Trade planning via an exit-strategy?

Given the latest Which? report indicating Apple Retail’s fall in UK public esteem from last year’s No.1 retailer slot to No.13, coupled with being overtaken by Google as the World's Most Valuable Brand, according to BrandZ Top 100 Global Brands, there is perhaps a lesson here for all NAMs’ in their approach to trade-investment…?

Because most business planning is based upon growth and moving towards the top of a league table – remember the pre-2008 days when growth was a given, and innovation guaranteed increases in consumer-shopper esteem - flat-line demand requires a change in order to factor in new realities in most markets.

Private equity companies - the ultimate pragmatists - have no trouble embarking upon a high potential takeover opportunity with an exit-strategy already worked out to three decimal places, yet they manage to pursue the acquisition goal with full enthusiasm and drive….

They simply position themselves at the exit-point - the ultimate objective - and then work out all moves that will help them reach that goal.  It goes without saying that expressing everything in financial terms makes the process easier to measure, manage and communicate..

In other words, we should invest in retail opportunities early, and with the aim of driving our business with the customer all the way to the top, and then manage its inevitable descent, all as part of the ‘life-time’ trade investment process…

In the same way, writing a clear business objective means imagining oneself at the end point, and simply describing what will have happened, as a definition of a successful outcome:

Example:
Objective: as a result of implementing the plan, the following will have happened:
- Achieved successful launch of new variant
- Sales grown by 12%
- Profits grown by 11%,
- Increased distribution to 78% by month two of new brand
- Incremental business of £450,000
- By month 7 have achieved 70% of full year target

A bit clumsy, perhaps, but it ticks all the boxes…
Or perhaps you prefer more of the old way?

Amazon buys the Washington Post, Waitrose buys the Good Food Guide, same difference for NAMs?

In another sign of the unprecedented challenges newspapers face as advertising revenue and readership decline, Amazon yesterday paid $250m for the 135-year-old Washington Post, breakers of the Watergate scandal… .

In addition to the newspaper, Bezos gets other publishing businesses, including the Express newspaper, The Gazette Newspapers, Southern Maryland Newspapers, Fairfax County Times, El Tiempo Latino and Greater Washington Publishing.

However, the Washington Post represents only a fraction of the company which has expanded into a stable of holdings, including education and health care services and most recently an industrial supplier. The collection of companies that make up the Washington Post is akin to that of Warren Buffett's Berkshire Hathaway Inc, which owns disparate businesses from railroads to underwear as well as a stake in the Post.

Obviously Amazon will bring innovation, a global database and leading-edge online/digital expertise to the mix, but especially consumer-focus, pace and 1-click convenience. 
Above all they will strive to replace all elements that appear to be the cause of newspaper demise, hopefully leaving untouched the core of what the Washington Post is to its readers.

In the process, Amazon, with little experience of newspapers, may happen on a long-term solution to the sector’s problems…

A pointer for traditional media, or the final threat…? 

Meanwhile, Waitose purchase of the Good Food Guide from the Which? consumer advice group, includes the website as well as the 63-year-old magazine.

In contrast with the Amazon deal, here the traffic is more two-way, in that Waitrose gains access to the receiving end of a food service culture, via an army of volunteers who inspect and rate restaurants anonymously, along with enhanced credibility with diner-consumers…

Waitrose also publishes a weekly lifestyle and recipes guide, along with a monthly magazine which will give some scale economies and efficiencies via the new purchase, apart from website synergies.

From a NAM point-of-view, both retailers have just added new dimensions to their relationships with consumers, giving them more insight into making ‘paid-for’ media work, and hopefully more appreciation and understanding of the real value of Return on Trade Investment.

It only remains for NAMs to be able to handle the resulting conversation…

When the buyer knocks your trade spend…

S:   ….and I am offering £50k to support this price promotion, subject to conditions,…

B:   £50k is not very much…

S:   How come?

B:   Like I said, for a company of your size, a drop in the ocean…

S:   How much profit do you think we make?

B:   How should I know?  Lots…

S:   Our Pre-Tax Net Profit is 11%

B:   So?

S:   This means that when I put £50k trade spend on your desk, I need to see incremental sales of £455k before I let go of the money…

B:   That’s your problem…

S    OK, Sunshine, let’s talk about your problem… You think £50k is nothing…?

B:   Agreed!

S:   Your business makes 2.5% Pre-Tax Net Profit, right?

B:    How do you know that?

S:   Companies House online, £1 for the latest Annual Report. See, I’ve invested in you already, we call it preparation…

B:   Wish I had the time to surf the internet… Anyway, so we net 2.5%...

S:   This means that my little £50k is equivalent to giving you extra sales of £2m……

B:    Prove it !

S:    Fine.  Our £50k trade investment comes with no handling costs (except bank charges!!!), so it goes straight to your bottom line. It therefore represents 2.5% of sales, in your business model.

B:   So?

S:    £50k divided by 2.5 and multiplied by 100 gives you sales of £2m, bingo!

Buyer:    What do I have to do?

SuperNAM:  Now you’re talking…..


Adventures of SuperNAM! (11)

Trade-spend Responsibility – a move to the Finance Department?

Having grown from a sales-department ‘slush-fund’ of  5%  of turnover to over 20% of  a typical supplier’s sales, trade-spend is now greater than cost-of-goods in many cases.

The global financial crisis having caused consumers and businesses to ‘deleverage’ by paying down debt, means there is less money available to spend, resulting in flat-line demand for the next five years, in most markets…

This situation was becoming unsustainable leading up to 2007, but the global financial crisis has changed the game fundamentally…  The sums and the stakes involved are now so high that companies have to consider applying all of the disciplines of capital investment and the law of contract to the allocation of trade funds, or risk devaluation of the share price by investors, or worse….

In other words, trade-spend, this key selling tool, has become too important to be left to the sales department…

However, it should be kept in mind that NAMs are closer to the customer and as a result are better placed than most to take a commercial view of the ‘cause and effect’ of promotional expenditure.
Above all, the NAM should by definition be a good integrator of company and customer interests in ensuring that trade promotions meet joint objectives.

The key is to be able to converse with individuals in their own language, framing all requests in terms of meeting their needs via the NAM’s initiatives, with the corporate goal-in-common expressed in financial terms, the common language, and Return On Capital Employed the key driver. .

By incorporating the principles of Capital Investment to trade spend management, including the financial impact on both parties P&L, NAMs will echo the finance department approach to making financial investment decisions and will thus make trade-spend feel more comfortable in Sales’ hands…

More on ‘How’ for NamNews subscribers in the February edition.
Free trial available here