A marketers explanation of the ‘Price Elasticity of Demand’, and its implications.

A marketers explanation of the ‘Price Elasticity of Demand’, and its implications.

Sep 15, 2021 | Analytics, Category, retail

 

‘Elasticity’ is something most of us did in economics 101. Why have we not used it more than the evidence of my eyes would suggest?

The price elasticity of demand is usually defined as the relationship between changes in price and the resulting changes in volumes sold.

Elasticity = % change in quantity/ % change in price.

For example, assume you raise the price of a widget from $100 to $120, which causes the volumes sold to go from 1,000 in each period to 900. The price increase is 20%, the volume decrease is 10%. Elasticity is therefore 10/20, or 0.5.

It is the absolute value of the metric that is important, the distance from zero, rather than if it is positive or negative. If the number of widgets sold had been 750 after the price increase, the elasticity would have been 1.25. (25/20) a more elastic response to the price increase than the 10% drop in the example.

It is crucial for marketers to understand the elasticity of their products if they are to optimise the price/volume relationship, as price is the most sensitive driver of profitability.

The challenge is that there are a whole bunch of psychological and competitive factors that weigh into the equation in a consumers mind, simply not accommodated by the simplistic price/volume curve we all saw in that economics 101 class.

You can speculate all you like about price elasticity, but the only way you will know is to evaluate it in the marketplace.

We are currently (September) in the season where there is a glut of avocadoes available. My local Coles store seems to be altering the prices daily, anywhere between 1.00 each to 1.69 each. It is probably that they are partly reflecting the deliveries into their distribution centres, but the data collected at the checkouts will give them a detailed view of the volumes at differing prices, and even the time of day. This data is invaluable market intelligence that can be used to optimise their profitability for the product category.

Given that cost is a lousy starting point upon which to base price, it may be that this Coles is leaving money on the table by reducing the prices below $1.49.

How many less avocadoes would be sold at $1.49 than at $1.10?

Someone in their data analysis system, somewhere, has the data to make this call with close to absolute certainty as it applies to this store.

Theoretical price research, outside of the real purchasing decision making, is at best inaccurate, at worst, misleading. A/B testing used to be a challenge, but increasingly we can use digital tools to interrogate the data that digital capture, in this case the checkout, that has become available to us.

Companies like Amazon with vast amounts of data are so good at it that they know the price elasticity of individuals in particular product categories. They display prices accordingly every time you search, in order to maximise the chance you will buy at the highest price they can charge, based on your history.  ‘Dynamic pricing’ is the now common term being used to describe this process.

Once you understand the elasticity of the price/volume profile of your product, you are in a better position to maximise profitability, while delivering value to your customers.

Header cartoon credit: Scott Adams. Not sure the analogy is a great one, but the idea was amusing.

 

 

Amazon, Whole Foods and the future of supermarkets in Australia

Amazon, Whole Foods and the future of supermarkets in Australia

Jul 26, 2017 | Category, Change, retail, Strategy

Amazon would not have paid $13.8 Billion for Whole foods without a plan. The purchase came as a surprise to most, but it should not have, they have been evolving into bricks and mortar for some time, with books, Amazon Go, The Washington Post,  and a few other dabbles.

Most commentators look at Amazon as a digital retailer, but when you think about it, they are not: they are a Platform that manages supply chains. Those supply chains just happen to end with consumers, rather than a B2B transaction.

Looking at the purchase of Whole Foods through the lens of a supermarket retailer will lead you to wrong conclusions, as you will be looking for the efficiencies that can be squeezed out of the existing model, with a few wrinkles added in.

Wrong lens, wrong model.

Amazon will reinvent the Whole Foods supply chains, and extend them straight to consumers, probably using Blockchain technology. Wal-mart is experimenting with Blockchain in their Pork and Mango supply chains, and I would be astonished if the work Amazon has been doing developing Blockchain technology in finance markets leveraging Amazon web services in collaboration with IBM was not applied very quickly to Whole Foods.

Amazons success (I predict) with Whole Foods  will be enabled by their efficient systems, great technology, engaged workforce and all the other stuff parroted around, but the real reason is far more strategic.

In the ‘old world,’  whether it referred to supermarkets, newspapers, personal transport, or accommodation, success came with the control of supply, which required capital to be in the game. In the digital world, success comes from the control of demand.

Amazon has demonstrated its mastery of demand management, and has demonstrated that this mastery can be leveraged backwards into the physical world, as they deliver a huge range of goods from their warehouses.

The mission statement on Amazons site states:  “Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”  No mention I can see of digital, or technology, just customers!

