TOP-TO-TOP 1994-01-24

KENNETH A. HARRIS JR.

Focusing on marketing and selling fundamentals isn't as intellectually stimulating as the latest acronym for industry initiatives (ECR, etc.), but it delivers results and separates competitors. A back-to-basics approach allows manufacturers to build franchises with both consumers and customers. In last issue's Top-to-Top column, Cannondale's Jack Ryder identified four fundamentals for trade marketing success through the 1990s. Let's explore each of these in greater depth.

Trade Spending: Trade spending continues to escalate unchecked, despite lower inflation. Trade is absorbing a larger proportion of consumer budgets, which is being diverted from critical franchise-building efforts. A marketing manager of a blue-chip brand, who watched trade spending skyrocket from 30% to 60% of his total consumer budget, said, "It's just the cost of doing business in the 1990s." We disagree. Too often this is simply nonproductive spending.

It's time to take a disciplined look at trade spending through focused, quantitative analysis (e.g., shipments, spending, sales) and accurate qualitative feedback from retailers and sales organizations. An insightful analysis can free up as much as 15% to 20% of trade spending to reallocate toward brand-building activities. Moreover, the resulting volume risks are usually negligible.

Consumer-Based Category Management: Helping retailers understand the relationship between consumer dynamics and how categories are shelved and promoted is the new minimum ante in today's marketing game. Contrary to conventional wisdom, manufacturers are best equipped to provide insight into category dynamics. The key to establishing credibility is tying consumer concepts to retailer profitability using their cost structure.

Most marketers have access to sound consumer-based data, but few have supported this data with high-quality primary research. Even fewer marketers have translated consumer concepts into relevant retailer language (e.g., movement and profitability). The strongest Category Management programs offer consumer insight in uncomplicated retailer-specific plans.

Item Optimization: One retailer said it best, "The choice is simple -- either come to us with a plan for streamlining the section . . . or we'll do it for you." What used to be fighting words are now stark reality. Although retailers are finding ways to limit shelf inventories, most are streamlining the wrong categories and wrong stockkeeping units. At the same time, most retailers are receptive to well-researched item optimization plans based on consumer-oriented category segmentation models.

It is critical to document volume trade-offs both within and across segments of a category. Performance rates should be set within the context of the individual retailer's criteria (movement, ROII, etc.). The audience should be presold prior to the presentation and "sacred cow" items identified. Make sure revised planograms work or objectives will be lost at the critical closure.

Account Marketing: The key to trade spending analysis, category management and item optimization is delivering to the right audience the right information at the right time. This discipline can become more science than art by adhering to the following account marketing philosophy:

1. