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 

New compressed aerosols deliver same quantity from 50% of the space…

Dove’s 150ml cans shrink to 75ml, but contain the same amount of deodorant and remain the same price.

Undoubtedly a great ‘Green’ move, the real merit of the idea is in demonstrating to the savvy consumer that Unilever is prepared to play fair when it comes to adjusting prices to reflect cost increases.

In other words, the new aerosol will focus attention on what consumers get for the money, when it comes to changes in pack sizes.

As you know, following years of freezes on trade prices, a number of suppliers have resorted to reductions in pack contents to disguise shelf-price increases, possibly causing damage to consumers’ faith in the brand. This latest move by Unilever heightens interest in the issue… and will surely cause the ultra-savvy consumer (and the competition) to conduct comparison tests for ‘peace of mind’….

Today's launch will be backed by a £13m marketing campaign. In these unprecedented times, Unilever will need to devote a high proportion of the money to explaining how an aerosol 50% smaller contains the same amount of active ingredient. However, if competitors have equivalent technology available in the wings, their subsequent launches will ease the consumer-education burden, but will leave Unilever with the innovator’s advantage for Sure Women, Dove and Vaseline Intensive.

Incidentally, given the resulting 15% reduction in shelf space taken up by the new cans, it would also be interesting to check out the small print of Unilever's retail agreements to see if shelf-payments specify shelf-length or number of facings…

It sure is complicated launching new products nowadays...

Watch this space...

Telling the time – a lesson in bonding…?

With 77 stores in the UK, and stocks thousands of products online at TheToyShop.com, The Entertainer is one of the most innovative and professional toy retailers I have encountered.
They are currently featuring a Time-telling kit aimed at helping kids learn how to tell the time, as preparation for the day when time becomes money…

If you are one of those parents that feel teaching your child to tell the time is part of the bonding process, the following pointers on the key communication issues may add some insight:

“.,…….Now: there are 24 hours in every day and every one of these hours is represented on the face of the clock…. 

There are three hands: the first hand is the hour hand, the second hand is the minute hand and the third hand is the second hand. 

Now the fat hand is hour hand and it is shorter than the minute hand.
I know that an hour is longer than a minute, but the Hour hand is shorter than the Minute hand because it is!

Now, when the fat hand and the thin hand are pointing at the 1 and the 2 up at the top of the clock- you see the 1 & the 2?-1 and 2 is 12. 
12. Yes it would be 3 if you joined them together…..”  (Dave Allen extract)

This hopefully gives a little flavour of the ‘advantages’ of having English as a first language, and its 'literal meanings' traps for those colleagues and buyers who had to pick it up…

Incidentally, if  the time-teaching task now seems a little more daunting, perhaps a quick trip to The Entertainer for a £7 kit would do you both some good…!

The full 6-minute Dave Allen Time teaching routine is below

Cross-selling promotions: beauty and bullets?

A husband and wife team in Kansas have been operating a combination hair salon and sporting goods shop that featured treatments and manicures as well as rifles and revolvers using the promotional slogan "where beauty and bullets collide"

Apart from Tracey’s undoubted reputation in haircare, Jeffrey was able to add authenticity to his category via his felony convictions for arson and possession of firearms… Linked-promotion synergies were optimised by combining the message that it was important for women to feel safe, with marketing material featuring sequin-studded revolvers.

Given that ‘an armed society is a polite society’ the salon was able to offer a peaceful haven of rest, a respite from the challenges of the world outside…

Unfortunately, the U.S. Attorney's Office in Kansas took issue with the fact that Jeffrey was operating without a firearm dealers licence, and are recommending five years in federal prison to enhance his CV.
Hopefully he will be able to surmount the more erratic supply-chain issues operating ‘inside’…

Regrettably, this unexpected development, combined with Tracey’s upcoming 3-year probationary period have resulted in the couple dropping all references to the firearms category from their website:  www.beautyandbullets.com

Have a peaceful weekend, from the NamNews Team!

The BOGOF Egg?

                                                                              pic: Moore household 29-01-2013
The chances of cracking open a double yolked egg are pretty slim.
One tenth of one per cent in fact.

But three double-yolk eggs in a row.?
A case of hens attempting to meet latest promotional specs?
Unprecedented times indeed!

The myth of scale economies?

How to measure the actual savings on increased quantities?

Yesterday’s NamNews item ref Morrisons’ latest ‘routine negotiations’ not only scored our highest visitor-count, but more importantly raised the question of how much discount to give when a retailer offers bigger volumes for a lower price…

As always, accepting an offer that ‘feels good’ instead of running the numbers is a good way to compromise profitability...

