December 11, 2006
R&FF Retailer: Face 2 Face
By Vinnie Vendor and Rhonda Retailer
RetailWire presents for discussion Face 2 Face, a feature of Refrigerated & Frozen Foods Retailer magazine that presents frank opinions
from a group of anonymous retailers and vendors on key industry issues.
Part 1: Vinnie Vendor has a problem with Rhonda Retailer. He thinks the two parties could accomplish much more together if Rhonda would make her customer data more “freely”
available to his company.
Thank you, Rhonda, for your recent “opportunity” to spend $250,000 with you for a microscopic blurb in your direct mail piece. We decided to pass.
You see, we’d like to work with you on programs where we both get benefits for the money we spend.
We both have a huge opportunity to leverage your shopper data to grow each other’s business. But if we have to spend $1.5 million with each retailer to access their data, plus another $20 million on syndicated data, we’ll simply go bankrupt. I don’t mean to be forward with you, Rhonda, but some of us think you’re starting to make data a new profit center.
Now don’t get me wrong. Many of us are willing to put the people resources against interpreting the data and gaining insights we can both use. The trouble is that every retailer has its own way of keeping data, so we have to assign people to each account just to get it into a readable format. So why doesn’t the industry get together and develop some standards on data? Maybe some honchos at FMI or GMA will read this and convene a special joint session.
Meantime, let’s at least do a better job of sharing category-level demographics and trends. Maybe we could identify groups of shoppers common to both of us, and come up with customized programs that move cases — without involving some middleman who eats up the profits. Let’s solve meal occasion-based problems for shoppers, and use strong post-analysis tools to create trust and accountability. We’re way past $250,000 blurbs in direct mail, Rhonda.
Part 2: Rhonda Retailer has a problem with Vinnie Vendor. She thinks he should spend more time listening and getting a handle on taking care of business basics before going
on to more complex efforts.
You know, Vinnie, you make me laugh. You want to do all this Star Wars promotion stuff, and you still can’t get an advance ship notice right. Sorry you didn’t take us up on our latest opportunity. Because you see, Vinnie, the old stuff still works.
What ever happened to the “build it high and watch it fly” saying we had about displays? We had a hot price from the local rep and we rolled up our sleeves together where the rubber met the road. Oh! I forgot! There isn’t any retail coverage anymore! Everyone’s back at corporate, looking at the numbers!
As for sharing data, let me tell you something. My shoppers are really freaked out about retailers sharing their information with anyone. That is why some retailers have bombed with loyalty cards — they broke the “loyalty pact” with their shoppers.
Most marketing plans are just that — plans that are drawn up by marketing department people who don’t spend much time visiting and listening to retailers. They have a preconceived notion of what our shoppers need and don’t really want our feedback.
We work with suppliers to do direct mails and local marketing through the consumer database, but no way are we going to share consumer specifics with suppliers. We’ll share some generalizations and work up some programs tailored to your needs, and then execute the program. All that costs us money, and we’ll pass along to you what it costs us. The mailing comes from us, not the manufacturer, so we aren’t breaking our pact with our shoppers.
I’ll grant you one thing — it may be worthwhile to consider a common way for retailers to format their consumer data, depending on what’s being done and what the needs are. But I’ll have to think about that one.
You know what really works? Listening to us, and not just pretending. You know… partnership. You don’t need Star Wars for that.
Discussion Questions: Who has it right, Vinnie Vendor or Rhonda Retailer? Do you see a middle ground compromise for the two? Does the grocery industry
need to create a single standard on how consumer data is formatted?
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What’s really the problem here? I would suggest that the challenge is not the lack of cooperation, but instead, the incredible cost of doing something effective with the data.
Vinnie Vendor is correct that the expense of $250,000 destroys the financials for the vendor and makes “data sharing” a one-sided deal benefiting the retailer and their third party suppliers. However, Rhonda Retailer is also correct that the solution is not to simply “share” the data so that the vendor can use it for their own benefit.
