Apr 14, 2014 | Branding, Customers, Marketing, retail, Sales
Walking into chain retailers these days you are inevitably confronted by displays of product, usually at a discount.
Most people seem to think that it is the retailer doing the promotion as a means to attract added sales, which is true, but the reality is that the promotion is funded by the suppliers, and it is a competition for the retail space that is generally won by those suppliers with the deepest pockets, and best information.
Retailers are in two businesses, selling stuff to consumers, and renting retail space to suppliers. Chain retailers business model relies on a formula that accommodates volume, revenue, and total margin over the space allocated. This can get very complicated, as the number of variables is enormous.
For a supplier to a chain retailer, the challenge is to balance the complex and competing demands of enterprise profitability and investment in the future against the need to meet retailer margin demands necessary to retain access to the consumer via the distribution controlled by the retailer.
Of real significance is the difference between sales that would have been made irrespective of promotional activity the “base sales rate” and sales made in a period as a result of promotional activity, “incremental sales”.
The need to fund retailer margin via promotional allowances is universal, but the sales that occur as a result of the activity may not be there when there is no activity, and are therefore” rented” sales. The effectiveness of the activity has many measures, but to the supplier two measures only are of any real use.
- The real cost of the promotional activity including all discounts on deal volumes and associated co-operative advertising.
- The number of consumers who convert over time from being a rented consumer to one who becomes a part of the base sales volume.
If you are not making these calculations, and adjusting the mix of your expenditure programs accordingly, and are prepared to make some very tough choices on the basis of the information gathered, chances are you are going broke being successful, a very common complaint in the Australian FMCG market.
Apr 13, 2014 | Uncategorized
This post goes back to mid 2012. A conversation yesterday with a colleague brought it to mind, as we were discussing the the opportunities to monetise Intellectual Capital of the sort represented by the 1200 odd StrategyAudit posts. “You know more about category management that almost anyone”, he said, “You almost invented what was then Trade Marketing 30 years ago, there must be a bob here somewhere”.
Perhaps self indulgently, I agree.
Apr 11, 2014 | Change, Collaboration, Innovation, Small business
courtesy respectserendipity.com
At first sight, “Organised” and “Serendipity” are at opposite ends of the scale, almost mutually exclusive.
Serendipity occurs by chance, when the stars align, the unexpected happens and not by any organised process, or so we are led to believe. Organisation by contrast removes by its nature the chance occurrences, random relationships, and inconsistency that make serendipity possible.
As collaboration increases and we recognise and seek to harness the intellectual capital of individuals by what is often called loose/tight management, the opportunity for serendipity increases, simply because the processes that run our lives are looser, more inclusive rather than exclusive. The use of technology to facilitate collaboration and recording process has increased the opportunity for those serendipitous moments and insights that just used to occur at the water cooler, and in the lunch room.
It follow then that setting out to organise in such a way that the chances of serendipity are enhanced is both logical and indeed, is a competitive necessity. It is after all where the insights that lead to innovation and its rewards are born.
Are you organised for it?
Apr 9, 2014 | Uncategorized
Holden, SPC, Alcoa, Caltex oil, and all the other industrial enterprises that are currently going out of business or leaving the country are doing so because they failed to keep up with the evolution of technology and management practice. Whilst labour costs, the $A, oligopoly control of retail supply chains, limited scale of the domestic market, and all the other reasons that are trotted out have played an important role, the underlying presence is a corporate failure to evolve in the face of these changes.
Well, SPC is not out of business, just. Woolworths have sent them a lifeline, but it is motivated by self interest, not benevolence, as they suddenly realised that without SPC, they had no local supply of canned fruit, adding uncertainty, inventory, 3 months lead time, and transaction costs to a supply chain where they had lost all leverage. They have also done a similar deal on supplies of milk, as they recognised, perhaps belatedly that they were killing their own supply chains.
Now the handouts have stopped, we are undergoing the corporate version of Euthanasia in manufacturing.
Painful, but unavoidable commercial evolution if you take the long view.
Governments seem to have made the choice (with some politically expedient exceptions like Cadburys) between retaining by subsidy an industry or enterprise that has no economically sustainable business model, simply to maintain jobs, and letting it die by cutting off the supply of taxpayer cash. This is not to make light of the emotional and financial challenges this places on the displaced families, particularly in regional towns that find their biggest employer closing.
There are many lessons for us all in this current flurry of corporate euthanasia, perhaps even the beginnings of a national strategy? Certainly, the space left will open up opportunities for others, innovative smaller businesses that use technology and agility to add value their larger less agile predecessors could not.
Apr 8, 2014 | Leadership, Marketing, Strategy
Often I find myself engaged in conversations with those running small businesses who believe they have discovered the next big thing, the idea that will change the world, or at least their business.
It can be as simple as a tweak to an existing product that enables it to be used in an adjacent market, to a patented idea that they believe will change the world, the 3 questions I always ask remain the same:
- To whom will it add value?
- How will it add value?
- By what means can you unlock that value and make a return as a result?
Whilst answering those questions can be time consuming, and sometimes confronting, and is often an evolutionary process, they constitute the core of strategy development,
So often I see a solution in search of a problem posing as strategy that it makes me shake my head in frustration, when a bit of discipline in the way tasks are identified and managed can go such a long way. These are 11 tasks you can set yourself to help the process of answering the “big three” along.
Walking into chain retailers these days you are inevitably confronted by displays of product, usually at a discount.
