Breaking the Rules in Supermarket Banking

The succession of own-goals by the traditional Big Four banks and daily revelations of fresh abuses of trust, have provided unprecedented opportunities for supermarket banks to grow market share in financial services...
However, keeping that share will depend on breaking the following self-destruct rules established by traditional providers:

• Hook ‘em in and ‘abandon’ them within the mix: great introductory deals for new customer and then revert to uncompetitive terms
• Exploit habit: Most people assume that their salaries will automatically appear in their bank accounts, direct debits will be paid on time and they can withdraw their own money from a cashpoint as required
• Inertia optimisation: make every move complicated in order to reinforce a perception of being held captive
• Establish standards-in-common with rivals to ensure a move elsewhere is not worth the trouble (collusion? See LIBOR)
• Avoid the personal touch via use of retro-IT automation, all geared to re-inforce the above
• Reduce comparability of offerings and exploit the customer’s numerical dyslexia
• Establish performance reward-mechanisms that operate out-of-phase with actual results
• Ignore the threat of efficient online everything
• Target the un-savvy consumer, forgetting  that all consumers are savvy, given the right help and encouragement
• Forget the basics, focus on cross-selling before establishing and deserving trust…
• Remember the customer is never right…

Easy? 
But what if the above rules are a pre-requisite of successful (i.e. profitable ) high street banking?
In other words, perhaps a whole new business model is required using customer-centric operations, dedicated to meeting shopper-needs and transparent, defensible and competitive prices, where proof of repeat business, in retrospect, becomes the only basis for reward of all stakeholders…
In which case supermarkets start with most of the aces already in their hands…

Winning by numbers: how performance analysis is transforming sport, and negotiation?

The July issue of Wired features a 4-page article on how video-analysis using Dartfish, a video-based software program, is helping Olympic standard champions improve their game.

In elite sports, being the most talented is no longer enough; top athletes also have to ensure they are the better prepared. They understand that their only sustainable advantage is to learn and improve faster than their opponents. The technology used by performance analysts allows them to measure every force, dissect every movement and time every action with absolute precision. That feedback allows athletes to find areas for improvement and aids the learning of new skills.

Application in sport
Applied to sports as diverse as squash, sailing, cycling and boxing, its use in improving skills in Taek won do, a Korean martial art suggests that this method of skill development might be applicable in fine-tuning negotiation skills in the NAM-Buyer relationship.

Use in negotiation
Incorporating video in a live session with the buyer, although desirable, is not feasible...
Realistically, this type of negotiation analysis is best used in-house, using real upcoming deals planned for major customers, with fellow NAMs and colleagues from Marketing, Finance, and  Production, all role-reversing key stakeholders in the supplier-retailer mix. The sessions should incorporate real numbers, ongoing trade issues and reflect the toughest scenarios anticipated in each live-deal negotiation.

Optimising analysis
Analysis should be constructive and rigorous, with each team-member exploring the recording from their job-perspective, assessing both verbal and non-verbal language, incorporating cost & value from each party’s perspective, together with ultimate impact of the deal on supplier and retailers P&Ls.


A bit (but only a bit) like role-playing of old, except for the live bullets and unprecedented downside of coming second best to an increasingly powerful buyer… 

Obviously, the use of the package in live negotiation might prove to be a step too far with even the most indulgent of buyers, give current levels of negotiating skills.

Besides which, who wants buyers keeping pace with your skill development in these unprecedented times?

Tesco’s UK Growth Strategy ‘On hold’ to Focus on Global Expansion?

Could the retailer’s "unprecedented" step of shelving advanced plans to open UK stores, as it focuses on improving its estate and opening smaller stores, be an acknowledgement that maintaining its current UK share and developing its global business will optimise Tesco’s return on investment in the long term?

