Wednesday, 17 May 2017

How to compete alongside the competition…When growth in flat-line can only come at the expense of competitors

With product, company and customer all going through different stages of different lifecycles, and the competitive profile changing in respect of all three, simultaneously, in a flat-line demand environment, it is little wonder that companies are tempted to evolve a policy of ‘ignoring’ the competition and marketing to a customer as if it were the only route to the consumer, with each customer receiving this ‘exclusive’ treatment in the name of a ‘tailor-made’ approach.

Moreover, given the consumer’s current degree of media and data saturation, it has become increasingly difficult to help the consumer to appreciate the subtle differences in a brand’s ability to meet individual need better than the competition.

These difficulties can be compounded by a fixation upon the competitor, amounting in some cases to face-to-face confrontation, with the only result being a dilution of energies and reduced focus upon the satisfaction of consumer need.

The competitor is not, and should not, be treated as the enemy. Each is competing for the mind of the consumer, and a focus upon consumer perception of the available alternatives will be more productive in terms of the optimisation of supplier resources.

Thus competing alongside, within a realistic acknowledgement of the competitor’s relative appeal, will be more productive. The supplier is thus merely using the competitor’s offer as a reference-point, focusing upon usable differences and then demonstrating to customer and consumer how the brand offer can more effectively meet the target consumer’s need, cost effectively.  The emphasis should be upon how one can capitalise upon the short period which a market allows before a better, cheaper, more effective alternative offer is thrown up in opposition…

Incidentally, if a competitor fails to emerge as a threatening alternative, a more fundamental question has to be asked regarding the assumed ‘unique advantage’ over the competitive offering in attempting to meet real need in the marketplace…

In expressing the offer to the customer it is only realistic to bear in mind that the buyer is merely interested in maintaining a competitive advantage over other categories and departments, and perhaps with other retailers in a macro sense. The buyer wants to maintain a fair-share balance within the category that is generally ‘right’ and allows the category to compete as a whole with other categories and with other retailers’ version of the category as part of the total shopping experience.  The buyer should not be expected to operate at SKU level. It is therefore a pity when availability shortfalls provide a negative trigger that detracts from appreciation of the overall proposition.

Within this set of priorities, expressions of ‘petty’ differences between brand propositions become a waste of effort and are ineffective in terms of providing a basis for securing instore compliance.
Equally, it is important to keep the buyer focused upon the category within a total aisle experience versus that of competing retailers. Again the emphasis should not be upon merely copying or attempting to neutralise the competing retailer’s approach, but instead, the competitor’s offer should be used as a reference point from which to establish a ‘unique’ shopping experience, instore.

Focusing upon getting the Marketing Mix basics right will then allow the supplier to take advantage of inevitable out-of-stocks, changes in brand-switching rate by consumers and any performance shortfalls of even the most daunting of competition, within an agreed ‘fair share’ balance of brands and own-label in the retailer’s version of the category.

On balance, competing successfully is less about seeking and exploiting ‘secret’ information or matching a competitor’s moves blow by blow, and more about identifying real points of difference between perceived alternatives available to the consumer wanting to satisfy a need.

Success is then about meeting that need faster and in a more effective manner than the competition, operating alongside comnpetitors, SKU by SKU, in the aisle….

Wednesday, 10 May 2017

Unilateral Collaboration with Major Customers…

Despite constant references to equal trade partnership, real world customer management has to play to a more pragmatic hymn-sheet…

Essentially, when a seller’s need to sell is far greater than a buyer’s need to buy, a genuine 50/50 relationship is not possible. Increases in trade concentration merely add to the problem.

Given the need to actively participate in the game, it is perhaps wise to optimise available resources by working to a vision of true mutual dependency and then scaling back activities and expectations to a level that acknowledges the actual power balance that exists between the two parties.

Strictly speaking, even a very one-sided relationship can be productive… No matter how large a customer, and despite having product research budgets that dwarf those of many suppliers, a retailer operates a business model that ‘knows a little about a lot’ and as a result can form a very productive, if on-sided, relationship with a supplier who essentially operates a business model that relies upon ‘knowing a lot about a little’.

In other words, a supplier with three categories and a focus upon consumption, can be a very valuable asset for a retailer who to manages 400 categories and by inclination concentrates upon shopping behaviour.  In a willing partnership, their combination of consumption insight and shopping insight can be highly synergistic. As long as key precautions are taken to minimise risk, it matters little that the relationship is relatively lop-sided.