By any measure, Bricks and mortar is on the slide, but on-line sales still amounts to a small proportion of retail. Just what the percentage is depends on whose numbers, and what they classify as retail, but it is less than 10%, 8.3% according to this study but will be more based on the huge number of filings for bankruptcy current in the US. According to this 2017 Nielsen study, online sales of FMCG accounts for 8% of dollars.

 

 

The split sales between on line and in store is very wide across different categories, but the growth of 80% in digital while off a modest base, is a statistic that should scare the pants off Coles, Woolworths, and other ‘traditional supermarkets around the world. Sainsburys in the UK has suffered in the share price stakes as their profitability has slipped, while they seem to have done a pretty good job with home delivery, and digital generally. Amazon could buy them from cash flow. Just a thought!

 

What will the digital/bricks & mortar split be in 20 years?

Will the current 90/10 reverse itself?

Perhaps not, but 50/50 would not seem to be outrageous when you think of the developments in Virtual reality emerging, where you will be able to visit your supermarket from the convenience of your couch at home.

The future is in personalisation, we all seem to accept that. However, the existing supermarket business model is intent on homogenising the experience in the pursuit of low costs.

Do you see a paradox emerging in this? Retailers are doing exactly what consumers do not want, at least outside commodity categories, as is evident in the foregoing graph.

I think  the era of big box retail is coming to an end, and in its place will be experiential retail. Alibaba, the Chinese version of the combination of Amazon and Ebay has stayed away from owning anything beyond the platform that enables connection and sales, but that is also changing. There are now 13 Hema supermarkets around Shanghai, delivering a step towards experiential retail, and using technology to drive then enable the transactions.

If I was running Coles, I would be experimenting with ‘MasterChef’  sections in some stores. Have a chef, cooking the fresh produce in  the stores, simple recipes that shoppers can see in use, and certainly purchase pre packed bundles that have all  the ingredients along with prep notes. Similarly in the Coles owned Bunnings I would have workshops teaching ‘do it yourselfers’ how to use the tools and materials, running classes that use them to make something. Customers  can then buy the tools, blueprints and product packs to make a work bench, toys for the kids, or whatever they wish. In Bunnings currently, if you want to be stocked, you need to have merchandisers that fill the shelves. The next logical stage is to have branded sub stores, where there is only branded product on sale, and with an ‘advisor’ paid by the supplier, on hand.

A shop within a shop if you like, which is not a new idea, department stores have had fashion brands running sections in their stores for years. Experiential retail.

The supermarkets are going in the opposite direction, commoditising everything in the name of efficiency.

The industry has consolidated and consolidated, fewer brands, retail options, and producers. Perhaps there is a tipping point, and we are just passing it.

The consumer is increasingly looking for natural, local, assured provenance, and  environmentally sustainable product, all mixed in with a new shape of ‘value’ less dominated by price than has been in the past. Communicating and delivering these attributes are the foundations of branding, and the delivery of ‘value’ to a purchaser.

Woolworths will live to regret the closure of Thomas Dux,  but it is just another in a long line of strategic blunders. it started so well. Their in store  ‘Foodies’ were a hit in the stores I visited, but the weight of the Woolworths machine drowned them. Bring it back I say, it may be your saviour, or try and buy Harris Farm again before Amazon come in and offer the Harris family enough to retire in gilded luxury to Monaco.

I like Ray Kurzweil’s observation that ‘The future comes very slowly, then all at once’.

This is classically the emergence of AI and combined with the Gartner Hype cycle makes a compelling case. Gartner’s 2016 Hype cycle has several technologies that relate to and are integral to the development of all the AI and VR stuff being hyped. Amazon has the grunt to bring all this to the table and disrupt the comfortable supermarket duopoly that exists in Australasia.

If nothing else, it will be fascinating to watch

 

Header photo credit: Eli Christman via Flikr.

5 ways to avoid brand prostitution in FMCG

5 ways to avoid brand prostitution in FMCG

Mar 8, 2016 | Branding, Category, Customers, Marketing

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.

Sad that.

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.

15 rules for dealing with supermarket buyers

Sep 9, 2015 | Category, Customers, Marketing, retail, Small business

 

supermarket buyers hold the power

supermarket buyers hold the power

Respected Australian Food industry journal Australian Food News published a terrific rewrite of a presentation I gave some weeks ago to a group of food industry CEO’s reflecting on the years I have spent in the industry.

After 40 years, I thought there may be something of value to pass on those following, and it was a great opportunity to have some fun.

A copy of the original presentation has been put up on Slideshare. AFN changed the order around,  improving what was in effect a brain-dump set of slides accompanying a casual presentation.

