Point of View | Route-to-Market in the Traditional Channel as a Key Factor for Better Pricing
Updated: 1 day ago
By Martín Riquelme, vicepresident at SummaPartners, and Felipe Walker, senior consultant at Walker Revenue Management.
I. Critical Analysis: The Margin Left on the Table
In the fast-moving consumer goods (FMCG) industry in Latin America, there is a fundamental asymmetry in how companies approach value capture. While marketing and portfolio teams spend months segmenting brands, designing specific packaging, and launching innovations for consumer micro-niches, the sales team typically applies a uniform, transactional Route-to-Market (RTM) strategy for the traditional channel.
The traditional channel (neighborhood stores, mini-markets, liquor stores) is not a secondary player: it accounts for more than 52% of fast-moving consumer goods sales in markets such as Mexico [1] and nearly 40% in markets with high modern retail penetration, such as Chile [2]. Despite this significance, most manufacturers manage their relationships with retailers in the traditional channel (hereinafter, “store owners”) under an inertial model of standard pre-sales and direct distribution (DSD), visiting all customers with the same frequency and offering the same commercial terms, regardless of their actual needs [3].
This lack of differentiation destroys value in two ways. On the one hand, it under-serves high-value customers: stores with high growth potential or a high willingness to pay for service receive the same level of attention as a marginal store. On the other hand, it over-serves price-sensitive customers: costly logistics and sales force resources are allocated to directly serving small retailers who buy solely based on price and who would be better served through an indirect model (wholesalers or distributors) or a digital model [3].
Central Thesis: Pricing in the traditional channel is broken because it is based on costs and flat price lists, ignoring the fact that retailers are not just buying a product, but a supply service. By failing to tailor their Route-to-Market to customer preferences, consumer goods companies are leaving between 2 and 5 percentage points of EBITDA margin on the table [4].
II. The Link Between RTM, Value Proposition, and Pricing
The most common conceptual error in sales teams is treating pricing and Route-to-Market as separate silos. Pricing is often viewed as a “price list minus discounts” decision, while RTM is perceived as a purely logistical and coverage challenge [5]. However, these two elements are two sides of the same coin: extracting surplus from the customer.
In the traditional channel, the retailer is a microentrepreneur with severe constraints on working capital, physical space, and time [3]. Their willingness to pay (WTP) for a product is not determined solely by the manufacturer’s brand, but by the total cost of acquisition and the certainty of supply [6]. A retailer who receives a highly reliable service (delivery in less than 24 hours, a fill rate exceeding 98%, flexible financing, or assortment consulting) drastically reduces their inventory costs and the risk of stockouts. Consequently, this retailer has a high willingness to pay a premium price for the product if it comes bundled with that level of service [6].
Conversely, a retailer located in an area with a high density of wholesale distributors will prioritize unit cost and be willing to sacrifice service in exchange for a lower net price [1] [3]. If the manufacturer offers the same price list and the same RTM to both profiles, a structural inefficiency arises: the opportunity to capture a premium price with the first profile is lost, and a high cost of service with no return is absorbed by the second. To correct this, the design of the value proposition for the channel should be structured under a Service and Price Menu model, where the RTM acts as the enabler of indirect price discrimination [5].
III. Segmentation of the Traditional Channel by Value Preferences
To implement a differentiated pricing model, it is essential to move beyond traditional segmentation based solely on purchase volume or geography. We propose a two-dimensional segmentation that cross-references Customer Value Potential with their Purchase Preferences (Service vs. Price). This matrix allows each segment to be assigned a consistent RTM model and pricing structure, eliminating the homogeneity that erodes margins [3].
Segment | Arquetipo de almacenero | Retailer Archetype | Recommended RTM model | Pricing strategy |
1. Service Seekers (High-Service Members) | High delivery frequency. Fill rate >98%. Credit and payment terms. Assortment and planogram consulting (product layout; how to display products at the point of sale or on the shelf) | Preferred Direct Service (DSD Premium): 2 visits per week, guaranteed delivery within 24 hours, digital support for emergency orders. | Value (Premium) Pricing: Higher list prices. Discounts strictly contingent on display targets and shelf share. | |
2. Value Seekers (Efficient Optimizers) | Medium-sized warehouses with high inventory turnover but working capital constraints. | Consistent delivery. Optimized product selection (high-turnover SKUs). Easy digital ordering. | Digital Hybrid Service: Self-ordering via the B2B app. Consolidated delivery once a week. | Efficiency Pricing: mid-range pricing. Digital volume discounts, eliminating the need for manual negotiation. |
3. Price Seekers (Price Seekers) | Small or outlying warehouses located very close to wholesale markets (e.g., Vega Central in Santiago, Central de Abastos in Mexico City). | Lowest net price per unit. Immediate volume discounts. Cash transactions. | Indirect RTM or Cash & Carry: transition to exclusive distributors or partner wholesalers. Direct cost of service = zero. | Net Discount Pricing: Low net-net prices with no associated services. The customer is responsible for logistics costs. |
4. Relationship-Based Customers (Convenience and Loyalty) | Small neighborhood stores with low turnover but high customer loyalty to the salesperson/ brand. | A relationship of trust with the seller. Convenient payment upon delivery. | Low-Cost Coverage RTM: biweekly visits or telemarketing, delivery through a subcontracted local distributor. | Standard List Pricing: No commercial discounts. Margin capture based on purchasing inertia and customer loyalty. |
Impact evidence: In its global survey of more than 250 consumer goods companies, McKinsey found that top-performing companies in Latin America use 1.5 times as many customer segmentation criteria as their peers, including forward-looking criteria such as profitability growth potential and potential market share in the category. These companies grow up to 7 percentage points faster than their category while reducing their selling expenses.