The solution is not in either side giving in; it is in fundamentally changing the financial dynamics of leveraging the data and TAKING THE COST OUT. How do you take the costs out? Here are a few examples:
DATA ANALYTICS=> Standardize the analytics to minimize the time and cost of generating insights and promotional programs. This does not require an industry standard; instead it requires that the retailer create their own standardized reports and promotional programs that they can offer to manufacturers.
CUSTOMER COMMUNICATION=> Stop focusing only on direct mail. The high cost of postage can destroy the financials of otherwise impactful targeted marketing and promotional programs. Shift toward lower cost vehicles such as email and the web.
CUSTOMER INCENTIVES=> Integrate targeted promotional efforts (consumer spending) with existing retailer promotional activity (trade spending), including weekly ad features. Retailer-developed targeted promotional programs offer the best opportunity to combine trade and consumer spending for maximum impact.
Instead of seeing themselves as a data provider, retailers should see themselves as a provider of efficient targeted promotional programs. That’s where the synergy is between retailers and manufacturers and where the most profitable results are being generated.
Call any 5 supermarket companies. Ask the buyers for the 3 brands whose marketing and promotion programs are most reasonable. You’ll get repeats in 10 out of 15 responses.
Then call 5 supermarket food suppliers in a single geographic area. Ask the salespeople for the 3 supermarkets most competent at sustaining win-win relationships. You’ll get repeats in 10 out of 15 responses.
It takes decent leadership to work together. Data standardization will help people who already are decent work partners. What will help the rest? New leadership.
They each could not be be more wrong or more right about things. Manufacturers and retailers have BOTH lost their way to a large extent in terms of basics and fundamentals (who are they serving, what are the needs, what is their unique selling proposition, what value do they provide vs. competition, etc.).
In the absence of those things, each reaches for managing efficiencies and costs. What you are left with is “same old/same old” over and over again (as each screams in desperation that “if only the other would do something different”).
Excellent topic choice and I look forward to seeing what others have to say about it.
Although there are merits to both Vinnie’s and Rhonda’s needs and wants Rhonda is correct in pointing out the sensitivity of sharing customer data with Vinnie. Rhonda’s violation of the trust their customers place with them will have a negative impact on her business. However, there is still a need to share consumer data that is agreed upon by both Vinnie and Rhonda, and the standards to do that need to be developed and agreed upon by all involved parties. Although easier said then done, standards of this nature have been created in the past and should be initiated by organizations like ARTS.
This is starting to sound like that commercial where the consultants “don’t actually do” what they propose. A lot of talk and no action sounds very similar to our friends Rhonda and Vinnie’s relationship. If the FMI or GMA wanted to get involved I would think they already would have, so they must not believe the problem is solvable. So what’s the answer and who’s right? Until category management evolves into the next level, we’ll be debating these issues for a long time.
Ask over one hundred major retail buyers, DMs, GMs and licensors what separates their gold standard vendors from all of the rest (those on the brink included) and indeed you will be able to draw clear conclusions…we did again this year when we conducted our update surveys for our annual “Ten Vendor Mistakes” report (which we’ll preview in January at a presentation here in Bentonville). We hear Rhonda is saying “MORE data, Vinnie? You can’t HANDLE the data you have!” and plenty of on-the-brink Vinnies are living a double life; playing lip service to wanting more, more, more (what else are they supposed to say?) yet having nightmares about their unprepared staff drowning from douses with a fully-loaded data fire hose!
Neither has it right. If we believe in category management as a guiding philosophy, then neither of these two appear ready to play.
Rhonda is right to expect operational excellence from Vinnie, including getting the advanced shipping notices right every time. But Rhonda, you’d be smart to listen carefully to Vinnie’s offer. Both of you want profitable, repeat customers. Study them together using your customer database.
Do you know how to win new stores customer through promoting Vinnie’s key brand? Run a couple of promotions together in controlled tests. Then study the retention cycles of the new customers you win. You don’t just want bottom feeders and coupon clips. So you need to learn about the whole customer relationships. What else did they buy? How far they travel to get to the store? How frequently do they revisit?
Do you know what it takes to retain a customer who buys Vinnie’s brand? On a broader scale, again with a control, find profitable customers who have bought Vinnie in the past but who now less frequent visitors. What does it take to reactive them?
