The primary tool used by retailers to attract customers is the discount prices that they offer on their suppliers products, largely funded by those suppliers.
As you read all the literature and case studies on brand building, and reflecting on my own experience, the last thing you want to do is indiscriminate price cutting to build volumes. Deep and regular discounting is a sure way to murder any long term position of the brand as anything other than cheap and nasty.
I have yet to see “Develop the brand to be cheap and nasty” in a strategy document.
However, promoting your product, as distinct from stand alone price cutting is a potent way to get trial, and any brand building exercise contains measures that encourage and reward trial; setting out to turn trial into habit.
It is a delicate balance, generating trial and confirming to customers that the product is delivering value for the non promotion price, when the discounted price rolls around every few weeks.
So how do you combat it, when you have so little control over the retail interface with consumers?
Not easy, particularly when to retain shelf space, discounting is mandatory, and often the suppliers have ceded control of their promotion timing and type via trading term agreements.
In effect the retailers do what they want, when they want, with your products to build their revenues and margins, and charge you for it.
In other words, they are able to prostitute your brand in their battle for market share and margin.
How do you break this cycle?
Not easy, and not without risks, as retailers can always delete your products and put something else in the space, and increasingly this is a housebrand.
The answer is in several parts.
Make the CEO the senior product manager. Too often, the boss is too busy to attend to the details of the sales and marketing programs, and conventional management wisdom is that you leave the detail to those responsible for the outcomes. However, abrogating responsibility is very different from leaving the details to the functional management. The boss must be engaged in the battles with retailers. Such engagement delivers certainty that you are serious to the retailers, and assures your people that the boss has their back if it goes pear-shaped.
Have a plan to manage the customer as well as the consumer. It is essential that you have a plan actively supported by the CEO around the supply chain challenges of building of a brand. This means that the CEO needs to support the sales and marketing management in the implementation in the face of retailer pressure, removing the retailers opportunity to play the ‘go to your boss’ card. Obviously, any marketing plan needs to address the consumer you are talking to, what they are looking for, and how you are delivering that value to them, or they will fail, but most in my experience miss the explicit references to those who control the choke points in the distribution chain.
Regain some control over trading terms. This is easy to say, but enormously hard to do, and is impossible in one negotiation round. To the extent that sales success requires distribution in the two gorillas, you need to be very aggressive and smart about wresting back some of the control of the on shelf promotional and price decisions. Branding success requires that you deliver consumer trial in a competitive environment, followed up and consolidated by the reward of great value, which is way more than a cheap pick-up price. Just going along with a retailer delivering a low price to consumers only rewards brand prostitution by the retailer.
Manage your data. You need data on which to base all your decisions, as debating challenging questions with a retailer on the basis of what you think is not good enough. Assembling data that demonstrates the ROI on promotional activity across a variety of time frames and consumer centric parameters is essential. This requires both scan data and external consumer and social data to be combined and analysed. Not an easy task, and certainly not without cost. However, if your volumes are dependent on promotional pricing without the ROI knowledge offered by data analysis, you have already lost.
Consumers need to be engaged. Outside the price, you need to be communicating with your consumers, supporting the value proposition in every way possible. This is now possible through a multitude of channels and tools not dreamed of just a few years ago, and these need to be used. However, if you have the budgets, old fashioned advertising, so long as it is good advertising that communicate clearly the value of the brand, still works.
Yeas ago as a young product manager, I was a (minor) part of the team that built Meadow Lea margarine into the dominating market leader in margarine. Meadow Lea peaked above 20% market share, well over 3 times its nearest competitor, in a crowded market, at premium prices. It was just margarine, a great product, but hardly worth that sort of dominance until you remember that we were busy congratulating mothers for using it for the benefit of their families health and happiness. I have not seen any numbers in a long time, but I have also not seen advertising for a long time, so I bet Meadow Lea is back with the pack, only selling on promotion, at discounted prices, and the parent company, which took a short term view of marketing, went from being a successful large company to an unsuccessful way smaller one until it was flogged off to a Singaporean group.
We built a brand powerhouse, only to have it squandered.
As a final groan, just pre Christmas I went into Woolworths to buy the family Christmas ham. The only choice was one of a number of Woolworths house brands. I went elsewhere, and found a really good ham from a specialist retailer, probably cost an extra $5, but was worth every cent.
I wonder if this experience is a portent of things to come, or just me being cranky.