develop the right products, but don't quite get the customer service function right. Doing it right means focusing on many facets of the experience, from wait time and store lighting to background music and return policies.

4. Innovate with the customer's help. Injecting an experimental mind-set into product and service innovation can disrupt markets. It's important to learn to prototype and act quickly. The customer will dictate success, and often that means updating products and processes quickly to meet their demands.

5. Define and measure impact. Retailers remain in the early stages of figuring out what to measure and how. The means for measurement will evolve as each new avenue to the customer comes along. The more precisely a company can assess the performance of its brands, the better positioned it will be to make robust brand and business decisions.

Supply chain excellence today is practically a given; an effective demand chain that's integrated with supply and driven by big data is the differentiator. As CPG companies and retailers come to know more about their customers, top-performing companies will drive growth by keeping an eye on their supply chains while pushing for operational excellence. Companies will need to drive top-line innovation while balancing the existing core business, as these parts are all critical to a successful value chain that keeps customers at the center of business strategies.

Anbu Mani is a principal, information management and analytics leader, for PricewaterhouseCoopers (PwC), a multinational professional services firm.