5 planning principals for the major long term sale.

Aug 26, 2015 | Uncategorized

Planning to engage a major potential customer is much more than finding the phone number on the web site and ringing reception to ask who is the right person to speak to.

Chances are, even if they know who the right person is they will connect you to the intern.

For years I have been teaching and running workshops with the eye-raising acronym of SKAM.

Strategic Key Account Management.

The underlying logic is that there are only 3 ways to engage with a customer that leads to a transaction that is of a significant size:

You can help them increase their sales

You can help them increase their productivity

You can help them reduce their costs

On another level, there are some questions that you can ask yourself, and in the answering, arrive at a number of possible approaches, as it is rare that the first you try will work, but learning from the experience will help you with the second.

1. How to I add value to what they are doing

• How do I demonstrate knowledge that I can make available to them that they will benefit from
• What trends or technologies can I bring to their attention that at will impact on their future profitability
• What insights can I bring to them
• What specific knowledge can I share

2. How do I go about building trust.

• What about their internal culture can I tap into and make a contribution
• What do the need or want that I have, and can give them

3. What can I do to be pro active and demonstrate my ability to work with them and help them achieve their goals

• What insights can I bring to them that will be of benefit?

4. How am I accountable for optimum results.

• Sales do not stop with the payment cheque. After sales service, warranties, ongoing advice, and so on all demonstrate that you are accountable for the promises made before the cheque was cashed.

5. How am I going to continue the engagement after the first transaction

• Once a customer has bought from you, if you do the right thing, you will have them as a customer again, and again. It is very useful to measure your “share of wallet“
• Would they recommend your services to their networks? Asking for referrals is a powerful marketing tool when you have satisfied customers, as there is no more powerful toll that word of mouth advertising.

Success in B2B sales of significant products, not just paperclips, takes patience and planning. It almost never evolves the way you expect, and almost never as quickly as you would like,  hang in there.

Suppliers to Supermarkets have  two customer types.

Mar 5, 2015 | Uncategorized

Big dogs hold the cards

This post is the 5th in the series, how to beat the supermarket gorillas at their game. Like David taking on Goliath, small businesses supplying into FMCG (Fast moving Consumer Goods) markets simply have to find the points where they can exert some leverage, where their relative agility can deliver them an advantage against the disadvantage of size.

It is important for them to remember at all times that they have two customers types, and they are different.

Entirely different.

One wants to make money from you, and is almost entirely devoid of any personal investment in any of your marketing activities, profile, or brand. The other needs you to solve problems for  them, or just fill an everyday need , and is highly likely to respond to any one or more likely a mix of your marketing activity, including those the supermarkets favour, i.e. Price reductions, shelf highlights and paid off location displays.

Supermarket are interested in the role you can play in making their brand the one chosen by consumers, weather or not the consumer then chooses to buy your brand of widget while you shop is almost entirely irrelevant to them, what  is relevant is how much in total consumers buy, how often they buy, and how they feature in the consumers mix of retail preferences. Do they just do the fortnightly big family shop with them, do they drop  in regularly to top up, or even just to buy a few necessities? From the retailer issued loyalty cards, if you have one, supermarkets know just about everything about the behavior of each consumer, and increasingly as social media and location data is integrated, they will have the opportunity to know just about everything about the consumers total buying behavior, inside and outside of their stores.

The planning of your marketing and sales promotion activity must take these realities into account, so following are two lists of the key considerations for small businesses as they contemplate climbing into, or just surviving the Gorilla ring.

Supermarkets.

• Maximum margin. As with any retailer, supermarkets want to buy as cheaply as possible, and sell as high as possible, and they have perfected techniques to extract added margin from suppliers via a range of promotional, payment and ranging/space allocation charges. At the same time, they pro-actively manage price, adjusting to local and regional competition and trading conditions to maximise their take at the check-out. Suppliers are often seduced by the scale of supermarkets and the potential sales on offer. Without rigorous go/no-go points, a focus on the sales and margin outcomes they want, and clear and aggressively enforced set of trading terms, they usually find themselves losing any negotiation.

• Two businesses. Supermarkets are in two businesses. The first is renting retail real estate to suppliers, the second is selling product to consumers. These are different games, and supermarkets are very good at both. Category management discipline dictates the manner in which retailers range, locate, and promote products, but do enable small businesses that know the “rules” to find ways to be creative and pro-active and to use  category opportunities   to their benefit. It is however, not easy, or for the faint-hearted, to be successful suppliers need to be absolutely on top of their strategies, and understand intimately their own target customers, and the ROI of promotional activity.