The problem of dominance
Essentially, when a retailer reaches 25% market share, especially in a politically sensitive category like food, then they invariably become the focus of attacks in terms of alleged abuse of power. When the share exceeds 25%, everyone from farmers, suppliers, shoppers, politicians, stockmarket and media then have a means of putting a ‘name‘ to a complaint.
Eventually, the resources required to manage the resulting ‘defensive mode’ result in diminishing returns at local level, and then begin to undermine a retailer’s global strategies.

Tesco as a mass retailer
With 30+% share of food retailing in the UK, Tesco began to redefine itself as a mass retailer, translating its market share into a current share of 12% of ACV, a share well short of the potentially troublesome 25%... This allowed the company to continue to open large spaces, seeking growth in non-food goods and services.
However, it would appear that a combination of the global cutback in consumer spending, especially in non-foods, and the increasing expertise of rival retailers lead to an unprecedented profit warning, prompting a change in strategy.

Supplier trade strategies
Suppliers now need two distinct Tesco trade strategies:

• UK: Helping Tesco to sell more of their existing products, to existing users, in existing stores, all formats, especially 40,000+ sq ft. in return for 100% zero-defect compliance and fair-share dealing…
• Global: Helping Tesco as per the UK, in countries where the retailer has already achieved 25% market share.   In other countries, Tesco needs help in attracting more new users, using the pulling power of well-known brands, with increased focus on shopper-marketing to reduce/neutralise the temptation to switch-sell private label, all in exchange for 100% zero-defect compliance and fair-share dealing.

Opportunity or Threat?
An unprecedented window is now available for those suppliers that can define and implement a truly global Tesco strategy. However, like all good windows, the opportunity is transient and also available to the competition.

Moreover, ad hoc, uncoordinated and localised initiatives will too easily translate opportunity into threat in dealing with what is still potentially the world’s most productive trade partner…

Farmers Escalate Milk Price-Cuts Protest

The impact of the price cuts ‘amounts to a combined profit warning for the overwhelming majority of dairy farmers in this country’ and reports indicate that supermarkets are to be targeted by blockade-protests from farmers. In some cases, given the fact that cows need milking daily, farmers plan to distribute the undelivered milk free-of-charge outside supermarkets.

In fact, in 2009 continental farmers resorted to more extreme measures such as spraying three day’s supply of unused milk onto fields and at the police.

A call to action
Yesterday, an unprecedented meeting of farming unions called for the immediate reversal of milk price cuts imposed on UK farmers since 1 April. The NFU chaired the meeting of leaders from NFU Scotland, NFU Cymru, Tenant Farmers Association (TFA) and Farmers for Action who came together in an industry show of strength after a catastrophic three months for the sector.

The representatives called for all milk price cuts imposed on farmers since 1 April to be restored by 1 August. They also plan a crisis summit in London on Wednesday 11 July.

Impact on consumer-retailer-supplier relationship
As savvy consumers, we need to run the numbers and realise that constant pressure on shelf-prices pushes back up the supply chain and in the case of clothing can eventually end with child labour abuses in third world countries. In a similar way, relentless pressure on milk prices can result in farmers going bust.

As savvy retailers, we need to run the numbers to ensure that in attempting to meet real consumer-needs, on-shelf availability is not traded off against the need for competitive pricing.

As savvy suppliers, we need to run the numbers to ensure that the total-offer-package meets consumer need better than available competition. In other words, we need to strip back any aspect of Product, Presentation and Place that may be superfluous to consumer need, and sell at a Price that represents better value than the competition.

Going forward
We then need be able to apply a similar numbers-based rationale in assembling a needs-based trade package that enables us to negotiate ‘fair-share’ deals with trade-partner retailers. These are retailers that can appreciate, and accommodate, the realities of each stage of the demand-supply chain in running efficient and effective routes to savvy consumers, in an open, needs-based market environment, offering a package that represents better value than the competition…..

All else is detail.

