The retail landscape in the UK is changing dramatically, and brands will be forced to change the way they interact with, and invest in them, if they hope to rise to tomorrows challenge.
The opinion of a current expert in retail sales, Brian Moore is that the current position has to result in a gradual loss of market share from Kantar’s current levels of 73.5% for the Big 4, to a combination of the discounters, Waitrose, online and emerging formats.
Brian suggests that this slide may eventually be halted at 50% share of the UK grocery market, leaving the four major retailers operating on ROCE levels that provide an adequate reward for risk, and maintain acceptable share prices.
What then are the challenges that face the brand wanting to grow?
The tools used by NAM’s are chiefly price based. Discount offers, and investment behind this, such as for additional space and retailer sponsored activity, such as couponing in the case of Tesco, and supporting POP. Increasingly it is very difficult to have any impact on retailer outgoing price, in particular for companies signing the retailer version of GSCOP where brand price in may well be linked to a retailer price, so NAM’s lose any pricing control on normal price. Retailers can price match without any reference back to the company.
What tools remain to be used that let you do better, for less?
1. Discount Promotions
In the 1990’s this was easy. Then the majors offered guaranteed growth year on year, and you even received further growth after a discount promotion as people who found they liked, stayed. Happy Days.
So over-investing in them was (nearly) a no brainer. Many Marketing techniques all but disappeared (such as couponing) when investment in retail price promotions was so easy, and so powerful.
Sales Directors report that the big three reasons for discounting are volume, penetration and pleasing the retail partner.
All these have now disappeared as benefits. If you want “free” growth, you need to be in the discounters, and profitless volume will take some justifying when you can re-list sample packs with them. Targeting volume can even hasten the demise of a company. I remember one NAM telling me that the month that Terrys of York went bankrupt he had the largest bonus he had ever received. Simply because it was based on volume, not profit.
Penetration gained, typically non-profitably, when the market in a major retailer is declining is a nonsense. Which leaves pleasing retailers. This might be hard to sustain in the typical boardroom. If you want to be cost effective in promotions and to build long term growth you need to look outside of price to reach those of your shoppers that value you. Interestingly, if you get this right it will also please your retail partners.
2. Retailer Sponsored Promotion Activity
This would include in store sampling, club card couponing etc etc. Best here to realise that if it actually returned adequately you would not be able to use it as own brands and previous brand triallists would fully book week in and week out. In general they are simply other means of extracting your budget.
How many National Account Managers look outside of these two? Often they will point you to a third;
3. Additional Space
Now actually, additional space can have benefits as it builds stock and presence on the floor. However, given the lack of return per promoted unit, the typical poor implementation, and the hugely inflated cost of such space, it is often hard to see why a profit conscious company would do this.
If all you want is unit sales – the discounters offer a really useful alternative for getting permanent additional space. Meanwhile, the latest Tesco re-range will increase both your space AND stock . With the commensurate lessened need for added promotion space.
Sensible sales departments will use additional space investment into other channels unless they definitely see either a long term gain OR if they get an instant additional profit over the top of the cost.
4. Shopper Marketing Initiatives
Throughout the past 20 years these have consistently delivered remarkably good results. However, most NAM’s have very little experience since the techniques basically date back 20 years. They were also the very first place that retailers looked to get additional investment in. So shelf talkers, bus stops, and various types of shelf signage are an undiscovered country. As are on-pack messaging, banded packs, all delivering benefit wherever they appear, and adding value, not removing it.
This is a core area that brands need to re-explore since there are so may new ways of delivering.
So Where are we?
The major retailers have imposed their vision of how to grow, on their suppliers, for the past 20 years. Had this been an unqualified success, they would not be where they are today, and neither would the brands.
So far NAM’s have had it easy. I know they won’t see it this way, but the retailer vision, as delivered by NAM’s has dramatically skewed the way that brands manage their business from start to finish. They carry additional stock and work in progress, and attendant storage and investment, to handle random promotion events that they may know about, or they may not. This adds pressure to costs and margins.
So far, what the NAM’s wanted, they got. Typically, they are under no pressure to measure the impact of, and return from, their spend. It is often merely lost in average margin.
At a time when so much data is available to Sales to measure, it should be criminal (and I do mean criminal) for this not to happen. Moreover, letting the supplier, such as dunnhumby, measure the impact of your activity based on marketing measures is also criminal, in both cases the company is being actively mislead into spending (investing).
