Outsourcing of Sales and Marketing Functions Expected to Grow 15 Percent Over the Next Three Years: Study

WASHINGTON -- According to a study released at the recent Grocery Manufacturers Association (GMA) Merchandising, Sales and Marketing Conference, outsourcing of sales and marketing functions among CPG manufacturers is estimated to grow 15 percent per year between 2005 and 2008. This growth will be driven by expected shifts from CPG direct sales to agencies, and growth of representation in new product categories, such as naturals and organics, and retail channels. The study further assigns a quantitative value to the current level of outsourcing at $4.2 billion in annual cost savings.

The main authors of the study, academic experts from the Institute for Customer Relationship Management, Georgia State University, and the University of Colorado at Colorado Springs, presented 10 key findings in the study, "The Value of Outsourcing Sales and Marketing." As well as the increasing growth and the opportunity for sales and marketing agencies (SMAs), the study compared and contrasted the manufacturer and the retailer perspectives on SMA capabilities and value.

Noted GMA senior manager of industry affairs Marjorie DePuy in a statement: "The research results indicate that agencies can deliver significant cost savings and at the same time align collaborative processes and philosophies between manufacturers and retailers."

Ninety percent of CPG companies polled said they were satisfied with their agency relationships, with 68 percent "very satisfied." Overall, sales and marketing agencies are performing well in the areas deemed most important by CPG companies, including new item introduction, increased product unit sales, improved market coverage and distribution, and better product visibility. The study also identified areas for improvement, where sales and marketing agencies could better promote their effectiveness and enhance forecasting and joint marketing planning with retailers. Regarding areas of SMA performance evaluation, the study suggests that CPG companies may have to re-evaluate their own models of operation and expectations, particularly with respect to improving revenues and profitability plans. Again, collaborative management yielded the highest satisfaction rankings, with joint development of strategies, plans, systems, processes, and competencies, as well as alignment of each other's sales administration processes to avoid duplication of activities and errors.

The report's findings were based on exploratory research, case studies, surveys, and interviews of 57 U.S. manufacturers, retailers and sales agencies. To download a free executive summary of the report, visit www.gmabrands.com.
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