True like-for-like comparison - the impossible dream?

In yesterday's Telegraph, Mike Coupe made an elegant, if rod-for-own-back, case encouraging the consumer to aim for true like-with-like comparison when considering an on-shelf purchase. 

Specifically, a shopper should factor in provenance or origin of the goods as part of the total offer, especially in the case of fresh produce. He also correctly  points out that the quality standards should apply all through the category, and not just the high end. In other words, shoppers deserve to have their needs met, all the way to the stomach, and beyond, whatever the price-point.

The problem is that we as consumers have become lazy. 

Having been aggressively aroused from a 30 year credit-fueled dream, where we outsourced our thinking in terms of unrealistic reliance on politicians, and bankers in the expectation that they could be taken at their word, allowing us to get on with consuming....confident that if a product or service failed to deliver, legal machinery existed to punish those who mislead us.  Clearly, the last few years have demonstrated that we are all on our own, so to speak...

The issue is expectation management. 

As we all know, branding was invented to assure purchasers that the contents would live up to the expectation created by the description on the tin. However, even this 'guarantee' can be jeopardised by one disaffected night-shift worker popping behind a packing case and 'interfering' with an unsealed tin, before putting it back on the line...  As consumers, we still need to check the contents before eating.

Even more so in the case of fresh produce. In practice ethical sourcing is an aspiration, not a guarantee of quality. It is impossible for a retailer to give a 100% guarantee without sampling 100%, and we are unrealistic to expect otherwise.

When the product comes from 'out foreign' our traditional  upbringing taught us that we need to be doubly cautious  of origin and treatment of the animal concerned in evaluating sources, again totally confounded by the fact that the horse meat crisis demonstrated that even closer to home even vigilant  sourcing can allow faulty content to slip through...

Think about it, if a horse carcass can be purchased for £15, and sold for £700 as beef, then someone in the chain will be tempted to take a short-cut.

At best we can take a reasonable guess - our call - based upon a reliable retailer's best efforts, in deciding that one product is a better deal than another.
And if a brand or retailer appears to short-change our expectation, at least most if us still have the ability to vote with our feet, and perhaps tell a friend....

On-shelf like-for-like price comparison – what’s the problem?

News that four retailers are moving to £/100g onshelf pricing is only surprising in terms of the apparent reluctance of other retailers to make no-brainer decisions…

Aldi, The Co-operative, Waitrose and Morrisons have made a quantum leap that will result in other retailers playing catch-up…

The savvy shopper
Consumer-shoppers are now better-informed than ever before…and they ‘walk’ when confused or suspicious. For anyone trying to sell them anything, this should be sufficient to encourage the seller to make the proposition and its comparison with available alternatives as easy as possible i.e. £/100g or £/100ml. The shopper is thus presented with a logical way of comparing Product, Price, Presentation and Place on a like-with-like basis, with emotion and other qualitative elements of the proposition playing their part in justifying any price premium vs. the competition.

Difficulties with multi-buys?
One excuse appears to be difficulties in expressing multi-buy offers on a £/100g basis…

When I buy a jar of my favourite coffee at the regular price, I occasionally check jar size for possible reductions i.e. ‘disguised’ price increases (people are counting pennies out there, can anyone still believe they are not checking value-for-money, 24/7, and are totally insensitive to pack-reduction 'short-changing'?).

At the same time, a quick check of the on-shelf price per 100g allows me to compare with other coffees. Incidentally, if there appears to be a uniform price increase across the category ‘to reflect ingredient cost-increases arising from a rainy night in Georgia, or Sao Paulo’, then I switch to tea-bags until the craving becomes unmanageable…

If I succumb to a 3-for-2 offer on a 200g jar that normally retails @ £5.80, I am getting three jars for the price of two 200g jars i.e. 600g for £11.60 = £1.93/100g, compared with the regular  rate of £2.90/100g, so I load up…

Simple, unless the retailer – or supplier – does not want me to make that comparison…
And if I even half suspect that this is the case, I am tempted to revert to tea-bags, at another retailer, along with the rest of my average £70/week basket…

Customer going bust - the incremental sales impact!

