Dec 4, 2014 | Category, Marketing, Operations, retail, Small business
Data management & analysis
The second of 10 ways to beat the supermarket gorillas at their own game, after understanding the way the supermarket business model works, is to be savvy with data.
Supermarket retailing is heavily data intensive. These days, any retailing beyond the archetypical lemonade stand by the side of the road is data intensive, but particularly supermarkets. Commonly a supermarket range is up to 30,000 Sku’s across a number of different formats and geographic and demographic locations, and several thousand suppliers, all with their own focus and story to tell.
The supermarkets physical space needs to be allocated across the Sku’s chosen to be on range in the way that best delivers a return on their investment in the particular store and strategically across the chain.
SME suppliers to chain supermarkets usually are playing from a position of weakness, as they lack the scale to have the data and category management resources that supermarkets demand. However, their strength is that they can be far more agile and market sensitive that their bigger rivals, often SME’s can develop and launch a product before a multinational can get the first development workshop together.
Whilst supermarkets have a wealth of data at their fingertips, both their own, and that supplied by their large suppliers, they recognise that not every piece of data is worth the digits it is written with. Data is only of any value if it leads to some sort of actionable insight, and it is here that SME’s have an advantage despite the disadvantage of small size. Making the connections between differing seemingly disconnected data points is where the gold is hidden.
There are several points at which data can be collected, from which insights can be gained. Internal, observed and purchased.
- Sales and margin history. No SME should be without a robust and detailed sales and margin analysis of their own sales history, and thus ability to forecast with some certainty. Every SME has a sales history in their accounting package, most do not use it. Most use the “Office” package, which included Excel, but many do not use the power of the tools in excel. Pivot tables are the most underutilised and useful tool I have ever seen for SME’s. If you are one of the majority who do not use them, wake up, spend 30 minutes on YouTube figuring out the basics, and start generating insights. Also in excel is the V-Lookup tool, which can be enormously valuable to SME’s to keep accurate track of a whole range of variables in their business.
- Sales intelligence. SME’s are usually in a position to have unfiltered market intelligence in the hands of decision makers easily and quickly. Usually the people best positioned to see change as it is evolving are those in direct contact with customers and consumers, often the lower paid front line staff. Being engaged with these staff, or indeed as is the case for many, being that staff as a part of the role of the SME business owner puts you in a position to see shifts as they occur, if you are watching. Finding a way to turn these random conversations and insights into data points that can be connected and acted on can build into a significant competitive advantage. There is no substitute for the insights gained by simply watching and understanding the drivers of consumer behaviour, then crafting an offer that adds value.
- Agile operations. Scale brings its own momentum, despite the huge improvements over the last 20 years by the adoption of Lean practises. Large suppliers to supermarkets, with large factories, fixed planning cycles and extended supply chains are often caught short by the unexpected and unplanned. Agile suppliers can often fill the gaps created, but do so they need to be able to make very quick decision on costs, time frames, and operational priorities and limitations. To make these decisions, they need absolute understanding of their cash and financial position, costs and decision drivers like break even points, the impact of discounts, and negotiation trade-offs they can make. To be truly agile, you need accurate and detailed financial and operational data that is easily useable to make well informed decisions, then track the outcomes of those decisions.
- Be experimental. Having good data enables experimentation on a scale that offers great insights, but minimises risk. The supermarkets are increasingly amenable to enabling SME’s to experiment with all sorts of offerings as they learn as well from the activity. However, you cannot just walk in and expect to be taken seriously without a history of sensible innovation and a relationship with the individual decision makers in the retailer. Having robust, realistic and well understood strategic and operational planning in place is a must if you wish to be experimental and stay in business.
- Purchase syndicated data. Scan data can be purchased in many forms, and to varying degrees of analysis and detail. There is a significant cost to this information, firstly the purchase costs, but more importantly, the data analysis capabilities. Increasingly scan data is being matched to the behavioural data emerging from store loyalty cards to add another dimension to decision making, and this trend will only accelerate. SME’e can dip in and out of this data, taking a slice here and there to provide insights without the significant investment of being fully engaged. Treated sensibly, it can be used a bit like market research, taking a small and well defined sample and using it as representative of the whole picture.
