When manufacturers approach retailers to sell a new line or engage in a business plan, they often find themselves struggling to strike a deal. Despite having a great product, perfect pricing, and market research, they may come up empty-handed. On the other hand, sometimes manufacturers may find themselves unexpectedly successful, but not know why. To avoid these situations, it’s essential to understand your customer’s strategy and their needs.
For instance, if you approach a hard discount food retailer with a diamond ring, it’s unlikely that they’ll be interested. Therefore, it’s crucial to understand what problem the retailer is solving for their customers and who their actual customers are.
Most retailers or distributors in the food game, bank an EBIT of somewhere between 2% and 4%. That’s $2.00 – $4.00 for every $100.00 sold, which is not a large return for a lot of effort. In fact, the retailers may very well be better off just putting their money in the bank .
To make selling more productive, it’s imperative to understand the retailer’s market position, competitive advantage, response, and the problems they’re solving:
The Retailer’s market position broadly:
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- Hard discounter
- Broad line
- Convenience
- Premium
The Retailer’s competitive advantage (from the Retailer’s Customer’s perspective)
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- How the retailer responds to this
- What problem they are solving
- Convenience
- Price
- Range
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The Retailer’s P&L
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- Helps give clarity to performance metrics
- What weight they place on key metrics
- GMROII
- Gross Margin
- Days cover
- Terminology used to discuss the metrics
The role that each Category broadly performs for the Retailer, and why
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- Sales Driver
- Margin Driver
To collect this information, you can obtain the most recent annual report, conduct store visits, assess space, look and feel, conduct price surveys, and review freely available geographic and demographic data. This will provide the anecdotal data necessary to get a pretty firm grasp on who the retailer is and who they serve.
A one-size-fits-all approach often doesn’t work with retailers, regardless of their size. Retailers require personalisation because they view their customers as individuals. For instance, manufacturers of cheap branded tinned tomatoes may struggle to sell to Aldi consistently. Aldi adopts an own-brand strategy to deliver the lowest cost possible groceries to their customers. However, the same supplier may have success dealing with Independents. Independents are opportunistic, support brands, and need a value offering to appeal to their value-conscious shoppers.
Understanding your customer’s strategy helps you focus your resources and hone your ability to achieve successful outcomes. This approach is valid regardless of the manufacturer or supplier’s size or the channel of operation.