Yesterday, the administrator announced that lenders and suppliers to toy and model retailer ModelZone face losing up to £11m after it collapsed into administration. Of this, the company owed more than £9m to the secured creditors Lloyds Banking Group, leaving approximately £1.5m to the suppliers, the unsecured creditors.

In other words, the suppliers will receive nothing - the anticipated £4m from the stocks sell-off will go the bank - meaning that suppliers will need to recover their losses via incremental sales elsewhere, whilst their ModelZone stocks end up competing with them in the markets at 50% or more discount….. a double whammy?

Getting it in perspective
£1.5m seems a small amount by comparison with the £9m owed to the secured lenders- a dangerous idea that could prevent us from appreciating the significance of the loss.

In the same way, we have somehow become so accustomed to ‘a trillion here, a trillion there, soon we’ll be talking about real money’ in the global financial crisis that it no longer seems like a joke…  In other words the big numbers appear to have raised the bar on financial pain for suppliers and customers.

How the NAM can break through the apathy
Because of this ‘insensitivity’ to ‘mere millions’ it is vital for the NAM to find a way of expressing loss in a way that is not necessarily alarmist, but yet causes the organisation to take the issue seriously. For instance, a supplier on a net profit of 5% needs incremental sales of £30m to recover from a loss of £1.5m, in the current climate (!), competing against its own liquidated stock selling at ‘50% off’ in the marketplace…

Now do I have your attention?

In the same way, NAMs have to impress upon their colleagues the importance of
- making credit worthiness a top KPI and not just a job for the credit control department
- picking up and communicating every delay in payment, instead of regarding it as a ’one-off’ glitch
- delivery drivers noting stock-gaps of key lines in the customer’s depot
- merchandising colleagues reporting on store-staff morale and on-shelf availability

The carrier of the can
But the main focus should be on the NAM’s ability to read the situation at the supplier-retailer interface, via a combination of updated analysis of the customer’s latest published accounts and the constant realisation that the NAM will have to pick up and implement the incremental-sales-tab in the event of a misjudgement….

Incidentally, using the same ‘incremental sales’ approach, the GSCOP Adjudicator might make more impact by referring to the potential £1bn fine for bullying suppliers not in absolute terms, but as the incremental sales of £20bn required by a retailer making a net profit of 5%, or are we back in the land of funny money?

Drowning in complexity - how to simplify without being simplistic...

An independent survey of 1,293 HR leaders worldwide has revealed how complexity in today’s business environment affects key business indicators and the degree to which managers lack confidence in their ability to handle that complexity (Hat-tip goes to Jeremy Blain for the link).

Results show 60% of survey respondents indicated that they did not have full confidence in their organizations’ ability to manage complexity. As a result, complexity has a very significant impact on key business indicators such as sales revenue, employee productivity and motivation, customer loyalty, organizational profitability, and sustainable long-term competitive advantage.

As part-time fire-fighters (if the job has become full-time fixing, it becomes a whole new ball-park, another time) NAMs need to be able to absorb and factor in new trading issues – and since 2008, most issues are new – and bring in results, despite the distractions such as tech-induced data-overload and increasing layers of complexity…

This means being able to simplify, without making an issue simplistic.

For instance, your customer has just received a take-over bid, ‘out-of-the-blue’... First of all, nothing, especially a takeover, happens unexpectedly to those who are constantly on the watch for signals, and NAMs are particularly well placed pick up and place key signals affecting their major customer in context, better than anyone in either organisation.  However, such signals, as with other key issues, come buried in a mass of data and complexity.. The benefits of being able to anticipate and act  while others are awaiting the next press announcement, hopefully go without saying?

Essentially, a NAM can manage most complexity by searching for answers to the following questions, fast!

- What is this about?
- Where is it headed?
- How does it affect me?
- What should I do about it?
- How?

