Online Exclusive

Pet owners demand supply-chain transparency

How products are handled and delivered is a growing priority for today's customers. Some premium brands have altered their distribution practices to develop closer ties to consumers.

Pet owners demand supply-chain transparency

Increasingly engaged, empowered and values-driven, consumers are prompting changes in the route veterinary products take from manufacturers to pet owners. The result is a shift to human-grade standards for handling and distributing veterinary nutritional supplements and foods. This development has significant implications for manufacturers, trading partners and consumers.

As brands develop deeper connections with pet owners to increase revenue, access to comprehensive customer data is increasingly important. Traditional sales models that separate brands from customer data are being reevaluated as progressive brands link profits with customer loyalty.

Pets Are People, Too

People are getting more pets and becoming more attached them. In the United States, households with pets increased by approximately 9 million from 2007 to 2016, representing 55% of all U.S. households.

In a survey of pet ownership, 81% of respondents stated that their dogs were equally as important in their families as their children. The same study revealed that 54% of survey takers preferred to be called “pet parents” instead of “pet owners.”

The nature of pet ownership is changing relative to previous generations, elevating the status of pets within the family unit.

Four factors play an important role in the growing connection between pet ownership and emotional attachment.

  1. More households have multiple pets, and owners with multiple dogs in the same house are likely to spend more to satisfy them compared with single-dog owners.
  2. The baby-boomer generation is not slowing when it comes to pet ownership. In 2006, 34% of people aged 70 or older owned pets. Ten years later, the number jumped to around 40%. Speculation about this increase centers on the realization among older Americans that pet ownership conveys health benefits.
  3. Minority segments of the population are taking to pet ownership in greater numbers. For example, the number of Hispanic cat owners increased by 71% from 2007 to 2016.
  4. Millennials view pet ownership as a testing ground for effective parenting. And in a related development, women are delaying becoming pregnant. Women in their early 30s were more likely to have children compared with women under 30 in 2016, marking the first time the median age reached this threshold.

With greater attachment comes greater willingness to sacrifice for our animal companions, to take steps to assure their well-being and to associate with brands that share the mindset of their owners.

Higher Engagement Compels Higher Spending

The increase in pet ownership and the attachment of owners to pets are growing trends.

Pet owners are so enamored with their furry family members that affection is measured by their willingness to splurge on the animals’ well-being.

Eighteen- to 35-year-olds are the largest segment of the U.S. pet-owning population, at 24 million. According to a recent study, they spend generously on their pets. Seventy-six percent of millennial pet owners surveyed stated they were more likely to make a large purchase for their pets instead of themselves.

Market research firm Euromonitor labels this trend “premiumization.” This concept relates that because more products are available at more price points than ever before, consumers are able to prioritize spending more on certain items —pet products, for example —and economize elsewhere on their shopping lists. One brand of fresh prepared dog food sold from refrigerated cases doubled retail sales from 2012 to 2016 despite being premium priced.

Another spending priority for more consumer segments, including pet owners, involves ethical, sustainable and “green” products. According to a Wakefield Research study, pet owners seek out products for themselves and their pets that contain natural, organic ingredients. People extend their own expressions of living a healthy lifestyle onto their pets. And as “clean” products often have a higher price tag compared with products made with artificial ingredients or by traditional production methods, spending on pet products increases.

A byproduct of higher price is often heightened scrutiny of products to confirm that they meet pet owners’ expectations for product quality and corporate authenticity.

They Have Superpower

Empowerment is another important component of consumer behavior underlying the shift of progressive pet product manufacturers to more stringent supply-chain requirements.

Consumer power is growing because of greater access to information, a broader selection of available goods and services, and the ability to share experiences with a wide network of contacts. In fact, most shoppers believe that they know more about products in brick-and-mortar store locations then the sales associates do.

This information explosion places more power in the hands of consumers relative to brands. The power shift disrupts the traditional relationship between purchaser and seller. The path to purchase is complex, involving multiple information sources for price comparison, peer validation, product research and personal satisfaction.

Brands must respond to the complex purchasing decision-making process in order for their products to prevail over competitors. After the choice is made, the sale could be lost based on non-product issues such as shipping, delivery and return options. Free and fast shipping and returns are the expected norm for product fulfillment, based on the model pioneered by Amazon.

The sales ecosystem for brands extends beyond product quality and includes the entire end-to-end experience of consumer engagement through research, service, purchase, fulfillment and returns.

Brands Are People, Too

A growing number of pet owners are willing to spend money on their pets instead of themselves. This influential consumer segment expects a seamless experience throughout the purchase process including high quality, competitive price, expedited and free fulfillment and friendly customer service after sale.

But there’s more. Based on the added complexity of the purchasing process, consumers understand brands covet their loyalty. For many consumers, brand loyalty depends on the corporate behavior of the company.