You want ASN, yes. But you also want to win new customers and retain good ones. These are areas where you can continuously improve through good cooperative programs.
So far so good. You have described about 99.9% of all retailer-vendor relationships in the CPG industry. But we all know generalizations are perilous at best.
For any manufacturer to position themselves as the category partner when unable to address the elementary foundations of business with any company is ludicrous. Ensure your house is in order before asking to host the party.
Retailers are as different as each of us are and all have as varied point of views on issues such as these as there are pundits like us. However, the lack of trust with manufacturers is astounding. I know there are numerous examples of why this is so. But, with the right (secure) environment, requirements for the key categories for this partnership, and the investment of a few qualified bodies, these arrangements could work very well.
This issue of treating these items as profit centers may never go away. Remember, everyone has to pay to purchase valuable information from any market research company. Why not the retailer too? As long as it is appropriately priced and the proper restraint of only utilizing the information in the business of that retailer.
Finally, the issuance of standards and, or, a code of conduct regarding this subject is an appropriate one for the GMA, FMI, etc to tackle. Understanding that they will be adapted accordingly by the retail community.
As an Account Manager for a large consumer goods manufacturer, I can tell you that this is not a conversation that takes place with the largest national retailers — particularly in Mass. Somehow they have managed to remember that the overall goal is to sell product, and the ‘team’ approach being used by the major retailers and major vendors gives both access to the data they need to meet their agreed-upon objectives together.
It’s been my experience that reaching an agreement on a set of measurable objectives goes a long way toward overcoming the challenges that Vinnie and Rhonda are having. In today’s wholesale-retail environment, vendors and retailers alike are so busy with daily deadlines that we often short-circuit our long-term success by failing to take the time to create a common set of measurable goals.
No retailer knows a vendor’s products as well as the vendor. A retail buyer has his attention spread over many items within a category and many of the items within a category don’t compete with each other. I have worked with many retail buyers and the ones that ultimately get promoted are the ones who listen to vendors and utilize the vendors resources. Retailers, over the years, have adopted one scheme after another as a short cut to doing their job. Selling silver bullet solutions to vendors has occupied too much of retail buyers’ time and effort. In my experience, few of the silver bullet advertising programs are ever repeated (a testimony to their lack of success). Retailers succeed when they do what is important to their customers. If it is not important to your customers then run away from it. Vendors are better off not depending on retailers for anything except distribution. However, if a retailer wants to share sales data (not customer information) see what can be done to utilize this information to improve your sales. I did find it interesting that the vendor and buyer in the example listed talked about data but it seemed they were talking about two different things. The frame of reference and unknown internal discussions which form that frame seem to be locking both parties into a parallel communication in which both are talking about data with authority but neither is referring to the same “DATA” as the other. This is not communication and I fault the vendor in this case as it is the vendors responsibility to keep communication clear and flowing.
The future requires increased personalization of offers by both retailers and manufacturers, i.e., it’s the only way to survive if you’re not the low-cost operator, and it’s a great add-on if you are.
The problem we see is that real personalization does require a degree of rocket science, and pseudo personalization doesn’t provide the “bang for the buck.”
The retailers who are more discriminating about the effectiveness of personalization tools — and there are a number of them out there — will get the results they need, and supplier support will follow. Those who are not as discriminating will continue to be stuck in this same face-to-face loop.
The jousting between Vinnie and Rhonda is battle-clouded by the heavy demands of the moment — including job survival — that both face. In that situation, it may be a far reach to expect that either can deliver more enlightened leadership under today’s intra-fraternity methodology. But Vinnie started up a creative and powerful GMA and Rhonda initiated a perceptive and action-oriented FMI to generate the type of leadership needed for industry-wide solutions this subject focuses on. Why then do many such situations stay unresolved for decades?