Economies of scale: Customers Looking For Savings From Suppliers

Yesterday’s NamNews’ item on Morrisons’ alleged demands for £500k savings from some suppliers produced our top visitor-count for the day.  
However, the issue is not whether larger quantities mean greater savings, but whether the discount demanded by the buyer matches the savings made by the supplier.

'Economies of Scale'

As you know, there are many potential sources of economies of scale, depending on the company and category in question, including:

- spreading administrative overheads over a bigger operation/quantities

- purchasing power to get better deals from suppliers of raw materials, packaging, etc

- lower costs in manufacturing - e.g. if longer runs result in lower costs per unit produced

- greater delivery quantities leading to lower distribution costs

- cross selling synergies

Any such savings will obviously depend upon your category and factory capacity/asset-utilisation levels.

The incremental sales route to fair-share negotiation

However, either way, the ‘incremental sale’ calculation allows suppliers to approach the problem from a more productive angle…

In other words, if a customer demands £500k cost-price reduction from a supplier netting 7% on the business with that customer, a ‘back-of-envelope’ calculation says the supplier needs incremental sales of £7.1m to cover the cost (i.e. £500k/7 x 100), unless you can identify and measure some real scale savings, and reduce the incremental sales requirement appropriately.

The basis of your costing-model

Any credible negotiation stance means that you will need to reveal the basis of your costing-model ( i.e. even tougher negotiation with your colleagues?) in order to be able to quantify and argue with the buyer that there is a shortfall between the actual savings and the discount demanded, an additional discount that will not realistically be covered by the anticipated incremental sales. 

Quantifying in this way may result in something approaching a fair-share solution..

Simply saying no is not an option

Q1. Why not substitute your figures and see how much extra you need to sell in order to break-even on the new deal?

Q2. Some might argue that explaining scale economies to a customer is not the job of a NAM/KAM. If so, please explain to us mere earthlings why the global financial crisis is diminishing, rather than enriching, the scope of the job…

Bankers & Politicians, the remaining ‘trust’ evaporates?

Given the latest global LIBOR banking scandal, with politicians playing belated catch-up, the one certainty is that savvy consumers are becoming more entrenched in their determination never to outsource their product-buying decision-making to third parties like suppliers and retailers, ever again. Apart from the ‘obvious’ irreversible damage to the City and traditional banking brands (and unprecedented opportunities for the Co-op bank, Tesco-bank and other retailers that carry little banking baggage. They simply need the skill to count reliably and meet consumer needs) this new ‘unprecedented turmoil means that suppliers have to increasingly deal, and be seen to deal, in business reality.

A wake-up call to end all wake-up calls?

This current wake-up call from 30 years of credit-fuelled demand has already lasted four years (!) and as a result we are embarked upon 10-15 years of flat-line growth, to be overseen and driven by increasingly savvy consumers, who will be satisfied with nothing less than demonstrable value for money…a new culture that is spreading back up the supply-chain…with de-stocking simply one symptom.

With EU unemployment at 15%, rising to 25% in the age segments that matter, consumers, suppliers, retailers and whole countries deleveraging (i.e. using money to pay down debt rather than investing/spending), there will simply be little or no basis for real growth, anywhere, for a long, long time.

The new business reality

This is the new business reality…an opportunity for anyone prepared to face up to it…

In fact, in the current climate business success, and even survival, is about being able to optimise reality.  Indeed, if you do not face up to reality in business, others will do it for you…  Hence the reason why bankers and politicians gradually increase their influence on a faltering business until they eventually officiate in its liquidation. And the LIBOR crisis is currently demonstrating the reliability and trustworthiness of both…

Like never before, reality now counts, bigtime, and the responsibility for dealing in reality is now in your hands, where it belongs, and should be kept…

Q: Is this really the responsibility of NAMs & KAMs?

Back to the pencil, a lead-intensive status-symbol for men...

