How to choose the right customer, when trade-funds are scarce….

Given that even in precedented times key accounts were never created equal, in unprecedented times the differences have become greater and require even more careful classification in deciding whether a customer should be labelled invest, maintain or divest...

In the current climate, it is crucial to redefine what makes a customer special, and deserving of your increasingly scarce attention. This means starting with measuring real Potential, assessing scope for fair-share Partnership, establishing relative Profitability and your ability to Perform, all relative to other key customers in your supplier-portfolio.

Potential
Ignoring history, how important is the customer now in terms of relevance in the market, ability to adapt to new demands, responsiveness to new ideas, high growth phase of its life-cycle, and potential market share?

Partnership
To what extent are you and the customer strategically aligned in terms of urgency? In other words, if you are striving to sort next year’s agenda, and the customer is obsessing about this coming weekend, your minds will never meet.... 
In terms of relationships, would you drink with the buyer in the evenings, without having a reason? 
Is there a good cultural fit, in terms of trust, risk appetite and little need for second-guessing? 
Finally, is your brand profile well represented in the customer’s traffic flow in terms of consumer match?

Profit
If they represent 10% of your sales, do they also represent 10% of your profits, i.e. a fair share relationship is possible?

Performance
How good is your competitive appeal vs. available competition within the customer?

Whilst scoring well on the above criteria will not guarantee a successful ROI each time, at least you will be starting with the right customer….

Discounts for ‘investment in joint growth’ - how to say 'no'…

With retailers hoping to recoup trading losses via additional discounts on agreed invoice prices, it is vital to refuse. This is not only because of the profit implications, but also as a matter of principle.
How you say it can determine the future relationship.

S:    I think I must have missed something. You are asking for a 4% discount on the prices we agreed 7 months ago? …and you want to apply the reduction to all deliveries made since that date?
B:    Correct!
S:    So, the agreement you and I made was unauthorised? Should I be seeing someone else to agree price increases?
B:    No, I have full authority
S:    Therefore, if I can show you why we cannot roll back the agreed price increase, the original agreement stands?
B:    No, this is an order from on high, it over-rides all agreements…
S:    Obviously your call, but it seems like your board is now doing the buying…..perhaps I can provide you with some outside rationale that you and your colleagues can use internally?
B:    I’m listening…
S:    First, your request is unique, no one else is asking for retro-reductions, so me and my colleagues have to assume that we have robust agreements with all other customers, companies that stand by their decisions. If we gave in to your request, we could de-stabilise the rest of our trading relationships.
B:    This is just you and me, the others need never know…
S:    Wrong, nothing is ever just you and I. Your demand means that, as an ethical company, I have to walk away.
B:    So be it
S:    Before I go, let me explain the size of your potential loss.   As you know, in our part of your category, we represent of £840k of your annual sales, ex VAT.
B:    How do you know that?
S:    Easy. With a 27% retail margin our annual sales to you of  £605k translates into £850k sales out, ex VAT, apart from trade funding and credit. Now, given our precise fit with your target shopper, the loss of our business would obviously be possible but a bit of unnecessary hassle to replace. Besides you and your colleague-buyers will most likely come up against similar resistance to going back on agreements in the market place.
B:    That’s our business
S:    Right. Now let me explain why we have to walk. We make a Net Margin of 6.7% on your business. From our published accounts, you can see we sell £7.5m per annum in the UK, on a Net Margin of 9%. This means you are already diluting our UK profitability. Also if we gave in to you, as an ethical company, we would have to offer the same deal to other customers.
B:    Just because they cannot buy properly is no reason to penalise us…
S:    No, think about it. If we reduced our overall Net Margin to 6.7% we would reduce our net profit by £172.5k   ( 9% of £7.5m = £675k, 6.7% of £7.5m = £502.5k, difference is £172.5k)   This means we would need incremental UK sales of £2.6m if we gave in to your demands. (£172.5/6.7 x 100 = £2.6m)  So you can see it’s not going to happen.
B:    I still need the money….
S:    You obviously know your bosses better than I, but are you saying you need the reduction in principle, or the money it represents?
B:    I think the money would do it for now…
S:    OK let’s talk about what’s involved if we count a 4% reduction on 7 months purchases.  (£605k/12  x 7 x 0.04 = £14k)  So you want an extra £14k from us
B:    I hadn’t realised it was so little…

SuperNAM:    Depends on how you look at it. With your net margin of 3.2%, it represents incremental sales of £437.5k… What we need is a bit more support instore for our additional £14k. How about an extra  couple of facings that currently cost £7k each, with a couple thrown in, free-of-charge so we can share the possible over-facing risk?
Buyer:           You reckon you can generate incrementals of … ?
Adventures of SuperNAM (16)

Where next, for survivors of Phase 1...?

Both suppliers and retailers are emerging from an unprecedented four years where even long established trading relationships have been put under stress and power abused, with many casualties in the process.

The drive for cash has resulted in grossly unfair payment terms, and the obsession with low shelf prices has brought about the meat crisis, the mere tip of a fundamental challenge to brand integrity, where the consumer has been short-changed in terms of discrepancies between  content and what it says on the tin… NAMs need to manage and optimise personal power and influence in order to cope with the fall-out.

But this is not enough…

We need to accept that we are headed into a flat-line decade under the scrutiny of a super-savvy consumer, demanding demonstrable value-for-money and who is unwilling to outsource any purchasing decision-making to marketers or retailers. Moreover, her demand for demonstrable value-for-money will extend back up the supply-chain and will impact all supplier-retailer relationships..

For NAMs in particular, this is going to be the era of adaptation, swift footwork, ingenuity, embrace of the unexpected, a rejection of accepted procedure, and above all focus.

Payday loans - a question of insight?