One of the things we spend a lot of time on is vendor/retailer assessments of various stripes, ranging from more general “industry studies” to very specific individual client assessments. One thing holds true throughout — you have to get the basics right as a vendor. The only thing that regularly trumps “basic account management” attributes in importance to retailers is “brand power.” And even then, vendors with the most powerful brands in the category can see scores drop dramatically during a time of supply problems or a botched product launch. The “strategic/technological” attributes are the differentiator that separates the players after the basics of brand strength and account management are met. But excelling there almost never overcomes a flaw in the fundamentals.
On the retailer side, the most difficult thing for vendors to recognize (and accept) is that the relationship style will be dictated by the retailer — not the vendor. As some have pointed out already, retailers who want to go there already work closely with top vendors on sophisticated programs with sell-through and waste reduction in mind. Retailers who want to do business in more traditional fashion aren’t necessarily “bad customers,” but vendors will frustrate themselves mightily trying to sell that “Free Frequent Shopper Card Analysis for a Free Display” program that Customer Marketing dreamed up.
I must side with Vinnie on his request for data. Vendors are hungry for data that can improve the business for both parties, but they are looking for trends by region or demographic, not to “spy” on specific customers. In many cases, there are real gems hidden within these data that can truly improve program productivity. I will concur that, once received, the data can be difficult to interpret, and often needs hours of finessing before it can be made useful.
As a retailer, I cannot survive without vendors, who, naturally, need me (and other retailers). It behooves both of us to ask ourselves what we can bring to the table to help the other do his/her job.
I keep fairly detailed profiles on select clients, usually people who are regular shoppers and have made multiple shoe purchases from me, or indicated that they intend to return to do so. This data has helped me cultivate more business from them as sales opportunities have arrived, and sharing this information, as long as personal information about individual customers isn’t disclosed, could definitely help the vendors I work with.
Whose products are moving? What styles, colors, sizes, price points, etc.? By letting vendors know this, they can adjust product mixes that they offer me, and I can better serve my customers. When I serve my customers better, everyone wins.
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What’s really the problem here? I would suggest that the challenge is not the lack of cooperation, but instead, the incredible cost of doing something effective with the data.
Vinnie Vendor is correct that the expense of $250,000 destroys the financials for the vendor and makes “data sharing” a one-sided deal benefiting the retailer and their third party suppliers. However, Rhonda Retailer is also correct that the solution is not to simply “share” the data so that the vendor can use it for their own benefit.
The solution is not in either side giving in; it is in fundamentally changing the financial dynamics of leveraging the data and TAKING THE COST OUT. How do you take the costs out? Here are a few examples:
DATA ANALYTICS=> Standardize the analytics to minimize the time and cost of generating insights and promotional programs. This does not require an industry standard; instead it requires that the retailer create their own standardized reports and promotional programs that they can offer to manufacturers.
CUSTOMER COMMUNICATION=> Stop focusing only on direct mail. The high cost of postage can destroy the financials of otherwise impactful targeted marketing and promotional programs. Shift toward lower cost vehicles such as email and the web.
CUSTOMER INCENTIVES=> Integrate targeted promotional efforts (consumer spending) with existing retailer promotional activity (trade spending), including weekly ad features. Retailer-developed targeted promotional programs offer the best opportunity to combine trade and consumer spending for maximum impact.
Instead of seeing themselves as a data provider, retailers should see themselves as a provider of efficient targeted promotional programs. That’s where the synergy is between retailers and manufacturers and where the most profitable results are being generated.
Call any 5 supermarket companies. Ask the buyers for the 3 brands whose marketing and promotion programs are most reasonable. You’ll get repeats in 10 out of 15 responses.
Then call 5 supermarket food suppliers in a single geographic area. Ask the salespeople for the 3 supermarkets most competent at sustaining win-win relationships. You’ll get repeats in 10 out of 15 responses.
It takes decent leadership to work together. Data standardization will help people who already are decent work partners. What will help the rest? New leadership.
They each could not be be more wrong or more right about things. Manufacturers and retailers have BOTH lost their way to a large extent in terms of basics and fundamentals (who are they serving, what are the needs, what is their unique selling proposition, what value do they provide vs. competition, etc.).
In the absence of those things, each reaches for managing efficiencies and costs. What you are left with is “same old/same old” over and over again (as each screams in desperation that “if only the other would do something different”).