Corporate strategies about the environment, transparency, sustainability, animal welfare, production and labor practices, charitable causes and community action are taken into account by progressive consumers when evaluating purchases. Pet owners have a heightened interest in the corporate behavior of veterinary manufacturers because their company policies directly affect the health and well-being of their beloved animals.

No More Secrets

Whether in the grocery store or a restaurant, ingredient transparency is a concept gaining traction among consumers as a measure of corporate authenticity toward the public. The mission of this grassroots movement is to persuade manufacturers to disclose a complete list of product ingredients that goes beyond government requirements. The food industry opposes ingredient transparency, so voluntary efforts to increase transparency are viewed positively by many consumers. A recent study concluded that 73% of consumers consider transparency more important than price.

Label transparency enables pet owners to acquire advance information about the products their pets consume. Important health considerations can be alleviated when complete disclosure occurs.

The degree to which companies willingly share full information about product ingredients is a determining factor for a growing number of consumers. In some consumer circles, the concept of transparency is being advocated not only to verify ingredients but also to confirm product integrity from the point of manufacture all the way to the point of consumption. This is the notion of supply-chain transparency.

Consumers who pay a premium for high-quality products are learning to question the conditions and methods used to handle, ship and deliver the item. To these discerning consumers, product quality may be affected by the journey it takes. Supplements requiring refrigeration that are delivered without temperature-sensitive packaging, for example, may be ineffective or harmful to the consumer or pet.

Consumers and governments are demanding the ability to monitor the movement of products as they move from origin to final destination.

There is a growing expectation for manufacturers to show the same level of heightened care in fulfilling product orders as they take in making the product itself. Premium ingredients fully disclosed on product labels that are handled with the highest quality standards and delivered free and fast is the new formula for customer satisfaction that earns brand loyalty.

The solution to achieve each of these stated goals exists within the pharmaceutical supply chain. This fulfillment pipeline is expanding beyond prescription medications to include human and animal health and wellness products.

The Link Between Data, Customer Loyalty and Profit

Increasing competition in the marketplace creates obstacles for companies that must differentiate their products. Advertising becomes less effective because more brands generating advertising decreases message retention among target groups. With more items available that address the same need, pricing becomes more elastic with a small price increase resulting in large drops in sales volume. This situation is played out online millions of times each day.

Price is only one factor in the purchasing decision. Customer service at each stage of the sales process —pre-sale, during and post-sale — has a bearing. Ease of returns and refund policies also play a role. The perception that companies share social values and priorities with consumers is another element considered when evaluating a product.

Progressive veterinary brands are therefore realizing that focusing on enhancing the customer relationship is the most effective method of increasing sales.

Changing the Buyer-Seller Paradigm

Traditional sales models for veterinary manufacturers involve distributors as conduits between the brand and the end consumer. The connection between brand and consumer is sacrificed in the distributor sales model because customer transaction data is consolidated. Although brands may develop a dialog with end consumers from websites, vast swaths of actionable intelligence are forfeited at the altar of the distributor model.

Premium and specialty veterinary products are especially vulnerable to traditional sales models. Research shows premium pet products are purchased in part by pet owners who value the welfare of their pets and their children equally. These consumers generally understand the high importance that brands place on earning their loyalty and they have high expectations of brands they consume and recommend.

The timely availability of sales information and analysis is vital for premium brands to demonstrate to their customers that their decision to purchase their product is valued and important. An inability to receive detailed sales analysis due to contractual agreements with distributors — or even a delay — may harm the ability of specialty brands to realize their full sales potential.

Amazon May Drown You

The Amazon online marketplace is an important component of overall revenue for animal health brands. Spending on Amazon represented 43% of total online sales in the U.S. in 2016 and is forecast to hit 47% in 2019. However, this success is built partly on Amazon’s ability to analyze data about successful products. In certain cases, Amazon uses its unparalleled analysis capabilities to migrate sales from successful branded items to similar products of its own manufacture.

Manufacturers selling directly to Amazon or in the Amazon Marketplace as third-party vendors suffer from restricted access to important customer sales and behavioral data. Amazon is recognized as extremely stingy when it comes to sharing customer information with brands that sell on the platform.

Amazon acknowledged its desire to keep customer information in the company’s hands in an attempt to increase its share of the veterinary product market. At the 2018 NAVC E-Commerce Summit, two Amazon executives managing the animal health business for consumables commented that Amazon wants to leverage the strong emotional bond pet owners have with their pets to create deeper connections with customers.

Pharma Supply-Chain Solutions

Products moving within the pharmaceutical supply chain are among the most regulated and scrutinized of any industry. Progressive manufacturers of veterinary products utilize the pharmaceutical supply chain in response to questions about the supply chain’s integrity and to demonstrate their commitment to the highest levels of product integrity.

