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Thirdly, White argues that it is vital that suppliers’ embrace complexity. He says: "You have to be able to understand with which retailers you can reach specific customer segments in the most profitable way." Unless you are prepared to go into this sort of detail, you are simply going to fall back on what White terms "the one size fits all, default discount model." In this the supplier typically treats all retailers as much the same and offers all of them similar products at similar prices. Disastrously any differentiation between retailers is likely to be by sales volume. Often, this leads to massive discounts being given to the largest retailers with the supplier unaware of the loss involved.
The next and possibly worse step is differentiation through product. Suppliers are forced to produce "unique" products for particular retailers. White says: "This tends to be extremely expensive with little or no measurement of the results. Often it is a case of ‘let’s knock something together or we will lose the business.’"
The alternative is a plan which shows why and how you will reach segment A by working closely with office products retailer B using selected stores and formats.
“Do consumers really want a relationship with your brand?”
Fourthly, White suggests that suppliers’ need to take a long hard look at account management. An audit in which both sides score different aspects of their relationship can be immensely useful. White says: "You often find huge disparities. The retailer may think the supplier’s product strategy sucks and the supplier may be blissfully ignorant of this." Such "misalignments" need to be spotted and acted upon if the relationship is to progress. Above all, White reckons that such relationships have to be multi-layered. "Pushing everything through a single point of contact is inefficient and risky."
Summing up, White acknowledges that "No one is saying this approach is easy." He adds: "You have to accept that cultures do not change overnight and that you are operating on a live patient. You have to set the pace but not force it. Above all, executive level involvement is essential."
However, the benefits to companies who have followed this route have been immense: "I know of companies who have cut their instore promotion costs, built long-term relationships which protect their investment and grown sales and profitability by adopting this approach."
Michael White is responsible for VIA’s retail channels practice. He has worked extensively in this area for a decade with clients such as Nokia, Group SEB, Electrolux, Kimberley-Clark, Microsoft and Hewlett-Packard. If you would like to follow up on any of the issues raised in this article you can contact him on +44 20 7585 3399.
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