Making Sense of the Savvy Consumer in Flatline….

Given ten years of market confusion, consumers are now beginning to make some sense of the financial turmoil, are developing increasing confidence in their common sense when making purchasing decisions, and those who still have jobs are working longer and harder, and possibly for less money.

As a result, they are relating every £1 of ‘discretionary’ expenditure to their current and future earnings, assessing the opportunity-cost in terms of alternative uses of the money, like never before…

They are raising their own performance standards, and using them as a measure against which to evaluate every product and service offering, refusing ever to outsource their decision-making to marketers and retailers again.

In addition, mobile-isation of market-comparison has made it easier for the savvy consumer-shopper to evaluate alternative offerings objectively and accurately, and is guiding their expectations of performance in the process.

The New Savvy Consumers

Welcome to the new savvy consumers, the professional shoppers, discerning buyers who are simply seeking to obtain satisfaction of their needs in an open market, at a price that compares well with alternatives available, based upon simple common sense, and trust in no one....

As the newly emerging primary driver of demand, the savvy consumers have to be persuaded that their needs are being met, for a fair price, and that their purchases deliver more than expected in practice. In other words, this new consumer, if willing to spend, is unwilling to accept anything short of good value for money.

The destruction of consumer-trust

Consumer-trust, having been severely undermined by the bankers and politicians, is now at an all time low, in that consumers realise that they have been betrayed by the ‘pillars of society’, and they are no longer prepared to ignore the learnings….

As a result, they now believe that in the final analysis, they can no longer afford to risk outsourcing purchasing decisions to marketers and sellers of goods and services. In other words, the consumer is now using basic common sense to evaluate what they get for their money and is rejecting second-best….

A real opportunity for the good guys

If this is seems like more doom and gloom, then we are simply not expressing it properly…

In fact, we believe that the emergence of the savvy consumer is the most positive and exciting social development of the current cash crisis. We are now living through the evolution of a commonsense approach to buying goods and services by increasingly informed consumers, who are prepared to vote with their feet. This is a development that will obviously challenge traditional marketing and selling practices, but will provide significant opportunities for those suppliers and retailers that are prepared go back to basics, factor this new reality into their product offerings, and always strive to exceed consumer expectation…

In practice, this means that the consumer is providing an entirely new basis for suppliers to re-evaluate every SKU in their portfolios against available alternatives, and ruthlessly eliminate anything that does not clearly demonstrate a total match with latest consumer need, made available in a way that shoppers want to buy, better than the competition. It follows that the customer portfolio has to be re-assessed from the same point-of-view, again with the aim of identifying and cultivating trading partners that are capable of expressing the brand offering in a way that can meet consumer-shopper needs at point-of-sale, profitably.

This elimination of consumer-brand mismatch and product overlap from supplier portfolios will reduce supplier costs, allowing liberated resources to be invested in winner brands with increased emphasis upon consumer satisfaction, thereby selling more to current savvy consumers, and making it easier to sell new products to those increasingly trusting and loyal users.

In the same way, building trade partnerships with like-minded retailers has to present joint-opportunities to optimise common-sense market need, while others await a return to ‘normal’…

The French KISS approach to beating the discounters

According to a report in Reuters, France is the only country in Europe where discounters have seen a significant drop in market share, slipping to 11.9% in the second quarter of 2014 from a 2009 peak of 14.9%, according to Kantar Worldpanel data.

In fact, the success of French retailers in stopping the advance of discounters in the last five years shows a way out of the crisis embroiling Britain's "big four" grocers.

Their simple formula: fewer complex promotions and big price cuts across the board.
(After all, rocket-science is so pre-2007...)

The French grocers expanded their budget product lines, cut a proliferation of promotions, simplified own brand ranges and worked with suppliers to slash prices of branded goods.

In practice, this approach in the UK would require high levels of collaboration between suppliers and retailers, given the inevitable margin hits’ impact on share prices…

However, for branded goods suppliers, since any growth of the discounters comes at the expense of brands, then helping the multiples, helps the brands.

Moreover, in negotiation terms, the price for such assistance has to be a demand for fair-share dealings, between equal partners…

Truly, we are all in this together… 

Flatline demand or wot?

A report in The Observer this weekend said everything in a graph...

As the chart shows, it is very rare for real wages in the UK to fall continually over a seven-year period. They have done so only three times in the past 150 years: after a deep recession in the late 19th century; in the 1930s, following the Great Depression; and again in the past seven years, the steepest fall in 150 years....

Given that in these circumstances, governments, banks and individuals have been paying down debt, it should be no surprise that very little spending money has trickled onto the market...

And given the extent of the fall in real wages, politicians' promises of an immediate upturn need treating with caution..

In other words, best to forecast product/brand growth at the expense of the competition, if you can...

While others await a return to 'normal'....

The Amazon KAM - A new way of Managing Major Customers?

News of Amazon’s latest issues with publishing giant Hachette and its authors, reveals the extent to which Amazon can affect markets in its aim to bring cheaper books to the public.

The row has come to a head because Amazon and Hachette have failed to agree new terms under which the online retailer can sell the publisher’s books. Amazon in turn is reducing its stock of Hachette titles and blocking pre-orders, which are vital to secure early sales and nudge a book up the charts.

For a good summary of the detail and implications, see Graham Ruddick’s latest treatment in The Telegraph.

Nothing like Amazon has happened before in terms of scale and influence. So perhaps it requires a different approach in terms of account management?

Obviously, Walmart is big and increasingly global, but Amazon has the capability of straddling the globe - albeit next day delivery might present some problems in the Amazonian jungle -, without the need for the same degree of ‘bricks & mortar’ infrastructure that would be required by a ‘walmart’ hoping to achieve the same coverage and access to consumers…

In fact, it could be said that Amazon is heading towards a 50% share of anything that can be sold anywhere, to anyone, at least…, and perhaps we should budget with that in mind?

This means that the traditional NAM/KAM model could be inadequate.

Traditionally, as you know, as in-house champions of their accounts, NAMs were seen as business managers of a customer-business-unit, often within a global context for that customer, charged with maximising sales and optimising long term profitability of the account, without compromising the company’s dealings with the customer in other countries, and with very little consideration of the impact on other  customers.

It was the job of senior management to ensure that each major customer received its fair-share of the action.

Amazon needs to be managed differently….

Whilst a company should never try to hold back a major customer’s growth in order to limit its share of the company’s business – in the current flat-line environment any growth should be cultivated – perhaps the role of the Amazon KAM & NAMs should be to not only enable Amazon to reach its full potential, but also be the in-house ‘educator’ to ensure that Amazon’s online disciplines and KPIs are applied to any other customers aspiring to compete online. In other words, Amazon standards should be used to raise the company’s total game, and to assess how trade support is apportioned among other members of the customer portfolio.

Amazon have found a way of growing in a flat-line environment and perhaps it is time for us all to learn how to optimise this new future...

Finally, it hopefully goes without saying that the Amazon NAMs should have an open-line dialogue with their Board-colleagues to ensure that immovable trading limits are set, and strictly maintained, as Amazon approaches what could be 50%+ of the company’s business…