Requirements for the proper manufacture, storage, handling and distribution of pharmaceutical drug products are strict and demand precise, consistent compliance. Current Good Manufacturing Practice (cGMP) regulations are listed in the Code of Federal Regulations, which is enforced by the U.S. Food and Drug Administration. The two sections of federal regulations governing pharmaceutical drugs are 21 CFR 210 and 21 CFR 211.

Stringent standards within the pharmaceutical supply chain increase confidence and reduce potential negative implications for animal health manufacturers that utilize pharmaceutical logistics services providers.

Biting the Hand That Feeds You

Of equal importance, pet owners and other consumers expect that the companies behind the brands they trust are taking every precaution to ensure product integrity at every step. This includes taking every available precaution during the fulfillment process. For them to discover otherwise may be interpreted as a deception on the part of the manufacturer, despite full compliance by the brand owner.

This culture of perception deception, where a company complies with regulations that do not match the high standards of its loyal customers, is a potential marketing problem prone to exposure and serious negative business ramifications.

The specifics of cGMP requirements for finished pharmaceuticals compared with veterinary food-grade requirements may be surprising, even to supply-chain professionals. For example, a reading of the guidelines state that hot and cold water in bathrooms is not mandatory for veterinary food-grade distribution facilities. Written standard operating procedures mandated for pharmaceutical warehouses are not specifically required to comply with veterinary food-grade facilities. High security, redundant power and entry/exit logging is optional for veterinary food-grade facilities. Off-floor storage of products is prohibited in pharmaceutical grade facilities but is allowed for animal health products. This is not an exhaustive listing of these qualitative differences.

Although veterinary product manufacturers may work with pharmaceutical logistics service providers, the expense of additional compliance may be commensurate with other facilities. And the potential savings from added safeguards can potentially save a business from financial loss.

Mixing Animal Health With Pharma Logistics

The cost-benefit analysis for animal health brands working with pharmaceutical logistics service providers includes important factors beyond price.

For many animal health brands that have traditionally operated within a distributor fulfillment model, working with a logistics service provider is a departure from the norm. It is important to note that manufacturers working with logistics service providers retain ownership of their products. Unlike the distributor model, where manufacturers sell their product to distributors that then sell to their customers, logistics service providers fulfill orders to destinations as instructed by the brand owner. The sales network is developed by the brand owner in the logistics service provider (LSP) fulfillment model.

The retention of product ownership in the LSP model enables the free flow of important customer data directly back from the LSP to the brand owner. Distributors own the relationship with end consumers and may guard key data points about customer behavior for their exclusive benefit. Sales data transparency enables brand owners to refine marketing outreach strategies, gain information to develop new products, and interact directly with customers for valuable feedback and two-way communication.

Have Your Cake And Eat It Too

Information flow, shipping and fulfillment are not core competencies of premium animal health brands. Priorities instead focus on research and development and marketing. Supply-chain logistics are often left to other companies in the hope that efficiencies will be maximized and costs will be minimized. Many of these firms selling online believe that fees from Amazon for shipping and fulfillment cannot be duplicated from other sources.

Actually, Amazon accounts for 3 to 5 percent of FedEx revenue and the low teens for UPS. Strongly positioned logistics service providers negotiate aggressively with carriers on behalf of their clients for favorable shipping rates and delivery speeds that compete with large online retailers.

Online sales conducted from brand-owned websites can be fulfilled directly by a logistics service partner in a seamless transaction, including picking, packing, shipping and returns. The design of these programs produces high satisfaction levels for customers who believe they are interacting with the brand name at every stage of the process.

A Healthy Animal Health Supply Chain

Pet owners are part of the changing purchasing behavior among consumers. More engaged with their pets today, they are empowered with abundant informational resources and are predisposed to support brands and products that share and promote shared values.

The culture of expectation for product excellence extends to service and support before, during and after sale. Ingredient and label transparency are important measures of brand authenticity that influence purchasing decisions.

The concept of transparency creates a halo effect that includes price, quality, customer service, shipping, delivery and returns. There is an expectation among discerning consumers that the brand owners maintain product integrity from point of manufacture to final destination.

For pet owners and the brands they entrust to maintain their furry friends’ health and well-being, this complex formula for business success may be achieved confidently by utilizing a pharmaceutical logistics service firm for receipt, storage and fulfillment.

Strict quality guidelines and a keen understanding of the importance of on-time product delivery generate confidence among progressive animal health companies lacking in warehouse facilities. Consumer research and demographic indicators suggest that veterinary product manufacturers may benefit from closer examination of their supply-chain practices if they want to satisfy their valued customers.

Lawrence Hotz runs the marketing department at WDSrx—Woodfield Distribution LLC, a logistics service provider for human and animal prescriptions and over-the-counter medications, medical devices, and health, wellness and personal-care products.

DMCA.com Protection Status
MENU