Whilst strong branding can help to tip the balance, it has to be said that one way of increasing mutual dependency is through the provision of own label on the back of an established brand. Philosophical issues apart, an own label relationship not only gives access to those parts of the category which might have gone to other suppliers, but also makes the overall supplier-retailer relationship richer and more complex.

Realistically, a brand-based relationship boils down to a one-to-one relationship between buyer and seller, and is vulnerable in that a buyer can de-list a brand with a keystroke, whereas uncoupling a complex own label relationship needs justifying up and down the corridor…

However, the influence of strong branding can be enhanced when a high degree of congruence exists between a brand’s consumer profile, and the store’s shopper profile. This match in consumer and shopper profile means that supplier and store marketing share a common goal, albeit with different behaviours required of the target audience in terms of consuming and shopping.

One can still go a long way on a one-sided relationship, but this can be tested to the limits, especially where a high maintenance customer may even resent attentions going elsewhere and demand exclusivity.

However, if a retail customer abuses the relationship, in terms of interpersonal behaviour (‘bullying’ is the description in the small print) or becomes ‘over demanding’ and unreasonable despite GSCOP, the extent of their power may prevent suppliers retaliating via ‘head on’ confrontation.  Instead of open confrontation, the supplier may simply insidiously divert discretionary funding to other customers, reduce service level and seek affection elsewhere.

Incidentally, in a world of increasing service levels, merely maintaining the service level to a problem customer, whilst upping the service to a favoured competitor-customer can be an insidious way of undermining a problem customer’s profitability.

Collaboration is about sharing risk. It is also about sharing reward, but not necessarily on a 50/50 basis. This is really about calculating relative exposure to risk, and attempting to divide available profit in the same proportion…

This exposure can include credit given, it being key to ensure that at least this is no more that the average credit given by all trade suppliers (see KamCity for method of calculating trade credit periods).

Another exposure is the level of ‘dedicated’ stock held in order to maintain agreed service levels, a direct relationship with mutual profit split.

Incidentally, those who are frustrated by the demands of a one-sided relationship should stop wasting energy attempting to ‘improve’ the partner, switch to building up mutual dependency, before seeking solace elsewhere.

However, if all else fails, buy a shop…

Tuesday, 9 May 2017

Audit-proofing Trade Funding…

With the continuing development of Post-Audit-Recovery (PAR), coupled with the growth in trade funding to over 20% (!) of sales to the customer, GSCOP preventing easy fixes, and the continuing need for major UK retailers to repair greatly diminished bottom lines, it is important that suppliers anticipate the probability that every record of every promotional initiative will be subjected to analysis in terms of ‘plan vs. actual’, up to six years in arrears…

Also, given that suppliers themselves have suffered bottom line erosion via price war pressures, it is vital that companies are not hit in the current year with allowance-demands arising from previous years.

If a supplier’s system can handle such examination without cost, then perhaps no further action may be required. However, for the remaining 98% of suppliers, it may be worth examining some positive aspects of the process.

Essentially, PAR is a post-payment review to identify overpayments to suppliers (and under-collections!). It is not an audit in the traditional sense. Rather it is a control activity designed to assure the integrity of the payment/collection process, and as such, it is clearly a management function and responsibility.

For those in any doubt as to the appeal of the process to retailers, bear in mind that although the customer obviously pays for a PAR analysis, usually on a percentage of recovered funds, all monies so recovered go straight to the bottom line... In other words, PAR is here to stay, especially for increasingly narrow margin retail businesses…

It follows that in the absence of documentary records, even a relatively weak customer has to be given the benefit of any doubt arising from a PAR audit. Whilst this may represent a major threat to the unprepared supplier, it is important to view PAR as a long-overdue and positive development in helping to regulate trading arrangements between supplier and retailer and provide an effective base for ensuring compliance, especially in trade funding.

Approached positively, it can also help to build a stronger relationship with trade partners. Incidentally, it is worth bearing in mind that the same post-audit-recovery process can be applied by suppliers to manage the financial elements of their purchases of materials and services from further up the supply chain.

By taking the initiative in terms of setting and documenting common standards, attempting to clarify process and ensuring accuracy in implementation of initiatives, the supplier can ensure that the resulting system will be easier to manage and audit, apart from contributing to a better return on investment. .

It follows that the NAM/KAM, being closest to negotiated trade funding deals, is in a key  position to help define system parameters and has a direct interest in ensuring compliance at all levels in supplier and retailer organisations.

Such a system, built upon an appropriate level of transparency and trust, will help to avoid disputes in the future, and can result in a seamless integration of trading strategies and an increase in joint profit, fully defensible at any point.