Excellent topic choice and I look forward to seeing what others have to say about it.
Although there are merits to both Vinnie’s and Rhonda’s needs and wants Rhonda is correct in pointing out the sensitivity of sharing customer data with Vinnie. Rhonda’s violation of the trust their customers place with them will have a negative impact on her business. However, there is still a need to share consumer data that is agreed upon by both Vinnie and Rhonda, and the standards to do that need to be developed and agreed upon by all involved parties. Although easier said then done, standards of this nature have been created in the past and should be initiated by organizations like ARTS.
This is starting to sound like that commercial where the consultants “don’t actually do” what they propose. A lot of talk and no action sounds very similar to our friends Rhonda and Vinnie’s relationship. If the FMI or GMA wanted to get involved I would think they already would have, so they must not believe the problem is solvable. So what’s the answer and who’s right? Until category management evolves into the next level, we’ll be debating these issues for a long time.
Ask over one hundred major retail buyers, DMs, GMs and licensors what separates their gold standard vendors from all of the rest (those on the brink included) and indeed you will be able to draw clear conclusions…we did again this year when we conducted our update surveys for our annual “Ten Vendor Mistakes” report (which we’ll preview in January at a presentation here in Bentonville). We hear Rhonda is saying “MORE data, Vinnie? You can’t HANDLE the data you have!” and plenty of on-the-brink Vinnies are living a double life; playing lip service to wanting more, more, more (what else are they supposed to say?) yet having nightmares about their unprepared staff drowning from douses with a fully-loaded data fire hose!
Neither has it right. If we believe in category management as a guiding philosophy, then neither of these two appear ready to play.
Rhonda is right to expect operational excellence from Vinnie, including getting the advanced shipping notices right every time. But Rhonda, you’d be smart to listen carefully to Vinnie’s offer. Both of you want profitable, repeat customers. Study them together using your customer database.
Do you know how to win new stores customer through promoting Vinnie’s key brand? Run a couple of promotions together in controlled tests. Then study the retention cycles of the new customers you win. You don’t just want bottom feeders and coupon clips. So you need to learn about the whole customer relationships. What else did they buy? How far they travel to get to the store? How frequently do they revisit?
Do you know what it takes to retain a customer who buys Vinnie’s brand? On a broader scale, again with a control, find profitable customers who have bought Vinnie in the past but who now less frequent visitors. What does it take to reactive them?
You want ASN, yes. But you also want to win new customers and retain good ones. These are areas where you can continuously improve through good cooperative programs.
So far so good. You have described about 99.9% of all retailer-vendor relationships in the CPG industry. But we all know generalizations are perilous at best.
For any manufacturer to position themselves as the category partner when unable to address the elementary foundations of business with any company is ludicrous. Ensure your house is in order before asking to host the party.
Retailers are as different as each of us are and all have as varied point of views on issues such as these as there are pundits like us. However, the lack of trust with manufacturers is astounding. I know there are numerous examples of why this is so. But, with the right (secure) environment, requirements for the key categories for this partnership, and the investment of a few qualified bodies, these arrangements could work very well.
This issue of treating these items as profit centers may never go away. Remember, everyone has to pay to purchase valuable information from any market research company. Why not the retailer too? As long as it is appropriately priced and the proper restraint of only utilizing the information in the business of that retailer.
Finally, the issuance of standards and, or, a code of conduct regarding this subject is an appropriate one for the GMA, FMI, etc to tackle. Understanding that they will be adapted accordingly by the retail community.
As an Account Manager for a large consumer goods manufacturer, I can tell you that this is not a conversation that takes place with the largest national retailers — particularly in Mass. Somehow they have managed to remember that the overall goal is to sell product, and the ‘team’ approach being used by the major retailers and major vendors gives both access to the data they need to meet their agreed-upon objectives together.
It’s been my experience that reaching an agreement on a set of measurable objectives goes a long way toward overcoming the challenges that Vinnie and Rhonda are having. In today’s wholesale-retail environment, vendors and retailers alike are so busy with daily deadlines that we often short-circuit our long-term success by failing to take the time to create a common set of measurable goals.