• Low shelf  price. Supermarkets around the world use price as a consumer “bait”. The Australian gorillas have both made low prices a central plank in their strategies to attract consumers.  Everyday low prices, deep price specials, off location displays and promotional prices are all funded by suppliers, at least to a significant degree. Coupled with the maximum margin strategy, this is a poisonous mix for suppliers without aggressive account management, and a deep understanding of their costs and consumers. The trade-off is in the scale of sales that can be delivered by supermarkets.

• Exclusive range. Retailers love something that consumers want, but can only get in their stores. Some products will always be available in both, but increasingly, small suppliers will have to make choices about which retailer they favour, but in turn, this can be used to suppliers advantage, as it shores up distribution in at least one of the gorillas. Problem is that the reach of the gorillas is so big that such a choice eliminates you from up to 40% of the potential sales.

• Better than competitive terms and promotional arrangements. All retailers work to a set of trading terms, and as noted, have perfected the management of them to extract the maximum from suppliers. However, there is always pressure to give a  bit more than is given to the other retailers, usually “disguised” in all sorts of ways, an extra promotion beyond terms, a guarantee of a longer buying period, longer payment terms, and all sorts of other creative ways to get a competitive margin advantage.   The next time you are tempted, just think about the repercussions if that buyer now pressing for an advantage turns up as a buyer for the other one next month. It does happen, as many can attest.

• Stock or inventory turn.  This is a common and base measure for all retailers. How often can they turn the stock over?. The quicker the better, obviously. If your stock is turning 10 units a week, and there is a product the retailer can put in the same shelf space that will turn 12 units a week at the same margins, guess which one gets the space! Obviously it is more complicated than this, as there are % and absolute margins and consumer choice to be considered, but stock turn is an absolutely  key measure.  Of course, if they can turn case a week over, but do not pay for it for 45 days, the supplier is effectively funding the gorillas working capital.

• Minimum inventory levels. Coupled with the point above, retailers aim for the minimum inventory levels consistent with ensuring that stock is available on shelf at all times. This requires some pretty fancy and data intensive footwork by both retailers and suppliers, but the pressure is on suppliers for more but smaller deliveries to central warehouse for redistribution. This often  has the effect of increasing the logistics costs for the suppliers, who instead of delivering a semi load every second day, are required to deliver a half semi every day.

• Assistance with the “last 20 feet”.  The most expensive and prone to error is the distance between the back dock of an individual supermarket, and the shelf. Supermarkets generally welcome the assistance of supplier employed labor to assist with that last 20 feet, but there are rules that must be followed. However, for a supplier there is considerable benefit in being able to ensure there is stock on hand, and that the planogram allocated shelf space is in fact taken by your products, while often being able to take advantage of opportunities as they arise at store level.

Consumers.

• Favoured brand and size. Consumers loyalty to brands varies widely, but generally is significantly reduced from 20 years ago. However, most consumers have a number of products that are acceptable to them as substitutes for each other, but with a favorite if all other things are equal. Anticipating consumers and reflecting their views and needs is the biggest variable left in the hands of suppliers, and success comes with the capability to use data to model and optimise the behavior triggers that exist.

• Lowest price. Price dominates the FMCG markets, but is still not the only factor. Consumers each have an individual perspective on what constitutes value to them, in any given set of circumstances, and shop accordingly. For most, price is the dominating factor, but there are many others. The opportunity for smaller businesses is to find the niche where price is less dominant, and build their business in that niche. Very easy to say, but very hard to do, but there are some out there delivering great results by focusing on things other than price, and ensuring they deliver consumers value.

• Convenience. Consumers are time poor, and shopping for households is usually a chore. Making it easy by adequate parking, easy access, wide isles, all in one place, logical shelf and store layouts, and many others makes a big difference in the choices consumers make about where they will shop.

• Courtesy and assistance. So rare these days, but genuinely connecting on a human level  makes a huge difference to consumers.  On the other hand, consumers  are increasingly cynical and dismissive of the  rote “have a nice day” and plastic smile.

• Confidence in the products on shelf. Consumers are prepared to make changes in their choice of retailer on the basis of their confidence, particularly in the fresh categories, fruit and vegetables, meat, and dairy. With the exception  of dairy, there are almost no proprietary brands in these categories, so consumers are relying on the retailer to take the place of the proprietary brand and provide reassurance of the integrity of the product. The recent very public recall of the “Creative Gourmet”  and “Nanna’s” brands of frozen berries have heightened the concerns with produce, and the supply chains that deliver them. Unfortunately, the owner of these brands, Patties Foods  is one of the last significant Australian owned businesses in the FMCG supply chain. Although they have reacted well to date to the problems, which should not have been happened with reasonable diligence of their supply chain, they stand condemned for the QA failure that allowed the failure in the first place. The recall and current  focused concern with country of origin labelling in produce categories  certainly offers an opportunity for Australian sourced produce to  gain some leverage back, should they be able to take up the challenge.