In addition, for both partners, PAR can help to identify opportunities to remove inefficiencies and redundant tasks from a number of cash management processes that cover internal functions and external trading partners.

A further benefit can result from the fact that the introduction of a PAR process can lead to a merging of accounts payable and buying departments, which means that any progress in setting and maintaining PAR standards, can benefit the supplier in terms of on-time payment.

Trade funding budgets now represent too high a proportion of sales to be left exclusively in the hands of the sales department. However, audit-proofing funds expenditure to meet PAR standards can help in retaining a high degree of influence by NAMs/KAMs…

Wednesday, 3 May 2017

Short-changing your best consumers - under cover of the letter rather than the spirit of the law...

Again the weekend papers give everyday examples of how established brands are insulting the intelligence of their best customers (regular users that know every aspect of the brand) Sunday Times April 30, 2017, thereby raising the following issues:
  • ‘Shrinkflation’ raises an issue called brand credibility…
  • Remember that hard-won property based on realistic assessment of savvy consumer needs, and then poured down the drain on the assumption that the same consumer is too dumb to notice a reduction in contents of their favourite i.e. repeat-purchase brand…?
  • Then adding insult to injury by urging consumers to ignore the evidence of their own experience (remember experiential marketing?) by pointing to the 'letter-of-law' weight declaration on the pack...
  • …with one non-shrinking member of a category being sufficient to demonstrate that a change in relative competitive appeal has occurred…
  • Thereby making themselves ready to scoop up dissatisfied demand…

Thursday, 27 April 2017

When your local store makes you an offer you simply cannot refuse....

                                                                                     Pic: Brian Moore, Taormina, Sicily
(Also picked up old Roman On-trade joke: A Roman walks into a bar, holds up two fingers and says ' I would like five beers please'......)

Tuesday, 18 April 2017

When the pricing gap becomes too great for savvy consumers....

How home-brew, at 9p a cup, could be a threat to food service coffee...

With street coffee priced at upwards of £2.50 a cup, I have reverted to grinding and filtering best quality French coffee beans, purchased from Waitrose at £2.59 per 227g bag. Each bag yields 5 x 6 cups, effectively costing me 9p a cup. If I could buy wholesale, the price would be no more than £2/bag....

OK, the ambience is worth something, but 30x 'domestic rates'?

In fact, when you think about it, apart from the bill, most people's memory of a great restaurant meal is coloured by the final course, a cup of coffee. Yet, even at these mark-ups, some restaurants risk diner alienation by skimping on the coffee..., thereby triggering the 'tell a friend' mechanism' whereby, if you please a customer, they tell one friend, disappoint them and they tell ten....., electronically.

Tuesday, 11 April 2017

If Airlines Sold Paint…

Given some of NAMs desire to avoid some painting chores by flying away for the Easter weekend, we felt it might be interesting to link airlines and paint with a lesson in pricing for those NAMs that never like to forget the ‘day-job’

Customer: Hi. How much is your paint?

Clerk: Well sir, that depends on a lot of things.

Customer: Can’t you give me an approximate price?

Clerk: Our lowest price is our introductory special at $12 a gallon. After that we have dozens of different prices up to $199.

Customer: What’s the difference in the quality of the paint?

Clerk: Oh, there’s no difference. It’s all exactly the same stuff.

Customer: Well, in that case I’ll take your $12 paint.

Clerk: Well actually the $12 variety is only available on our website. If you want to buy it here at the store you’ll be charged an additional $20 Customer Convenience Fee

Customer: So if I go home and get it off the website, its only $12?

Clerk: That’s correct sir – plus a Credit Card Usage Fee of $6 and then there’s standard Shipping and Handling of $15.

Customer: What? So in other words buying online would cost me almost exactly the same as what I’d have to pay here in the store?

Clerk: I suppose so, but if you buy it here you get to use it immediately. Online purchases take ten business days to get to you – unless you pay the optional $25 Express My Paint Fee.

Customer: You’ve got to be kidding me!

Clerk: Well no sir, but it’s academic anyway as right now the $12 paint is completely sold out in both places.

Customer: That’s BS. I’m looking at shelves full of the stuff!

Clerk: Ah, but that doesn’t mean it’s available for sale. We sell only a certain number of introductory priced cans on any given day. Oops, look at that! It just became available again – at $17.50.

Customer: C’mon! You mean to say it went up while I’m standing here?!

Clerk: ‘Fraid so. Inventory control changes our prices all the time.

I strongly recommend you purchase your paint as soon as possible as it could go up again. How many gallons do you want?

Customer: Well, maybe three gallons. No, make that four, I don’t want to run out. I assume I can return anything I don’t open?