Meanwhile the rest of the company, including Marketing, are being hounded for their ROI measures. In my experience, the Sales Department can actively prevent other Departments from gaining access to “their” store by store epos data. A resource that can be used to measure the impact of almost anything at least as well as Nielsen, for much less. I recall looking at a couponing campaign for a major brand where we managed to get some pre-data, but post data was impossible to get. Those in charge of access were simply too busy for six months.
Or were they too nervous of what might be found? Such as the fact that a major deep cut promotion in Asda had actually removed stock right back to depots.
And the fact that a number of stores the coupons were dropped round did not stock – even though these were core areas for the brand shoppers, and the information was freely available, but of course, to another part of the same company.
Result, internal analysis of the activity showed it had not been successful. It’s not that the coupon was not persuasive, it is just that the Sales Department ensured it would fail, and prevented that information coming to light. Not deliberately, I am sure but by actively discouraging external light being shone in the way they were managing and investing company monies.
Planning a way Forward
This is the era of big data, not small spreadsheets; NAM’s will absolutely need to understand the return from their activity. When they do this, they will understand that rolling back the clock to look at cross retailer initiatives such as on pack and couponing will regain their place. They have all the data, they just don’t know how to use it. With properly managed epos data you can;
Identify the sweet spot for promotion discounting, and allocate properly product to core stores (yes you can!)
Identify core areas and improve availability and shelf space where it will offer the greatest return, and maintain these stores for long term benefit
Identify products that cry out for small store ranging – an area few major retailers actually understand
Measure the impact of any and all sales or marketing investment behind core stores
Pick up Nielsen distribution, ROS and Kantar “who buys your product” insight
Use a retailers own data to develop targeted change for guaranteed results
If you are not doing this, why not?
Support Marketing objectives; The customers for any brand cluster together. For a growing brand perhaps 15% of stores will provide 50% of sales. Even very large brands would be 15% = 35%. And these are definitely not simply the largest stores, they are the stores where most of a brands customers visit. All the stores in these areas should stock, since the 4 stores on average that each shopper is now visiting would benefit from stocking the brand. Field Team callage on the top 200 is volume speak, and not brand growth speak. There are many ways of building distribution. Typically very few of them are explored by the average Sales Department.
One example of this is the recent successful MBO for Seabrook Crisps where 30% of the Tesco stores in core areas were actually non ranged. Stores that had chosen to stock. Simple contact processes (not Field Marketing) both gained, and sustained these stores. This also meant that any Marketing spend has a much greater chance of gaining return, and the individual store managers you impress this way will be very much happier. Meanwhile these opted to stock stores have now become official stockists!
Be aware of all the available techniques and don’t let prejudice overcome facts; I sat in meetings with a Marketing and Sales Director where the former was not even aware that store by store epos existed. On the other hand the National account team denied that there were ever stock outages because theirs was a “slow moving product” despite photographic evidence to the contrary. Many Sales Directors are not aware that, in varying forms epos sales by store is available from all the majors. Sales Directors are not used to looking outside their teams for insight. This will need to change, simply because you cannot get sufficient insight into your market with just your own data, it needs to be benchmarked.
Sales Departments will need partnerships in the next few years. Establishing permanent change in the base product sales can be achieved in many other ways than simply cutting the price. If all you know is cutting the price and doing what the retailers dictate you will rapidly run out of runway.
Develop Independent Shopper Marketing; The essence of this discipline is to use investment to build your core shopper. This should oversee both Path to Purchase Marketing (alongside Brand Building investment) and retailer based spend. In this regard it must sit between Sales and Marketing, a great way to position it might be to a Commercial Director. The essence of Shopper Marketing has to be to measure and build. To know what works, and develop these strands over time.
My view is that Shopper Marketing should be tasked to deliver positive ROI this year, which is where it differs from Marketing, and long term by outlet growth as well as short term (where it differs from Sales). Of course, it is easy to do this. Some of our best results are at 30/1. But you can’t do this unless you have influence over Sales and Marketing. The impact of a couponing campaign is much greater if you combine it with gaining more stores in your core areas. And yes, this applies to ALL sizes of brands.
I don’t have a National Sales background, though we do deal with people in this role all the time. So I’m going to leave the last word to Brian Moore. His company runs training programmes for them, as well as delivering a regular news feed that is an excellent source of retailer feedback. Brian says;
Within this intensively-competitive, high-stakes environment, the emphasis will be on quality improvement and cost reduction, literally making every penny count. In an era where even the short term is unpredictable, the Big 4 NAM will be expected to forecast demand, and optimise returns on resources in the medium to long term. The NAM will also need to justify trade investment budgets that can stand comparison with sums allocated to equally important major customers, given that any growth will be at the expense of colleagues managing the other three players.