Many of these factors will require trade-offs, some short term, others longer term. For example, for added distribution, most suppliers will consider fattening retailer margins while retaining low on-shelf prices in the hope that sales volumes will recover the difference, but often low price is counter to the long term health of the brand. Diversion of resources from branded marketing to retailer margins in return for distribution is the often the hardest choice that needs to be made. Over the last 20 years  the supermarkets have won the debate and sucked the resources suppliers have away from brand marketing activity to their margins, to the detriment of the long term health of proprietary brands.

In Australia with the two gorillas holding 75-80% of sales, depending on the category, it has been a branding disaster, now consumers are increasingly confronted by an array of brands they do not know, often housebrands produced under contract for retailers, often by the owners of their  former favorite brand, now no longer available.

The minefields outlined above require experienced and dispassionate navigation, get in touch for a dose of both.

Has your business leapt these 7 digital hurdles to success?

Mar 2, 2015 | Uncategorized

Lyn & Steve Aspey

As a participant at the Techfest in Armidale this week, a regional effort to bolster the IT profile of the New England area, I was thinking about the characteristics of businesses I have seen over the last 20 years that have successfully  navigated the changes to their competitive and strategic markets wrought by the explosion of digital capability.

All exhibit some or all of these 7 characteristics.

It also seems that these traits of those who successfully  made transition, are made more obvious by those who had not survived, who had failed to navigate these hurdles.

It also seemed not to matter one bit if they were multinationals or the corner store.

1. Pressure on prices and margins. The most obvious impact of digital is the relentlessly increasing pressure on prices and margins. Customer and consumers can check competitive offerings with a few swipes on a phone, and do  research on the relative value to them, of competitive offerings with consummate ease. Inevitably, prices are pushed down, and margins are squeezed in all cases where a business has failed to clearly differentiate itself from its competitors.
2. Power has moved from the seller to the buyer. I have written about this phenomenon in several places, as it is a profound change in the way markets work. The buyer now has all the opportunities they want or need to make judgements about competitive offers before the seller even knows they are in a race for a sale.
3. New competition emerges from unanticipated sources. Who would have expected a computer company to disrupt the music industry, or the business travel sector being eroded  by video conferencing. Emerging competitors also often have the effect of cherry picking, taking away the most profitable customer segments from incumbents, destabilising their position. Telecom is the primary example here, as private providers concentrate on dense urban areas, ignoring the “social compact” that existed previously of equal access. The incumbents are having a tough time.
4. Business models have evolved very quickly.  Not only are there new businesses models, but they evolve almost on the run, with new businesses iterating to new models as they “pivot”  and find their way to markets that value what they can deliver.
5. The war for talent. There are lots around who can do the simple stuff, and mouth the jargon, but a shortage of those who “think digital” but are able to translate that thinking into the sorts of innovations and processes that change customer and market behaviour. There is a substantial  competitive advantage that can accrue to those who have in their teams just a few of these rare people, and the competition of their services is substantial. Never was the cliché “our people are our greatest asset” truer, nor harder to maintain than now.
6. Supply chains are now global, and transparent. Digital technology is national  border agnostic, resulting in the globalisation of supply chains. This simple factor has changed the manufacturing face of the first wold, and in this country led to the decimation of Australian manufacturing, something for which over time we will pay a very high price.
7. Scale of operations has changed dramatically. It used to be that to build operational scale, you also needed a scaled management infrastructure to service that scale, but no longer. Scale can now be digitised, outsourced, and the capabilities of just a few people leveraged. At the same time the global nature of supply chains has strengthened large organisations able to make  the global leap, but paradoxically, has opened opportunities for local businesses not there before.

It also seems to me, and I have no evidence beyond the anecdotal and that of my own eyes, that we have become a society where the value of personal relationships has been diminished, at the same time in theory they have been made easier to maintain. It seems that we have substituted numbers or breadth  of relationships for the depth we used to have confirming again the theories of Robin Dunbar.

As I said, I am a participant at Techfest. This participation is via my 20 year old consulting business StrategyAudit, plus a new business in the throes of being launched, Intellicast, which is a partnership with Lyn Aspey of Imagehaven, and Steve Aspey of Aspey.com.au.  In addition Lyn and Steve between them are prime movers in NETAG, the New England Technology Advisory Group, a small voluntary group of the aforementioned rare individuals who are prepared to offer their advice and experience to those in the area struggling with the digital revolution.

I hope the effort of a few deliver benefit to the region, and to the businesses in the region.