IV. Success Stories in the Region: Impact Evidence
Implementing this approach has driven the growth of the “winners” in Latin America's consumer goods sector. Below are two illustrative case studies that demonstrate the quantifiable impact of aligning RTM with the value proposition and pricing.
Case 1: Leading Bottler in Chile — Hybrid RTM Strategy
One of the region’s leading bottlers identified that 30% of its warehouses in Santiago, Chile, were located less than 2 km from a wholesale distributor and exhibited high price sensitivity, constantly demanding discounts that eroded the company’s margin. The company migrated these customers to a digital self-service model (B2B app) and delivery through local partner distributors, reducing the number of visits by its own trucks. At the same time, it concentrated its direct fleet on high-density “Service Seekers,” guaranteeing them express delivery within 12 hours.
Reduction in Cost to Serve | −14% |
Increase in average effective price (DSD Premium customers) | +3,5% without a loss in volume |
Case 2: Multinational Food Company in Mexico — Cost-to-Serve Pricing
A global snack company that distributes directly to more than 300,000 retail locations in Mexico was experiencing low profitability in the traditional channel due to the high cost of fuel and delivery personnel required to visit small stores [1]. The company implemented a dynamic pricing model based on cost-to-serve: stores that required high-frequency visits but had low average ticket sizes received a 5% price increase on their list price, or the option to switch to biweekly visits while maintaining the previous price.
Low-volume customers who accepted a reduction in frequency | 65% → 18% reduction in logistics |
Customers who absorbed the price increase (validated WTP) | 35% → validation of willingness to pay for convenience |
V. Implications for the Commercial Agenda: The Path to Implementation
To capitalize on this opportunity for margin and pricing, the Sales and Pricing teams must collaborate on a joint transformation agenda structured in three sequential phases. Each phase produces specific deliverables that feed into the next, ensuring that implementation is gradual, measurable, and reversible in the event that the pilot does not validate the willingness-to-pay hypotheses [5].
PHASE 1 | COST-TO-SERVE AND WILLINGNESS-TO-PAY ANALYSIS
Deliverable: Channel profitability map and preliminary customer segmentation by value profile. |
PHASE 2 | SERVICE-PRICE MENU DESIGN AND ROUTE REDESIGN
Deliverable: Catalog of Value Propositions by Segment and a new pricing policy for the traditional channel. |
PHASE 3 | COMMERCIAL PILOT AND CHANGE MANAGEMENT
Deliverable: KPI monitoring dashboard and decision on national rollout based on pilot results. |
VI. Conclusion: From Coverage to Value Creation
In the traditional channel, the route-to-market (RTM) presents an opportunity to develop a better pricing strategy. Companies that have made the shift from a uniform RTM strategy to one differentiated by customer segment have demonstrated that it is possible to grow both volume and price simultaneously, while also reducing the cost of service [4].
The key to this transformation lies neither in the product portfolio nor in advertising investment: it lies in the sales organization’s ability to understand that the retailer is a B2B customer with diverse preferences, and that the price they are willing to pay depends directly on the value of the service they receive. Clearly defining the route-to-market by segment is, therefore, the most powerful and least-utilized input for a profitable pricing strategy in the traditional channel.
Action question for the team: Do you know today what the actual Pocket Margin is for each store in your portfolio?
If the answer is no, that’s the first step. Without that information, any pricing strategy in the traditional channel is, at best, a well-intentioned guess.
References
[1] TMC Consultores. “The Traditional Channel Is Reborn: What Large Consumer Goods Companies Need to Understand Before Planning for 2026.” TMC Consultores Blog, June 2025.
[2] Kantar LATAM. “The Value of the Traditional Channel in Chile: More Than Just a Point of Sale.” Kantar Insights Latin America, October 2024.
[3] Strategy& (PwC) — Navarro, C.; Valero, J.; Dubey, A. “Designing Profitable Go-to-Market Models in Consumer Goods: Getting Routes to Market Right.” Strategy& / Booz & Company, 2010 (reprinted 2013).
[4] Bain & Company. “Revenue Growth Management: Building a Single, Cohesive Engine.” Bain Consumer Products Practice, 2024.
[5] McKinsey & Company (Bright, K.; Kouba, J.; Lyn, S.; Reynders, P.). “Revenue Growth Management: The Next Horizon.” McKinsey Growth, Marketing & Sales Practice, October 2019.
[6] Vendavo. “What Is Willingness to Pay & How to Calculate WTP.” Vendavo Pricing Glossary, May 2025.