None of this is easy, which is OK, because if it was, everyone would be doing it. However, many SME’s simply think it is all too hard, and stay away, effectively walking away from 75% of the volume in the market. For many, this is a sensible decision, but for some, those SME’s with a genuine opportunity to become larger businesses, building solid capabilities in collecting and leveraging data is essential.
Oct 29, 2014 | Marketing, Small business, Strategy
Any business that has done business with the supermarkets knows that they are not there to do you any favours. They have shareholders to keep happy, customers to sell to at the lowest prices possible consistent with their margin objectives , competitors to beat, and shelf space for sale to their suppliers.
In order to survive and prosper selling via supermarket distribution takes a business model that is tailored to the demands that the retailers make.
Following are 10 strategies that have worked in the past, the more of them you cover off the better, and the first few are mandatory.
- Understand the supermarket business model. The supermarket business model is based on three factors: high volumes, lowest possible supply chain and transaction costs, and low prices. With some minor category exceptions for some retailers, they do not vary from this model, in Australia or overseas. Given the scale of their operations, they get to set the rules, and there is little room for negotiation, even for major suppliers.
- Be savvy with data. Mass market retailing is a data intensive game. The retailers have mountains of data at their disposal, and plenty of suppliers willing and able to interpret it for them, with the obvious disadvantage to those who do not interpret. Scan data, combined with the loyalty card data increasingly being used is a goldmine of demographic, behavioural, and promotional information. Being in a position to present data with your interpretation, and having the credibility to interpret the retailers and your competitors data is a price of success.
- Aggressively execute on Category Management. Category management disciplines are the foundation of the retailers ranging, promotional and in store product placement strategies. It is data intensive, and an integral part of he business model, and as such sufficiently important to be treated as a separate “to do” for those to whom success with supermarkets is essential. Allowing your products to be “category managed” by your competitors is simply not sufficiently competitive , or aggressive. You need to execute on category management in partnership with the retailers, even if you are not in the “category captain” role.
- Build a brand that has relevance and connection to consumers. The alternative to having a brand that has at least a small but demonstrable group of consumers your brand has no effective substitute, and who will perhaps change their choice of retailer for, is essential. To be a price taker with no leverage at all, is to be an irrelevant supplier who is absolutely dispensable.
- Recognise you have two customers. The supermarkets may be your direct customers, but the consumer is also your customer, indirectly. As a part of brand building, you need to open communication channels with consumers, so that they are predisposed to buy your products. This may seem like brand building, and it is, but it is more short term direct, and actionable than building a brand which is a long term investment. Direct promotional and communication activity can now be a part of your tactical marketing plans in a far more directed manner than has ever been possible before.
- Remove transaction costs. Transaction costs have two basic causes, the first is not getting “it right first time” requiring rework to correct, and the second is the penalty of small scale. It costs the same to raise and process an invoice of $1,000 as it does for an invoice of $100,000. To the extent that technology can be applied to process the invoices, the costs will not be material, but if people are involved, the costs of the $1,000 invoice is 100 times as much as the $100,000 invoice. This relationship is reflected throughout the supply and distribution chain, and even minor improvements can deliver substantial savings. The source of Woolworths superior performance over the last decade compared to Coles has been the impact of their reductions in transaction costs that have dropped straight to the profit line. Wal-Mart became the biggest retailer in the world by focussing on the reduction of transaction costs of all types, and passing the savings on to consumers as lower prices.
- Collaborate for scale. Small suppliers to supermarkets have to find ways to apply leverage to their opportunities. Collaborating to reduce various forms of transaction and supply chain costs , as well as pooling data and data capabilities are logical if challenging tasks. Many produce suppliers have found ways to collaborate, but their produce is unbranded, and commoditised by retailers, so it is harder for branded FMCG but nevertheless possible.
- Constantly innovate. It is almost a cliché, but nevertheless true, that to stay still is to be left behind. Innovation is a part of the necessary armoury of success. Not just innovation in the product supplied by the means of its production and supply require constant innovation.