Clerk: Certainly sir. The $12 paint is non-refundable, but if you return it within 48 hours you will be entitled to a $5 credit towards the future purchase of another gallon of the same color at the same or higher price.

Customer: That’s crazy. In that case I’ll just give any unopened cans to my brother as he’s planning to repaint his home soon.

Clerk: Sorry sir, no-can-do! Our terms and CANditions – that’s a little in-house joke – prohibit paint transfer. It is strictly for the use of the original purchaser.

Customer: But wait a minute, I hadn’t spotted those “Paint Sale – $9.99* a Can” signs over there? That sounds like a much better deal.

Clerk: Ah yes, that’s from our low cost paint division. The asterisk denotes that the cans are actually half-gallons and the price is based on a minimum purchase of two. There is also an additional Environmental Fee of $5 per can, a non-refundable Can Deposit of $3.50, a Paint Facility Charge of $5 and if you want more than one color, the second has a $25 surcharge and the third is $50 extra.

Customer: This is utterly ridiculous. To hell with this! I’ll buy what I need somewhere else!

Clerk: Well sir, you may be able to buy paint for some rooms from another store, but you won’t be able to find paint for your connecting hall and stairway anywhere but here. And I should also point out that if you want Uni-Directional paint it is priced at $249 a gallon.

Customer: I thought your most expensive paint was $199!

Clerk: That’s only if you paint non-stop all the way around the room and back to the point at which you started. Stairways and hallways are considered one-way exceptions to the rule.

Customer: So, if I buy the $199 paint and use it in my hallway what are you going to do about it – send some goons in to paint over it?

Clerk: Wow, I believe you’re getting it now sir. But no, please, that would be plain silly. We’ll simply charge you a Direction Adjustment Fee plus the difference to $249 on your next purchase.

Customer: Next purchase? No way! I’m out ‘a here

Clerk: At Skyhigh Paints we never forget you have a choice, so thanks for shopping with us. Have a nice day!

Have a price-sensitive weekend, from the NamNews Team!

Credits: latest version found here
Appears to have originated in Travel Weekly, October 1998, by Alan H. Hess

Tuesday, 21 March 2017

Busy NAMs: How to select the right actions when issues are complex and time is short

Nowadays, effective National Account Management means being on top of key trade issues, anticipating their future impact and taking action now in order to optimise the personal benefits.

This is why we try to help you by completing each news update with a call to action.

Essentially, we try to end each news item with a four-step approach:
Where at:
Where headed:
Effect on you:
Action:

Specifically, each step aims at covering the following:

Where at: (our NamNews summary of the issue, from the NAM perspective). You need to be able to summarise the issue ‘in a phrase’ in order to focus and communicate...

Where headed: (by the time we tackle the issue, it will have developed and possibly escalated).  In other words, we need to make a judgement re the stage it will have reached in order to pinpoint the effect and action required now.

Effect on you: Pointless raising the alarm, unless you can outline the probable impact on you and the company.

Action: Well based decisive action is required of you (the in-house customer expert) in any issue affecting the supplier-customer interface.

Example:
Yesterday’s Daily NamNews bulletin announcement: 

Unilever Reportedly Planning £6bn Food Sell-Off

NAM Implications:
  • Where at: Companies sell divisions in order to focus on more profitable parts of the business. Companies acquire divisions of other companies in order to release synergies by amalgamating operations, rationalising any aspect, in order to cut costs and justify the purchase price.
  • Where headed: Unilever will sell the spreads business, and the acquirer will do what acquirers do…
  • Effect on you: As a competitor, the category will experience a change in competitive landscape as the new owners drive the business harder, without the distraction of other activities.
  • Action: Complete what-ifs on various options and re-evaluate your relative competitive appeal from consumer and retailer POV.
Competitor NAMs have a choice: await completion of the Unilever deal, and allow the dust to settle, or start planning now to optimise the probable new category landscape.  We believe our NAM Implications can provide a little help…

NB. See how NamNews subscribers benefit a little each day. 
Simply download a free copy of January NamNews and see 20 news items analysed as above...

Friday, 17 March 2017

A failed attempt at bridging the generations…again?



You have no doubt seen the TV advt (above) featuring the trendy dad in latest enviable car, attempting to fist-bump his 14 yr old daughter before she exits to meet her pals at school....

Well, yesterday at schools-out time, I boarded a local bus. I made my way to the back, where two 13/14 yr old creatures sat staring at the floor as I advanced.

Putting it down to natural modesty, I gave them a reassuring grandad smile and sat opposite. I was then subjected to a high-intensity eye-roll reaction to my Nike Air Max trainer trendiness as they reverted to their texting conversation...