 

Know your business and theirs

 

  1. Know more about your business than the buyer does. This seems pretty obvious now, but in an early (late 70’s I guess) encounter with one of the doyens of the industry, Eric Bender of Franklins, he demonstrated what can happen if you are underprepared. Eric took pity, and let me off lightly that day, and I never forgot the lesson.

 

  1. In a power imbalance, negotiation is challenging. Whether we like it or not, the buyer has all the power, even the biggest companies have little power to influence them in any way that is inconsistent with their best interests. I remember many years ago Coke had a blue with Coles (I think) believing that Coles needed them on shelf, so they hung tough, for a while. After a period which was a golden age for Pepsi, Coke relented.

 

  1. Don’t put your eggs in their basket. People often say that you should never put all your eggs in the one basket, but from time to time, when you control destiny of the basket, it is OK. However, putting all your eggs in the buyers basket has proved fatal for many, particularly small businesses that simply do not have the wherewithal to service the relationship at the margins on offer. Besides, depending on whose numbers you believe, there is somewhere north of $45 billion of sales outside supermarkets, so why do you need to covet the buyers basket.

 

Know your customer and control your message

 

  1. Buyers are lousy at marketing. Over the 40 years this has been proved over and over again. They are good at being retailers, they understand the dynamics of their floor and shelf space, customer traffic, negotiation, and copying quickly, but very little about customer behaviour outside their stores, and the importance of branding and communication that contains a promise other than price, then delivering on it.

 

  1. Know the rules well enough to play in the grey areas. There are the written rules, there are the unwritten rules, and between them is a grey area of interpretation. Knowing the rules well enough, and knowing the administrator of the rules well enough to identify the grey areas and play to them is a rare skill learnt over time, with deep experience. I used to work with a field sales manager affectionately known as “Cookie”. She was the best I ever saw in a store, had the planograms in her head, knew all the personnel, what they were like, what they wanted, and how to turn them inside out. She and her team destroyed all our opposition in NSW.

 

Experience counts

 

  1. Dealing with Buyers is a job for your “A Players” The smart people in your businesses should be the ones taking up  the challenge of dealing with buyers, as it can be a make or break activity. Many seem to think it is a place to train future product managers, or hide the boss’s nephew. Wrong, nobody should be a product manager without having had the chance to be mauled a few times, but that should not mean buyer training is a pathway. Only allow your smartest, best, most motivated people in front of your biggest customers, who also is paid to extract the maximum from the piece of real estate you covet. I always found professionally trained introverts were best. They instinctively over prepared, and had data driven logical and sequential minds, and were generally smarter than the buyers they faced. Ask yourself “what is someone who looks after 40% of my sales really worth?” and pay them appropriately.

 

  1. Corporate memory is absolutely invaluable. Don’t re-learn from your new experience, it is really, really expensive, learn from the past. Learn from others, learn from the experience that the business has had in the past so you avoid repeating mistakes.

 

  1. Beware new buyer syndrome. We have all been faced with a new buyer, recently promoted from the baked beans aisle of the store in West Bullamakanka, who is suddenly given the power of “No” over you, and found the feeling seductive. You have little choice but to work with them, so put your best people on them, and there is a chance that when a bit older and wiser, they will remember the effort, and it will pay dividends.

 

When it’s over it’s over               

 

  1. Let the horse die. No amount of flogging will get a dead horse to move, no matter how encouraging the vet may be, and you know he has a vested interest to keep you flogging. You must know when to give up and walk. In this case, the Vet needs your promotional money, so keeps encouraging you to stick at it, but you know the product has eroded so it only sells on price discount, which is below your floor, and the buyers keep buying it from promo period to the next, never at full tote. In the end it costs less to lead the horse out to a humane death while it still walks, rather than leave it to suffer, keeping up the strong and expensive medication, then suddenly finding it has died, and you have a warehouse full of horse food to write off.

 

  1. Innovation is more than changing the pack colour. Innovation is when you do something that makes the pie bigger, not just add something similar and slice it up in a different way. Besides, flagging “new and improved” leads consumers to conclude you have been selling them second rate stuff up to now. What retailers are selling to you is shelf space, and as such are going to get as much for it as they can, and they do not care if they sell your product or somebody else’s from it. You go in with your whizz bang new pack colour, they will take the promo money, and line fees, and all the rest, their business is selling you retail real estate, and if you offer a good enough price, you get the chocolates, this week.