- Build agile value chains. Commercial agility is the ability to alter processes in the face of changed circumstances without resorting to non value adding discussion and debate, and without losing sight of the objective. Agility is not flexibility, which implies that things “bend” then go back to normal. By contrast, agile value chains have the characteristic of being able to evolve rapidly, and improve in the process.
- Do not play. The last and most obvious strategy is to ignore the supermarkets, and play in channels they do not control where the value in the product is able to be recognised in some way that is impossible in the high volume low margin supermarket game. Depending on how you measure, and what category we are talking about, supermarkets control between 50 and 80% of FMCG sales, which leaves some 30 billion of Australian FMCG sales left over, not an insignificant sum.
That is an awful lot to do, and the best time to start was a while ago. However, the second best time is now, so go to it. If you need a bit of assistance, just get in touch, and I will bring along my 35 years of experience with this stuff and put it at your disposal.
Jul 2, 2015 | Customers, Marketing, Social Media, Strategy
I find myself writing a proposal for the development and implementation of a digital marketing strategy for a bunch who know they need it, because I suspect their kids told them, but have no idea what it is.
Part of the challenge is to figure out how to balance the digital and social media education against the tough realities of marketing which have not changed despite all the new tools. The entrenched view that marketing is about putting out a monthly newsletter full of general bluster and crap and discounting as and when deemed necessary, usually from an inflated starting point pervades the thinking, and has contributed to ensuring the previous efforts in the digital space have failed.
Perhaps I am wasting my time?
Some of the essential early questions are proving to be challenging for them. Questions like:
1. Who is your audience? We need much more than generalised demographics, we need specific behavioural information informed by the demographics to the point of being able to give prospects individual personalities which we can address in communications.
2. Why and where do they spend their time online? The prospective audience all have digital lives, and if we are serious about becoming a part of those lives, we need to be serious about understanding how it works on an individual basis now, or we risk alienation.
3. What do you have to say? Unless what you have to say is of interest to them, sufficient to engage and over time lead them to a transaction, there is no future. Speaking to a prospect in their words, explaining why should they care about what you have to say is now essential.
4. How does what you have to say add value to their lives? It is one thing to be noticed, and hopefully gain some interest, but unless we can tell them specifically how the item being promised will add value to their lives, they will not engage. Long gone are the days of broadcasting generalised features and standing back with an order book. Now we have to specifically target benefits and articulate them unambiguously and with sensitivity to the aspirations, situation and needs of the prospect.
5. Why are you reaching out to them? The initial and quite reasonable and logical reaction to digital communication is that you are just trying to reach them to flog them something, and nobody likes to be a target. Describing the payoff to them in their terms is essential.
6. What results are you expecting? Knowing the end you are seeking is pretty important. This is not just the end point of the whole process, but the end points in all the building blocks in the engagement to transaction process. The practise of marketing has been revolutionised by the ability to collect and analyse data. For the first time we can now identify which half will be wasted and eliminate it.
Todays digital consumers are pretty savvy, cynical and can smell a con a mile away. However, they are also able to see the intention behind the tools and the benefits that can be delivered to them by the tools, and are comfortable with the trade-off if it is of benefit to them.
Mar 17, 2015 | Customers, Marketing, Sales, Small business
marketing funnel
Creating a marketing funnel is the basis of all digital marketing initiatives. If you put the term into google, you get back 3 million plus responses, many of them having nice illustrations attached that in one way or another, look like a funnel, with stages and various names attached.
However, there are very few places with useful advice on how you create and manage a funnel, perhaps it is easier than I have found it.
Every situation is different, and every prospect needs to be addressed personally in some way, nevertheless, there are a number of generalised stages I have seen, which drive the manner in which you deploy the digital tools.
Step 1. Create a “Hook”. A “Hook” is something that arrests the attention of someone in the target market. This implies, accurately, that you have defined your target market in considerable detail. I am working with someone who is an expert at setting up self managed superannuation funds. His target market is the owners of small businesses that rely on the owners presence, often they are tradesmen, who are over 55, and have not put enough money away enough for retirement. The “Hook” we have evolved is “If you are over 55, and behind in savings for your retirement, you have the opportunity to use a tax effective self managed super fund which delivers a doubling of your net worth in 7 years”.