What is this about? i.e. takeover bid
Read wide and fast, a mix of mainstream media and blogs, combined with the views of key people in your network. Despite the appeal of various lines of investigation, resist and merely dig out facts relevant to your question, remembering that you are aiming at producing an ‘elevator pitch’ i.e. an explanation that can be put across between floors on a lift-ride (apologies for culture-mix, but lift-pitch does not quite express it)....     As the in-house expert on the customer you are going to be asked for a detailed strategic reaction minutes after the CEO has read the news…If you are not her first choice for a view, mmmmm….

Where is this headed?
Given this morning’s bid is already history, the only sensible place to play is in the future, while others indulge in ‘analysis paralysis’ and other clichéd approaches to making sense of something that requires immediate action…(your fire-fighter mode).

Think future in several time-frames to generate deeper insight. In other words, thinking laterally, what are the immediate consequence of the bid, 1 month later, 6 months on and finally a year later, and pencil in appropriate actions for each time-frame. Think through the various parties affected by the bid, say consumers, the customer and suppliers. Explore positive, minus and interesting aspects of the bid from the point-of-view of each party, all well established lateral thinking process...

How does this affect me?
You now have a pretty comprehensive grasp of the issue and its consequences, along with the anticipated views of those concerned. This should be sufficient to take a stance on the bid’s impact on you,  your company and your brands.

Converting everything into financial impact will then lend the exercise a little immediacy and urgency, if per chance the pace has slowed….

What to do about it?
Again many of the required actions will be obvious, again requiring financial fleshing-out and factoring into amended trade strategies (you simply need to have been at the receiving end of a single takeover bid to know exactly what happens, and what to do about it…)

A key element should be a risk/opportunity analysis assessing what could go wrong/right, and exploring impact on the business and chance of occurrence…fast.

How to do it?
Can take a little longer but outside experience, objectivity and contacts can save time, and lend some fire-power to your recommended actions…

So, five questions later, you have an outline trade strategy, and judging from the average 5 minutes that NAMs devote to KamBlog postings, it is still less than ten minutes since you heard about the bid…..

TV goes to the dogs with first channel for canines - a breakthrough in discerning viewing?

Lonely, bored dogs left at home all day while their owners are at work could soon be getting some digital company - a TV channel with programming just for pooches. DOGTV, a 24/7 channel designed specifically for man's best friend, will air nationally next month on the U.S. satellite operator DirecTV, with hopes of attracting dogs in some of the 46 million U.S. households that have at least one.

Given the quality of alternative viewing choices it has to be presumed that significant numbers of suppliers’ regular advert-targets might choose to watch DOGTV with their pets…

This raise a number of issues:

• Who is the real target here?
• How will doggie viewing patterns compare with humans’ passive behaviour i.e. a real challenge to content and advert appeal?
• If the TV station upgrades its output for increased engagement, how will human couch-potatoes cope with the resulting excitement?
• If the dog barks in response to a specific advert, does this indicate approval or the opposite?
• As the sounds include a range of frequencies tailored to a dog’s sense of hearing, how can owners monitor the messages reaching their pets?
• Presumably someone put a proposal on a table somewhere and raised adequate start-up capital i.e. there has to be a potential revenue stream here, or a hidden agenda, the final nail in the traditional TV- coffin?

The real opportunity?
For those of you now seriously considering the potential of this new medium, it may help to know that the real competition may be the proposed content … The channel won't be showing the canine equivalent of "Modern Family," "Mad Men" or "Downton Abbey" but will feature programs with music, visuals, animation and the occasional human that are designed to relax, stimulate and ease the loneliness of home-alone pets. This means that the advertising has to be sufficiently compelling that dogs will time their ‘natural-breaks’ to coincide with the content rather than while the ad-breaks are airing, perhaps the ultimate Kanine-Pee-Indicator…?.

