Progress Test 4 Audio Script

Track 8
Jim Id now like to hand over to Mark Parry . . .
Mark Thank you Jim. It was at the end of last year when I sat down with the CEO of a
leading fast-moving consumer goods business to talk about where companies should
focus their innovation effort. Im worried that the way we do business might come
to an end in two to three years, he said. I mean, we make lots of small product
improvements, get them to launch as quickly as we can and then spend lots of money
on marketing them. But each time, the lifetime of that product gets shorter and the
amount of dollars we spend gets higher. It cant go on. Judging by a number of
recent profit warnings, that time is already upon us. Unilever admitted last month
that sales of its leading brands were likely to fall in the third quarter. Colgate-
Palmolive, Coca-Cola and Cadbury all warned of lower than expected earnings. The
last two, together with Unilever, blamed bad weather. But in reality, they are being
squeezed on price by retailer power and own-label brands. This results in companies
spending up to sixty percent of their marketing budgets on promotional offers to
supermarket chains to guarantee them space on the shelves. The ad agencies tell the
companies they should spend more on their brands and so on. Good luck to them.
But we give our clients different advice. We tell them that its too late. They must
start to innovate in terms of what they produce and sell. They must also break two
outdated assumptions, which leads me on to my second piece of advice. Theres an
assumption that our customer is the consumer. Wrong. The retailer is your customer.
For too long, companies have developed new products based on consumer insight-
driven research, focus groups, consumer pilots and so on. Rarely do these start from
the needs of the retailer. And what are these? Increased revenue, location, lower cost
of capital, improved stock turnover perhaps? So, how can a CEO ensure the
products meet at least some of these needs? And thirdly, companies think that the
retailer is our distributor. Michael Dell created a forty billion dollar market leader by
avoiding distribution channels and going straight to consumers. Other companies can
do this too. Dell also lets customers design what they want from their own PC

PHOTOCOPIABLE 2006 Pearson Longman ELT 1

Adapted from the Financial Times

PHOTOCOPIABLE 2006 Pearson Longman ELT 2