Consumers in Latin America have a close relationship with their neighborhood stores. The traditional channel accounts for at least 40% of retail sales in the region, according to ILACAD World Retail 2021 data. However, advances in business strategies are starting to encounter some obstacles within this model.
The informality of this type of business and the consequent lack of information makes it difficult to apply innovative Customer-Centric models and customer loyalty strategies.
The days of standardized consumers are long gone. Today, mass consumer companies are facing demanding consumers who quickly adopt new habits and seek products that meet their particular needs and adapted to their reality.
Therefore, when it comes to sales and distribution in the traditional channel, a very big challenge arises. How do you apply a Customer-Centric Culture if you don’t have formal tools to get to know your customers? How can the traditional channel be adapted to new contexts?
Part of the answers lie in the incorporation of new technologies. In the following article, we’ll tell you how data collection, artificial intelligence and machine learning are great allies when it comes to moving from a “distribution-driven” model to a “customer-centric” one.
Familiar and Accessible: The Human Value of the Traditional Channel
In Latin America, the traditional channel is the oldest retail sales format. Its roots date back to the colonial era, through fairs and small neighborhood stores where people acquired their basic goods. It wasn’t until the 20th century that the traditional channel saw competition from the modern channel, with the appearance of supermarkets and large retail chains that brought an expanded offering of mass consumer products and brands.
However, the traditional channel remains firmly in place. Kiosks, grocery stores, neighborhood shops, open-air markets. The formats may vary, but in general consumers prefer them because they retain some important human values, such as trust, familiarity and proximity.
It is also an extremely important sector for companies, as it usually provides more profitability than the modern channel, where the market is often more concentrated and there is less bargaining power. In certain product categories, such as beer and carbonated beverages, the traditional channel takes on a dominant position.
Challenges of the Current Era: Applying the Customer-Centric Approach to the Traditional Channel
Until now, the strategy in mass consumer marketing has revolved around “distribution-driven” approaches. From management, a commercial strategy was established based on general information. Contact with customers was standardized: the same products were offered to everyone, at most with some generalized segmentation, but with the same instructions for all.
Today the trend is the application of the “Customer-Centric” or “Customer-Centric” strategy. As the name implies, it’s about putting the customer at the heart of the company. The entire commercial strategy and actions must be aimed at satisfying their particular needs, providing a satisfactory experience throughout the purchase process, from the moment they enter the store to the after-sales.
The goal of this strategy is to increase sales through the construction of a strong and loyal relationship with customers, and should target both the intermediary (shopkeepers, merchants, kiosk owners) and the end consumer.
To successfully carry out this strategy, the most valuable raw material is information. The challenge is to understand and anticipate consumer demands in order to provide a personalized experience. And for this, new technologies have become an essential tool.
Anticipating Customer Desires
We live in the age of data. Today, our daily life is digitized. From the route we choose to get to a destination in our car to the food we buy.
All this digitization allows the collection, crossing and analysis of a huge amount of data that serves as the basis for making business decisions with unprecedented precision. And even more: the recognition of patterns through artificial intelligence makes it possible to anticipate actions.
That’s why the incorporation of new technologies is key when it comes to applying the Customer-Centric strategy to the traditional channel. If mass consumer companies are able to implement digital sales management platforms oriented towards the traditional channel, they will be able to collect valuable data on the performance of their products and campaigns. And the most powerful thing is that through data crossing they can get to know their customers in detail in order to offer them personalized experiences.
Such is the case of a company that produces and distributes bakery products. If this company bets on the digitalization of the sales process in the traditional channel, it will be able to access statistical information and know, for example, that in certain middle-class areas, sales of gluten-free products are increasing, due to higher levels of celiac disease or a new food awareness. It could also know if those products are usually bought with other diet products.
Better Results
With this information, it is possible to better guide the commercial strategy, offering the shopkeepers specific promotions based on those products. This is an intelligent sale. In addition, the system “learns” from the experience and in future orders it will make an intelligent or automatic recommendation with higher quantities of those best-selling products.
In summary, what is achieved is a precise understanding of the needs and interests of customers. This will generate a closer relationship with them and increase loyalty levels, generating an impact on the increase in the company’s total sales and a greater use of the data that allow providing the customer with a better shopping experience.