 

Work with them not against them

 

  1. Be nice to buyers. There is little value in annoying buyers unnecessarily, although it is sometimes pretty easy to do. Remember that buyers like to be liked, just like anyone else, so get them to like you, store up the brownie points when you can, you may need them some day.

 

  1. Ensure the Buyer knows you are not afraid. You need to be serious, informed, appropriately acknowledging the power imbalance by being creative, but never afraid. Even when the buyer beats up on you, if you are prepared to push back, they will respect you in the morning, but if you cower and beg, well, there will never be any respect, and there will be no coming back.

 

  1. Buyers do not care about you. Retailers are in business to satisfy shareholders, and the individuals buyers have targets to meet that do not have anything to do with you. They care about themselves, and the challenges they are facing, so getting them to do something you want them to do revolves around you solving their problems, not them yours.

 

  1. Buyers need you or someone like you. When it comes down to it the shelf space needs to be filled. So if you can articulate the need, they will give you back a bit of the power imbalance that exists.

 

  1. Beware the armchair experts. Many of those who claim expertise haven’t actually got any. So listen to all the sensible advice you can find, but make up your own mind, and implement with focus, agility and passion. There really is no better way of knowing about buyer behaviour than by working with them.

 

So, there it is, almost 40 years of pain and experience in the time it took you to read this article.

Bargain.

 

 

Is FMCG Private label able to continue to grow?

Aug 24, 2015 | Category, Marketing, retail, Small business

private label

Australia’s Grocery retailers continue the march towards private label range dominance, basing their strategic decision making on two foundations, it would seem to me.

  1. By controlling a large section of their sales via PL, they manage to both increase their margins at the same time they reduce their transaction costs. Good trick if you can get away with it, and in the short term they certainly can, but in the long term?? Who knows.
  2. What works in Europe, and particularly the UK will work here. Over 40 years in this industry, this has certainly held true, what works there generally becomes translated here at some point, in some form.

However, when considering the future of PL as a part of the landscape in Australia there are a few other considerations not present in the UK, and elsewhere in Europe.

  • We have large distances, and  a smaller population, making the economies of scale in manufacturing  and distribution that much more elusive, and less attractive. In western Europe you have 350 million, or thereabouts living is far less space than Australia occupies, with a multiplicity of manufacturing options. Just the UK has 65 million in about the space as Victoria.
  • Over the last decade, the number of middle sized  Australian owned FMCG manufactures has been decimated by a combination of the high $A, the GFC, and the power of the two major retailers, so there is little left. Now the $A is lower, and the opportunities emerging, they are not coming back. Imported private label products now have to carry the added cost burden as well as the substantial costs and risks of the extended supply chain.
  • Where is the innovation going to come from? Medium sized suppliers have been the source of much of  the innovation that has driven category growth over the last 25 years. While it is relatively easy these days to pick new stuff off the shelves in Europe and set out to copy  it, the retailers still need to have the products manufactured, and often massaged to suit local tastes, not so easy any more.
  • Retailers in taking their ideas from European retailers, seem hell-bent on  segmenting the PL share. No longer the cheap and cheerful substitute, European PL now  offers under a range of house brand labels that cover the market from ‘top’ to ‘bottom’ as well as emerging segments like organic and halal are being pushed, further eroding the power of the proprietary brand. As a marketer I ask “for whose benefit?” certainly not the consumer.
  • The Private label business model that demands minimum transaction costs on both sides does not sit comfortably with the proprietary model, with its complex trading terms. In most cases, suppliers of PL also supply proprietary products, adding to the complexity of the paperwork and relationships.
  • Produce is a bit of an anomaly, as there are almost no proprietary brands. Producers and their representatives have comprehensively failed over 30 years to do any sort of branding job, so consumers do not miss what  they never had. However, increasingly consumers seem to be reluctant to buy anything much beyond robust commodity products from supermarkets, believing after 25 years of cricket balls masquerading as peaches, that the specialists do a much better job.
  • This last point is really anecdotal. There appears to me to be a backlash coming from consumers. A typical comment made  to me last week was ‘if I do not want any choice, I will go to Aldi, but when Woolies denies me a choice, I wonder why I pay the premium over Aldi’. The two majors had better be careful, they do not ‘own’ consumers, who will make their choices independent of a retailers profit considerations.

Private label is now irrevocably a part of our lives, but  I doubt if there is too much more room in dry goods for share growth without  compromising retailer margins, but I guess they will be very wise with hindsight.  Meanwhile, the pressure on the few medium sized manufacturers left intensifies.

 

5 ideas for SME’s to compete using data.

Dec 4, 2014 | Category, Marketing, Operations, retail, Small business

Data management & analysis

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.

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.