One of Faber-Castell’s more popular products is a pencil. But it is no ordinary pencil, it is the company’s Perfect Pencil, which will set you back about £180. Each!
It comes, admittedly, with a rubber on the end (tapping ipad?), protected by a little platinum cap. And the tip is also kept safe from breaking with a lid, which incorporates a hidden pencil sharpener. It is rather nifty. But it is still £180 for something that might only give you a few weeks’ writing.
Competition-wise, the availability of 20 bog-standard pencils for £1 at Poundland makes the Faber-Castell version stand out in a world where men’s status-symbols are limited to cuff-links and watches.
To add the numbers, the company, which is fully owned by Count Anton Wolfgang von Faber-Castell and his family, posted sales of €580m (£468m) last year, an increase of 19pc, and operating profits of €42m.
P.S. If you wish to push the boat out a little farther, Count Anton is holding their £60,000  'Pen of the Year 2012 Diamond Edition...
A lesson for all who believe that luxury cannot be added to the mundane….?

ADmented Reality - Google Glasses Remixed with Google Ads

Google's Project Glass is its attempt to make wearable computing mainstream 2014, and it's effectively a smart pair of glasses with an integrated heads-up display and a battery hidden inside the frame.

If you are one of the 16.5m people who have seen the latest Google glasses Youtube clip, you will probably appreciate this slightly more realistic version of Google's augmented reality glasses - now featuring contextual Google Ads, published by Jonathan McIntosh at rebelliouspixels!

All of the AdWords used are actual Google ad returns found via Google searches based on the dialogue, situation or setting in the original video.

NAM/KAM applications
Street accidents permitting, Google Glasses look like a potential boon to NAMs, especially in negotiation. Think of the advantages of instant lookup of sales stats, buyer’s name, bonus-progression, kamword definitions, simultaneous cost & value calculations, but especially continuous interpretation of body language signals and regular prompts to show a vestige of interest in the buyer….all whilst maintaining almost 100% apparent eye-contact…

Meanwhile, the only real decision is whether to shell out $1400 now for a developer’s working prototype, or await the mainstream launch in 2014, when the politicians will probably be telling us about the emerging green shoots of economic recovery…

Have an day-dreamy weekend, from the NamNews Team! 

P.S. Original Google Glasses clip here and useful technical details here.

Meet The Omnichannel Shopper: Anytime, Anyplace, Anywhere

Add savvy (‘unwilling to outsource their purchasing decision-making to either suppliers or retailers, ever again’) to the omnichannel shopper and you have a major shift in  power to shoppers that choose how they interact with brands. Moreover they come complete with influential decision-making information readily available at their fingertips. Ignore at your peril...

Traditional channel management
The brand and retail ‘purists’ that devote energies to the preservation of discrete channel strategies like grocery, pharmacy, geography or even retail, mobile and web,  are missing the New Tricks of  providing a unified customer experience irrespective of the channel, to consumers that reward those who allow them to use a combination of store, catalogue, call centre, web and mobile - simultaneously.

In other words, meeting consumer needs...?

Managing the omnichannel
It follows that suppliers and retailers need to reorganise to accommodate this new market need, perhaps replacing the current channel manager role with that of Omnichannel Manager. This will enable a ‘one brain’ focus on ensuring that channels are not operating independently, thereby reducing the risk that the brand is attempting to maintain separate dialogues with an omnichannel shopper, and losing that shopper to a brand that is capable of engaging with them simultaneously in all channels…

Comments invited: 
1. Should all channel managers report into, or be replaced by, the Omnichannel manager?
2. Any practical downsides to building an omnichannel strategy now, like today?                        