No retailer knows a vendor’s products as well as the vendor. A retail buyer has his attention spread over many items within a category and many of the items within a category don’t compete with each other. I have worked with many retail buyers and the ones that ultimately get promoted are the ones who listen to vendors and utilize the vendors resources. Retailers, over the years, have adopted one scheme after another as a short cut to doing their job. Selling silver bullet solutions to vendors has occupied too much of retail buyers’ time and effort. In my experience, few of the silver bullet advertising programs are ever repeated (a testimony to their lack of success). Retailers succeed when they do what is important to their customers. If it is not important to your customers then run away from it. Vendors are better off not depending on retailers for anything except distribution. However, if a retailer wants to share sales data (not customer information) see what can be done to utilize this information to improve your sales. I did find it interesting that the vendor and buyer in the example listed talked about data but it seemed they were talking about two different things. The frame of reference and unknown internal discussions which form that frame seem to be locking both parties into a parallel communication in which both are talking about data with authority but neither is referring to the same “DATA” as the other. This is not communication and I fault the vendor in this case as it is the vendors responsibility to keep communication clear and flowing.
The future requires increased personalization of offers by both retailers and manufacturers, i.e., it’s the only way to survive if you’re not the low-cost operator, and it’s a great add-on if you are.
The problem we see is that real personalization does require a degree of rocket science, and pseudo personalization doesn’t provide the “bang for the buck.”
The retailers who are more discriminating about the effectiveness of personalization tools — and there are a number of them out there — will get the results they need, and supplier support will follow. Those who are not as discriminating will continue to be stuck in this same face-to-face loop.
The jousting between Vinnie and Rhonda is battle-clouded by the heavy demands of the moment — including job survival — that both face. In that situation, it may be a far reach to expect that either can deliver more enlightened leadership under today’s intra-fraternity methodology. But Vinnie started up a creative and powerful GMA and Rhonda initiated a perceptive and action-oriented FMI to generate the type of leadership needed for industry-wide solutions this subject focuses on. Why then do many such situations stay unresolved for decades?
One of the things we spend a lot of time on is vendor/retailer assessments of various stripes, ranging from more general “industry studies” to very specific individual client assessments. One thing holds true throughout — you have to get the basics right as a vendor. The only thing that regularly trumps “basic account management” attributes in importance to retailers is “brand power.” And even then, vendors with the most powerful brands in the category can see scores drop dramatically during a time of supply problems or a botched product launch. The “strategic/technological” attributes are the differentiator that separates the players after the basics of brand strength and account management are met. But excelling there almost never overcomes a flaw in the fundamentals.
On the retailer side, the most difficult thing for vendors to recognize (and accept) is that the relationship style will be dictated by the retailer — not the vendor. As some have pointed out already, retailers who want to go there already work closely with top vendors on sophisticated programs with sell-through and waste reduction in mind. Retailers who want to do business in more traditional fashion aren’t necessarily “bad customers,” but vendors will frustrate themselves mightily trying to sell that “Free Frequent Shopper Card Analysis for a Free Display” program that Customer Marketing dreamed up.
I must side with Vinnie on his request for data. Vendors are hungry for data that can improve the business for both parties, but they are looking for trends by region or demographic, not to “spy” on specific customers. In many cases, there are real gems hidden within these data that can truly improve program productivity. I will concur that, once received, the data can be difficult to interpret, and often needs hours of finessing before it can be made useful.
As a retailer, I cannot survive without vendors, who, naturally, need me (and other retailers). It behooves both of us to ask ourselves what we can bring to the table to help the other do his/her job.
I keep fairly detailed profiles on select clients, usually people who are regular shoppers and have made multiple shoe purchases from me, or indicated that they intend to return to do so. This data has helped me cultivate more business from them as sales opportunities have arrived, and sharing this information, as long as personal information about individual customers isn’t disclosed, could definitely help the vendors I work with.
Whose products are moving? What styles, colors, sizes, price points, etc.? By letting vendors know this, they can adjust product mixes that they offer me, and I can better serve my customers. When I serve my customers better, everyone wins.