In our last few columns we discussed the realities of the consolidating marketplace and ways to increase clout with retail “partners.” In the not-too-distant future, retailers like Wal-Mart will be running your marketing departments, controlling your new products initiatives, ad spending levels, packaging graphics, and publicity campaigns. (If they’re not already; see the Marketer of the Decade story.) Deploying multi-functional business teams to assess your retailers’ needs and assembling a strong business plan is no longer a competitive advantage, it’s a necessity.
Packaged goods manufacturers will need to accomplish three things to rise above this retail reality.
SET CLEARLY DEFINED GOALS
Promotionally speaking, how well have you identified your specific objectives? What role does promotion play? What should your promotion plan look like? At Zipatoni, we have identified five options:
1. Integrated: Big consumer promotions are advertised and extended into retail.
2. Direct-to-consumer: Promotion dollars are focused solely on direct marketing.
3. Mass-to-consumer: Promotion dollars are directed broadly at consumers, without an in-store component (FSIs only, for example).
4. Sponsorships: Consumer promotion dollars are spent to line up sponsors and properties (e.g. NFL, NASCAR, The X Games) and trade promotion funds tap the properties for retailer-specific programs.
5. Retailer-specific marketing: All promotion dollars are spent with retailers.
Which option are you currently living by? Which option is right for you? Companies like Coke and Pepsi are employing the integrated promotions option, and they can afford it. (They can’t afford not to!). Second-tier brands and below generally take the retailer-specific route. These are the brands that have ended up as hostages to the trade.
Determining which option is the right one for your brand isn’t that difficult if you answer the following: How much budget flexibility do you have? What is the competitive landscape? What role does your brand and your category play at retail? How capable is your selling organization?
It’s easy to reject option No. 1 (“way too expensive for my brand”) and No. 2 (“the cost to reach each consumer to trigger a purchase is unprofitable”). That leaves No. 3, which is where most packaged goods brands reside, with a little augmented, retailer-directed activity during peak seasons. Few brands opt for No. 4, because most selling organizations aren’t set up to leverage an inventory of `brand assets’ on their own. And weaker brands end up at No. 5 as their shares get whittled away and their desperation mounts.
DEVELOP A DISCIPLINED ACCOUNT-PLANNING PROCESS
It’s December. Do you know what key trends will affect your brand and category next year? Do you have your Q4 2000 plan put together and ready to be announced? Have you assessed your successes and failures from this year and made the appropriate corrections? From a brand perspective, I bet you do. Now, how about plans for your top 10 retailers? Can you pull those out and feel comfortable that you have pre-emptively devised compelling business ideas that will drive the category and your share? Is the retailer’s brass ready to meet with your management and sign off? If so, congratulations! If not, join most of the rest of the industry, and get going!
Customer business planning should encompass all the key business drivers, including customer service, in-store fixturing, pricing, retail coverage, new products, and, yes, promotions. But the plan should go way beyond promotions, that’s for sure.
HAVE A CLEAR UNDERSTANDING OF HOW YOUR TOP RETAILERS OPERATE
By a show of hands, how many brand people in your organization have spent a day working in a Kroger store or a Kmart? OK, hands down. The more time you spend at retail, the more you’ll learn, and the smarter you’ll become and the faster your brand will grow and the higher up the ladder you’ll be propelled. You’ll also come to the quick conclusion that there aren’t many retailers out there who really want to be your “partner.” Here’s why: Your brand makes roughly 20 percent pre-tax operating profit. The average retailer makes roughly five percent. Well, that’s just not fair and they’d really like some of yours. In this case, it is a zero-sum game.
The February edition of “Channel Surfing” will provide details about how to evaluate your retailers and show them your brand is important to them.