(tips: unprecedented times, survival priority, risk-of-change, lack-of-experience, forgetting that with ideas in times of great change, everyone has the same level of experience…)

Touch but don't press - How daily Apples have become unhealthy for the competition

Latest figures from Kantar Worldpanel reveal that in the UK, more than one in seven people now have a tablet in their household and over 52% of the population own a smartphone. Couple this global realisation that tapping keys have become increasingly out-of-tune with consumer intuition and it can be seen why Apple have forced Microsoft, Blackberry and Nokia into catch-up mode…forever in pursuit of Apple’s innovator advantage.
In other words, Apple have made ‘screen-touching’ the only future…

A touching retail experience
Add to this the escalating success of Apple’s retail outlets, and it can be seen that the company is successfully applying the same fundamental creativity to retailing by populating its outlets with non-virtual Apple people! In fact, over the past five years, the company created 35,852 retail jobs, all acting as representatives for one of the best known brands in the world, optimising their unique combination of retail plus online plus a daily dialogue with enthusiastic users that few tech companies can duplicate.
In practice, their stores are more about being the front line for Apple advertising, rather than a ‘normal’ retail experience.

Helping people buy...
However, this experience of the ultra-softsell, in an open-table environment littered with products in constant use by enthusiastic shoppers, and continual access to human advice, can be addictive. In fact, this tactile experience, coupled with the realisation that the price cannot be bettered elsewhere, makes buying compulsive.
A frustrating lesson for ‘normal’ retailers everywhere….

Applying the Apple lessons to your business
Seth Godin extracts 10 iPad lessons to enhance your product launches, especially in niche markets.

Can you risk being out-of-touch in an Apple-free personal-corporate life balance that does not include a daily bite of the inevitapple?

Gourmet Flash-mobs, French Style!

Those who think that organising a flash-mob means simply encouraging members of your social network to turn up ‘as-is’, need to check out the 25 year old French version…
Dressed head-to-toe in white, flash-mob guests must bring a table and two white chairs, a picnic basket filled with "quality menu items" and a china service, including stemware and flatware. Only wine or champagne are allowed, as beer and hard alcohol drinks are considered no-nos.

A compelling invitation, in the right media?
Last week, thousands of participants at the "Diner en blanc" were told of the venue via social media sites and the Internet, then rushed to assemble in the heart of Paris' Marais district, in a 25-year-old tradition that still leaves passers-by open-mouthed. Other venues in Paris have included Notre Dame, the Eiffel Tower, the Louvre Museum's courtyard, Les Invalides, the final resting place of Napoleon, and the famed Champs-Elysees.
The pop-up event is so popular it has been picked up around the world, with Diner en Blanc events planned this year for the United States, Canada, Spain, Singapore, Mexico and even Rwanda.

Traditional new product launches a little passe? 
Given the competition for attention represented by this 25 year evolution of consumer engagement, it may partially explain the increasing expense and diminishing returns in attempting to persuade ‘our’ apathetic/savvy consumer to drop everything and rush to buy our brand in a Kings Cross supermarket…  
Perhaps a little less money, a little more creativity, and ideally unique, starting at home?
In fact, for something really different, why not make this a pop-up weekend, from the NamNews Team?

Walgreens-Boots - a new $100bn global customer?

With yesterday’s Stage1 purchase, Walgreens-Boots ($100bn) began a process that in three years will see them become a $130bn global player (prescription medicines, OTC and Beauty) with $100m savings on purchases in Year1.
In other words, plenty of time for suppliers to procrastinate on issues like prices and terms disparities…Wrong!

Given the high speed at which companies move in these circumstances (see their combined site which opened yesterday, and appears to have taken months of top secret preparation…) and the fact that Wall Street appear to think that Walgreens are paying over the odds for Alliance Boots (see yesterday’s drop in share price), suppliers would be wise to anticipate early pressures on prices to both companies ‘to prove it is a good deal’.

Action:
1. Check your US colleagues for your company sales to Walgreens, along with retail/wholesale margins, net margins on Walgreens business, credit periods and terms, plus pointers on trade funding and deductions…fast!

2. Check your UK and rest-of-world colleagues for your company sales to Alliance Boots, along with retail/wholesale margins, net margins on the AB business, credit periods and terms, plus pointers on trade funding and deductions…faster!

3. Quick ‘what-if’ on all of the above rising to the highest common set, the worst scenario for the business…even faster!