NB. Caution ref high-pitched sound:
A pet-food marketing pal of mine Ray Wilsmer tried this idea many years ago using a Great Dane lying asleep on a couch in front of the TV. Ray crouched behind the TV with a high-pitched dog-whistle which he blew several times during screening of his commercial, without managing to awaken the dog… Eventually Ray crept behind the couch, leaned over, positioned the whistle on the dog’s ear and blew with such vigour that the dog committed a massive social indiscretion all over the couch…

Finally, before you ask, the station is already planning a TV channel for cats…

Your annual report – what it tells the buyer, if you allow it...

Last night we downloaded the latest annual report (2013) of a medium-sized UK food supplier from Companies House, and extracted the following:

                            2012          2011                  Buyer’s reaction:
                            £’000         £’000
Sales                   65,000       55,000  +18%     “We helped, how about a discount?”

Net margin          8.5%          9.1%                  “Double our 4.3%, we need more…”

Stockturn             21 times     19.6 times         “...helped by our forecasting/efficiency, gimmee”
(i.e. days stock     17 days      18.5 days)   (potential lapses in availability = deductions opportunity?)

Trade debtors       56 days      56 days           “...we pay you in 46 days, we want 10 extra days”

Trade creditors     39 days      26 days          “this shows you are now taking 13 days extra to pay
                                                                       for ingredients, to cover cost increases!”

Incremental sales for each
£1k trade spend = £11,7k                       “Your large net margin means you can afford to invest more”

Return On Capital Employed
                                22%          25%       "Compared with our struggle to hit 11.5%, you guys have it easy"


*****NB. In-use demo here will connect you to a scenario treatment of the buyer-seller dialogue in practice!


This is just for starters!
If you feel that your team might benefit from a live run-through of your open domain figures at Companies House, and their application in negotiation, why not email me on bmoore@namnews.com, or give me a call on 07977 273409?

Amazon - end of the free lunches?

Today’s news that Amazon has scrapped free delivery for orders of less than £10 will come of no surprise to regular users. Indeed many will have progressed  to Prime level, where for £49 per annum, all orders have free delivery. Prime members don’t only contribute a £49 fee, they’re also Amazon’s most loyal, high-spending customers, with some analysts claiming subscribers spend $1,224 every year compared to the casual user’s $505.

Today’s free-delivery restriction will no doubt cause many of the regular, non-Prime users to sign up for the free-delivery service..

That leaves current small-time users and new users.

• New users will ‘never’ know that free delivery existed, and may be attracted by the Amazon convenience, anyway
• Current small time users may be a casualty of the new restrictions, but they should expect a couple of retrieval/trade-up moves from Mr Bezos...

Finally, Amazon takes a step towards meeting City needs for profitability in line with sales.

A win-win-win for all…without missing a beat…
Competitors beware… 

Coca-Cola fine-tunes demand-supply, by outlet...

Coca-Cola GB is revamping how it gathers data from retailers to pinpoint which areas of the country hold the greatest potential for marketing and selling its brands to shoppers.

The customer insight initiative will see the business create a network of outlets over the next three years that either currently sell or have the potential sell its brands. The platform, developed in partnership with customer insight agency Serendipity2 Marketing Group, garners sales and volume data which Coke will combine with its own before mapping it against external consumer, workplace, competitor and retail geo-demographics.

In effect, Coca-Cola is making each shop a major customer…and treating them appropriately.

Think about it!

Substituting ‘major customer’ for ‘outlet’ in the above description of their customer insight initiative produces a strategy that hopefully describes the level of tailor-making many suppliers can just about afford to give their major customers, as follows:

The customer insight initiative will see the business create a network of major customers over the next three years that either currently sell or have the potential sell its brands. The platform, developed in partnership with customer insight agency Serendipity2 Marketing Group, garners sales and volume data which Coke will combine with its own before mapping it against external consumer, workplace, competitor and retail geo-demographics

Scale obviously helps, but if successful, the Coca-Cola initiative will not only set new standards in optimising store-based assortment, but will also produce reductions in ‘over-lap’ wastage and buffering. In addition, any current sales losses arising from low availability will be minimised.

However, the real issue for all other suppliers will be the extent to which Coke are raising the game in major customer management, and the risk one runs in not anticipating the move…