After a year-long investigation by the Office of Fair Trading (OFT), it is thought lenders will face advertising curbs and be under closer supervision.

Big deal!

With much lending at the ‘budget’ end of the market depending on the premise that people simply do not understand percentages, much less APR, the emphasis should surely be on helping people fully understand the situation they are entering via a payday loan.

When the key issue is the impact of weekly repayments on a pay-packet, a potential borrower, already panic-stricken because of inability to cover outgoings, ignores interest-rate and duration of the repayment-schedule.  For these non-savvy consumers, 4,500% APR is meaningless, however large the typeface, or the frequency of explanation.

Might we suggest that a compulsory headline such as:
“If you borrow £100, you will owe us £4,600 after 12 months!” might have more impact?

The lenders can be expected to soften the impact in the remainder of the advertisement, but at least they will be forced to use reality as a starting point.

Amazon-Tesco: Optimising the most targeted TV audience in the world…

As Tesco and Amazon compete in developing different routes to market dominance, they each represent an unprecedented threat to both the traditional entertainment industry and other retailers…

Amazon TV production
Amazon's recent move into original TV production mixes the tactics of traditional network TV with innovations from the online world. It does not sell a stand-alone video subscription service like Netflix - instead, it bundles streaming video with its Amazon Prime membership program, in which shoppers pay an annual fee of $79 for two-day shipping on most of their purchases from Amazon.com. They are creating pilots for about a dozen shows, anyone of which becoming a breakout hit would attract people to Amazon Prime, the only source…

Established TV and movie players seem unperturbed by Amazon's efforts, considering the company just another entrant, among many, in the quest for original content (!).

Streaming Tesco
Meanwhile down the block, having bought an 80% stake in the Blinkbox film and TV site in 2011, Tesco is preparing to launch two specialist ebook and music retail websites later this year. The three Blinkbox retail sites will sit separately from Tesco’s main online store and will only carry subtle Tesco branding. However, the supermarket will advertise the sites heavily in store and use them to ensure that customers in search of specialist online sites for books, music, films and TV box sets continue buying from Tesco. 

The real breakthrough will be Tesco TV, a new television station that will be available to members of Tesco’s ClubCard loyalty scheme, free of charge, and will offer a mix of archive films and television shows.

Amazon and Tesco, in their different approaches to the market, are evolving ways of capitalising on their unique access to their tribes, deriving synergies which other retailers have already underestimated to their cost, and which traditional entertainment producers are not even dreaming about… 

Researching the customer - The Moscow Rules?

Whilst some NAMs may feel the need to disguise their real intent (and appearance) on customer premises, despite having no agenda, these spying tips may help in piecing together the customer  profile.

The Moscow Rules:
1   Assume nothing
2   Never go against your gut
3   Everyone is potentially under opposition control
4   Don't look back; you are never completely alone
5   Go with the flow, blend in
6   Vary your pattern and stay within your cover
7   Lull them into a sense of complacency
8   Don't harass the opposition
9   Pick the time and place for action
10 Keep your options open
Source

Alternatively, why not spend an online pound in Companies House and let the latest published Annual Report provide some focus, and the bulk of the jigsaw, leaving eyes and ears to fill in the real gaps…?

When you have to go by bus....

Time to have a word with your local council  about mobile amenities...?

High Street Winners & Losers: 'Just gimme the facts, NAM'*

High Street store closures: Just the facts... 
The BBC have highlighted analysis from PwC and the Local Data Company revealing that chains shut an average of 20 shops a day last year.

The facts: 
WINNERS
Payday Loans +20%
Pawnbrokers +13.2%
Poundshops +13%
Supermarkets +3.6%
Coffee shops +3.4%
Betting shops +3.3%
Charity shops +2.7%

LOSERS
Computer Games -45%
Health food -24.7%
Card shops -23.4%
Recruitment -15.1%
General clothes -8.7%
Women's clothes -7.2%
Banks/financial -2.9%
Net change in units in 2012. Source: Local Data Company

Who?
See KamBlog for list of 'casualties'

Why?
At the very least, the above figures reveal chronic over-capacity. This is only partly driven by retailers' inability to evolve an omni-channel response to the emergence of online.

Why now?
In turn, this overcapacity reflects equivalent levels of supplier-side ability to produce more than is now required as we continue to awaken from a thirty year dream of borrowing-based demand….

New demands from the super-savvy consumer
A new complication has been the meat crisis, merely the tip of an iceberg that is becoming a fundamental challenge to brand integrity. This is causing the super-savvy consumer to demand proof that ingredients actually match up to on-tin descriptions, adding this new requirement to their now constant demand for demonstrable value for money.

How to survive and thrive
For those that are managing to survive this mother-of-all-wake-up calls, paradoxically the way forward has to be a step back to basics, a fundamental review of consumer need, a realistic comparison with alternatives available, and then a stripping-back of the brand-offer to a precise fit with need, and priced accordingly…all communicated and made available, however, wherever and whenever the consumer beckons…
This is the new fact-based reality, folks….

* 'Just gimme the facts, MAM' was a catch-phrase from Dragnet, perhaps the most famous and influential police procedural drama in media history. The radio and TV series gave millions of audience members a feel for the boredom and drudgery, as well as the danger and heroism, of real-life police work.

Jack Webb wrote, produced and played lead Joe Friday. He insisted on realism in every aspect of the show. The dialogue was clipped, understated and sparse, influenced by the hard-boiled school of crime fiction. Scripts were fast moving but didn’t seem rushed. Every aspect of police work was chronicled, step by step: From patrols and paperwork, to crime scene investigation, lab work and questioning witnesses or suspects. The detectives’ personal lives were mentioned but rarely took centre stage.
A bit like the new-era role of the NAM, really…..