Managing the Merging of Retail Customer Investments

February 21, 2019

It is no longer enough for a sales executive to manage “trade spending.” CPG brands must manage all activities and investments with all retail customers in order to predictably manage their P&L. We call this approach Customer Investment Management rather than Trade Fund Management.

Why is this important?

  • The retail landscape has changed dramatically, with Ecommerce retailers (Etailers) predicted to make up 15-20 points of most progressive manufacturers’ volume.
  • The evolution of Etailers and technology allows shoppers to be aware of market prices at all times. Price shopping has become as simple as a few clicks.
  • Decisions about the introduction and maintenance of new SKUs has become critical since any SKU launched in any channel can become an Etailer’s SKU.
  • Consequently, marketers must now focus on critical SKU management as much as brand management.
  • Spending once considered “marketing,” such as television, radio, billboards, print, FSI coupons etc., is now delivered digitally, often from Etailers. Does that make it trade spending? It is focused on the consumer but financed through the retailer. Theoretically, this is the same as any traditional brick and mortar retail investment in discounted pricing and promotion. However, it is usually sourced differently in the manufacturer’s P&L; which means the analytics and understanding of the ROI for these vehicles requires new techniques.

How do brands manage this?

  • Operationally focused, rational SKU strategy must be completely written from scratch as one cannot simply “bolt on” an Etailer plan to a historical channel plan.
  • Pricing and promotion direction must be more specific and execution by field sales must be more disciplined.
  • SALY (Same As Last Year) planning has never worked. Now more than ever, new retailer and Etailer-specific account plans must be developed from the ground up to support a revised company strategy.
  • Tactical business performance and gap-to-plan tracking must be in place to constantly guide adjustments in organizational behavior.

What exactly should be done?

  • Ask the right questions…business is an act of will as much as it is about skill. Be clear about what leadership wants to do with the business.
  • Answer those questions honestly….instill rigorous analytics that assess the reality of the situation. Remain open to alterations to previous plans and new ways of thinking.
  • Make decisions with integrity…realistically deal with changes to the distribution mix, pricing and promotion that will be consistent with the new learning on the table.
  • Act courageously…consciously execute decisions internally and in the marketplace. This is simple to say but hard to do. It will require a healthy dose of eliminating ideas that don’t fit or are operationally restrictive, both internally and externally. You are not being uncreative by saying, “no” when an approach does not work or fit your strategy. To succeed, brands must execute a handful of things extremely well, as opposed to doing a number of things acceptably.

CMG combines exceptional analytical rigor with real-world industry experience to help clients achieve their financial objectives. This consists of optimizing all retailer-related activity and spending, not just the areas that have historically been considered “trade.” Contact us if you would like to learn more.

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