Also, given the long lead times required to negotiate something you want, the pressure to agree a scale-discount in the heat of the final moments of a last-minute discount-negotiation can cause you to accept ‘an offer you can’t refuse’…knowing that if you do refuse, the guys back of the ranch can label it a bad decision, never having to test it with actual numbers…

The following steps may help:  

• Keep in mind that a 10% Increase in sales does not necessarily mean a 10% reduction in costs
• Also, as a supplier, you know more about manufacturing cost-savings than the buyer…
• Select a specific SKU for one of your leading brands in the customer’s portfolio
• Check out the sales, order sizes and average delivery delivery-frequencies of the SKU to the customer in question
• Check with marketing/finance/production the cost savings on sales increases of 10%, 20% and 30%
• (sales increases greater than 30% have to raise the question of whether you have been missing too many ‘potential’ tricks with the retailer…)
• Actual savings will be driven by packaging and ingredient scale economies, capacity relationships etc in production and delivery, but it should be possible to arrive at a conservative figure ( you won’t believe how low the savings are, using real figures …hence ‘the myth’ of scale economies)
• Ask for a quick check of other big SKUs (other brands in your portfolio) to isolate any ‘funnies’ in terms of exceptions
• In negotiation, focus the discussion on your chosen SKU and limit the ‘give & take’ to a fair share of the real savings
• Run a reality-check of the incremental sales required to produce the shared savings, just in case…
• Agree minimum order quantities, and timed delivery frequencies, along with quarterly purchase levels
• Build these conditions into a deal/contract tied to a discount paid retrospectively on performance, with on-time payment added for good measure
• After six months consider extending the deal to include the rest of your business with that customer
• This will hopefully bring your dealings a little closer to real scale-economies at the next ‘routine negotiation’, only this time with the benefit of a little history…

On the other hand, why not simply roll over, and over, and over……like other folk?

Talking big mobile - The Walmart approach

Walmart anticipated 40% of their online traffic in the holiday season would come from mobile, with much of that from people shopping on their phones while they're inside one of Walmart’s  4,000 stores.

Keep in mind that Walmart are the guys that found a link between Dads buying bulk-packs of baby-napkins and six-packs of beer on Friday evenings, became the first retailer to merchandise beer in the baby category and enjoyed a 30% uplift in sales as a result…

In other words, with a data-warehouse bigger than the Pentagon, they make data work, while other retailers look for logical connections that follow traditional patterns of shopper behaviour and focus on ‘tidy’ categories, adapting gradually to change, if they must…

This is why Walmart are taking a direct approach and are going all out with mobile. The idea is not to make it an either/or option; instead, their apps cater to people who are already shopping inside a Walmart store.

If you opt into "in-store mode" the feature aimed at keeping their shoppers buying from Walmart, even via online when what they want isn't in the store, they will use your location to provide you with an app tailored for that store.

With 60% of its shoppers opting-in within two weeks of launch, and 140m weekly shoppers, the Walmart approach makes other retailers seem like they are toying with mobile…or worse…

Time for a trip to Leeds?

(Thanks to Sophie Schwartz and Jason Goldberg for the link)

Horses for courses - an exercise in brand devaluation?

The multiple horse-joke reaction to the burger-meat scandal has tended to obscure the real issues involved:
- patently, it is no laughing matter, especially for the most important stakeholders, the consumers...
- brand integrity, the fundamental reassurance that allows consumers to avoid the need to personally check the contents of the tin before purchase, has been seriously compromised...
- market segmentation, the process of tailoring a brand to consumer taste is about informed modification of ingredients, not the misleading of the consumer via artificially low price-points...

Anyone in any doubt as to the extent of the damage need only walk the aisles, and observe the focus on white meats, the subtle references to local sourcing of red meat ingredients, and the reduced uptake in the burger section.....

....and these are still early days, while retailers are exploring alternative arrangements.

Essentially, this all goes back to a fundamental misunderstanding of the role of branding, and an under-estimation of consumer sophistication in terms of their ability to evaluate what they are getting for the money. Given that much of the brand experience is 'enjoyed' in the home, a disappointed consumer may not choose to articulate their dissatisfaction at point of purchase, but simply switch brands, or even worse, shop elsewhere, pausing only to tell their friends on the way....

If we accept that these savvy consumers are very capable of picking up subtle content-downgrades, then it calls into question the ingredient-answer to a perpetual freeze on price increases, a 'secret' compromise of quality.  The use of horse meat or indeed any other 'filler' is but one example of how an obsession with cost control can compromise brand equity, be it supplier or retailer...

Moreover, as any experienced brand owner knows, consumer praise operates on 1:10 odds, while criticism is given 10:1 every time a brand disappoints...

Finally, should anyone be left with an impression that this is simply about meat...it might be borne in mind that any reduction in pack size or amount of ingredients is in danger of straying onto the same consumer-disillusionment territory...

The issue is hard-won, easily lost brand integrity, whatever the odds...