One needs plenty of self-confidence in this town, I find.....

Am I alone in this? 
(Please add personal experiences in 'comnments' or if you prefer, personal email to bmoore@namnews.com !!)

Thursday, 16 March 2017

The Little Guys Matter Too…..

Although the growth in customer concentration at the top end of most trade sectors, especially UK grocery, has been halted by the advance of the discounters, and global is becoming increasingly local, combined with our increasing ability to communicate directly with the consumer via social media, it could be said that major customers are ‘more manageable’ and thereby less threatening…

In addition, the relative difficulty in influencing online shopping behaviour combined with the high cost of servicing small accounts, could cause us to forget the potential advantages of cultivating and developing business with small customers, especially as a means of keeping our mults ‘under control’ and moving towards fair share dealings.

For instance, as we enter a post Article 50 Brexit environment, the UKs ‘re-appreciation’ of independent retail presents potential lessons in channel re-alignment for local and global consumption.

Four major elements are changing UK channel configuration, firstly causing a significant power-shift within convenience, as the two radically different cultures of Tesco and the Co-op continue to develop the top end of the arena and Sainsbury's increasing rely on convenience for growth…

Moreover, discount drug is in a state of flux, courtesy of Hutchison Whampoa, who incidentally also have ambitions in the distribution of mobile telephony, and as a result, are re-defining their business model in retail…

To this must be added the near certainty that the government will further de-regulate retail pharmacy (self-medication) as a way of easing pressure on the national purse, allowing grocery retail and discount drug to compete aggressively with traditional pharmacy, the only real constraint being the availability of qualified pharmacists…

Given the basics of supply and demand, it seems obvious that those with deeper pockets with which to fund a 'golden hello' are unlikely to suffer from such shortages…

And all this at a time when Walgreens Boots Alliance continue to roll out their global strategy, everywhere….

Whilst ‘risk-seekers’ are prepared to tolerate/encourage ‘extreme’ trade concentration, many suppliers may prefer to spread risk by building and maintaining effective distribution at the lower end of the trade.

As the future is probably more about store-level retail competition, then suppliers should prioritise ‘Intrapreneurial’ store managers within the multiples’ superstore base. However, whilst such managers are/can be highly qualified, and motivated by share options and career aspirations, nothing beats the dedication and focus of an entrepreneurial owner-manager that has managed to survive global recession and flat-line demand, attempting to optimise the performance of a small outlet, living with the constant distraction of overdraft constraints and other life-or-death issues associated with small business survival.

However, whilst small independents undoubtedly need professional help, they are often unwilling/unable to pay market rates. Even if suppliers are willing to supply a version of this help via consultative-selling at outlet level, it is unlikely that full compliance will yield sufficient return on investment in terms of sell-through.

The answer has to be to seek to work with ‘natural-groupings’ via wholesalers, symbol groups and dedicated third-party organisations designed to manage the entire marketing-sales-merchandising role at independent level.

Successful partnership with such intermediaries requires NAM/KAM-level analysis of the partners’ organisational needs, taking a realistic view of the degree of trade-off in having to share their resources with other suppliers, coupled with their need to achieve acceptable levels of return on investment at outlet level.

Providing tailor-made solutions, fully integrated with the intermediary’s own marketing aspirations, targeted at optimising performance at outlet level, can help ensure the achievement of ‘fair share’ vis a vis other suppliers in their portfolio.  

This treatment of the intermediary as a ‘national account’ and managing them appropriately can help in optimising resource allocation across the supplier’s customer portfolio.

Whilst dedicated intermediaries can be of considerable help in managing existing independent sectors cost-effectively, suppliers should also be sensitive to opportunities to cultivate new customers in emerging channels, i.e. there are 17,000 postmasters in the UK capable of granting potential access to 28 million consumers/shoppers each week….

Finally, for those small retailers outside the ‘loop’, who wish to remain independent because they ‘like it that way’, and are by definition highly individual, one can thankfully rely upon the rule of large numbers in finding groups with needs that are sufficiently similar and have sufficient critical mass to make tailor-making a viable option. The solution can then be to design template-variants aimed at meeting the needs of these ‘obvious’ segments. All that remains is to find appropriate media with which to communicate those solutions…

This concrete recognition and development of independent retail options will not only help to balance channel-mix but will also enable the supplier to manage the mults, and thus help to preserve brand integrity…

Alternatively, suppliers have the option of ignoring the little guys and spending the extra cash on fire-proof clothing for the 2017-18 kitchen…?