This statement is in 4 parts:
It identifies the prospect very clearly,
It is very specific about the situation the prospect finds themselves in
It tells them of a solution to the situation
It makes a big promise.
Without the very specific definition of a target market, the Hook is less effective, as it does not speak to anything specific to which a reader will relate, it becomes too general.
Step 2. Generate traffic. This can be done by a variety of means, using both paid and organic means. Organic is slower, and is centred around personal networking, blog posts, articles, and other content that gets shared on social platforms. It is a passive approach. By contrast, paid traffic generation can be very effective with the great degree of target definition that can now be generated by all the social platforms. For my self managed superannuation (SMSF) client, we are targeting the small business owners with a very specific and targeted Google Adwords campaign, coupled with an extensive organic program.
Step 3. Customer capture. Having driven traffic to a website, you need to do something with them to progress them through the steps towards a transaction. Usually this involves the download of something of value for free in exchange for a name and email address. The lead is then followed up with a staged set of automated emails that are responsive to the actions of the potential customer, often offering further “freebies”. This tactic is now so widely used that it is losing its effect, so increasingly it is being supplemented with the further offer of something of greater value still for a minimal amount, $3-7. This does two things:
It qualifies the lead as a real lead, not just a freebie follower,
It gets leads used to using their cards to purchase from you.
Step 4. Transaction development. This process can take many forms, from the gentle prompting towards a transaction that can be a highly iterative and lengthy process, to the maximisation of a sale by adding value to the original offer. By way of example, it takes me ages to come to the conclusion that I need to buy a new suit, it is a substantial cost, and occasional purchase. However, once in a shop, the opportunity to also sell me a tie, belt, shirts, and perhaps another pair of shoes is real. The upsell stage, or as McDonalds have perfected, “would you like fries with that?”
Step 5. Remarketing. Once you have a customer who has bought and hopefully had a good experience, it is easier to sell them again, and again, and over time you can build a very good picture of what they like and what they do not by their interactions with your database. Again, by way of example, I still buy a lot of books, real books from one of the few remaining bookshop chains. I have a card that gives me a discount based on purchases, yet they insist on sending me emails with offers that bear no resemblance to the purchase habits exhibited on their database via the card. Utterly stupid, and exactly the reason they will go out of business eventually. Amazon will never make that mistake, their offers are very specific and targeted to behaviour, not just of the individual, but of the cohort of individuals with similar behaviours that can be ascribed to the individual. In addition, once someone subscribes to your database, you have their permission to market to them, so irrespective of where they may be in the funnel, there should be processes in place to periodically “re-tweak” their interest.
Funnel management Toolbox. There are a range of tools, digital and otherwise, for each step in the sequence, and their relative performance is the subject of much very effective review, so I will not repeat it. Suffice to say several specific tools are necessary for any effective automation.
- Registration page . To attract the registration and manage the delivery of the “freebie” and of the leads details to the auto responder software. There are many around, but Leadpages seems to have the game pretty well sewn up. Recently both Facebook and Twitter have added “one click opt-in” capabilities to their sites that leads people directly to your autoresponder.
- Autoresponder software. Absolutely necessary, and there are a host of suppliers, from those with simple tools to those fully integrated with CRM systems with more bells and whistles than even the most sophisticated and technically savvy medium sized business will struggle with, so my advice for the small businesses where I operate, is to keep it simple. Mailchimp and Aweber are the most popular around my patch, and both work well.
- Creativity and originality. Unfortunately, or perhaps fortunately for some of us this does not yet come in a box, or made available for download, it resides between the ears of real people.
- Customer centric copywriting skills. As with the above, not available via download. It is one thing to get all the digital tools right, but someone still has to be able to make them work to optimum levels, and the copy writing skills and experience needed are significant.
- Technology implementation . Again, somebody who knows what they are doing with this technology. It is one thing to know how it works, it is another entirely to actually make it work. Implementation simply is not as simple as all the vendors would have you believe, for most small businesses, implementation sucks.
PS. The illustration at the top of the post is confusing, hard to understand, and not at all like the last one you saw. Just like in life!!