4. Map out key steps to harmonise prices & terms….already overdue!

5. Selling Prices to Walgreens and Alliance Boots: Run the following numbers for discounts of 1%, 2.5% and 5% on your best selling prices to each company
- Assume your total annual sales to Walgreens-Boots                 = £120m, ex. taxes
- Assume your Net Profit margin on Walgreens-Boots business   = 7%     = £8.4m
- Assume additional discount                                                    = 2.5%  = £3.0m
- New sales                                                                             = £117m
- Assume Costs, etc. remain the same                                      = 93% of £120m = £111.6m
- New net margin                                            = 4.6% i.e. 100-[(£111.6/117) x 100] = £5.4m
- Incremental sales to restore net profit  of £8.4m                     = £65m = £182m- £117m
                                                                                          i.e. (£8.4m/4.6) x 100 = £182m

6. Time to map out your Walgreens-Boots negotiation strategy, globally?

Underestimating a 26% CAGR customer in a flatline zero-sum world…

With a vision ‘to be the earth’s most customer-centric company; to build a place where people can come to find and discover anything they want to buy online’, the problem in many categories is that Amazon’s vision is becoming reality, fast.

Walmart-like origins

Essentially, having started trading in 1994, Amazon has grown fast, and in relatively low profile to its current global scale of US$48bn, growing over the four years of the global financial crisis at a CAGR of 26%, producing a net margin of 2.2% and an ROCE of 9.06% in fiscal 2011. In other words, serious customer-centric retailing, from a standing start, rather like Walmart - only faster - with an EDLP platform that seems to retain its excitement for consumers, everywhere.

Customer-level assortment
Amazon is raising not only the online commerce bar, with all of its potential efficiencies, but is also going to the heart of state-of-the-art retailing, providing much more than store level assortment. It is, in effect, tailoring the offering to individual consumer level, better than any other provider.

Convincing colleagues, fast
Our free analysis of Amazon’s business model aims at helping you build an in-house case to raise its profile within the business. We have also added a key-point treatment of the wealth of insight available within Amazon’s 2011 Annual report to help you explore the implications for your categories.

Finally, if still in any doubt about Amazon’s impact on your business, think 50% of most categories in the next 5 years, and see if that provides an appropriate wakeup call…

Exploring the downside: A positive benefit at the museum of failed products…

Spend time vividly imagining exactly how wrong things could go in reality, and you'll often turn bottomless, nebulous fears into finite and manageable ones.

Happiness reached via positive thinking is fleeting and brittle; negative visualisation generates a vastly more dependable calm.

A new book* by Oliver Burkeman supports the intuitive realisation of many NAMs and KAMs, that we learn more from failure than success. In other words, when a project is successful, all of our energy goes into bragging about it, whilst a failure keeps us awake nights, revisiting every step, missed signal and failed KPI…

Provided we have the courage and power to cut our losses, maximise the learnings and move on to try again, the overall result can be positive.

The book deals with examples of many failed FMCG brand variants available at the Museum of Failed Products, Michigan (part of GfK Custom Research, North America). More details of products here. Each failure must have made it through a series of meetings at which nobody realised that the product was doomed. Perhaps nobody wanted to contemplate the prospect of failure; perhaps someone did, but didn't want to bring it up for discussion. The examples are fascinating in themselves, but also reassuring for those marketers and KAMs that feel their little set-back is a one-off…

*The Antidote: Happiness For People Who Can't Stand Positive Thinking, by Oliver Burkeman, published next week by Canongate at £15 (guardianbookshop.co.uk )  

Making ideas work in the KAM role

In the same way that objections should be regarded as buying signals, so too should degree-of-resistance be seen as an indicator of ‘goodness’ in the spread of ideas. Fear of plagiarism can also be a constraint, however, as per Howard Aiken:  "Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats"

Have a persistent weekend, from the Namnews Team!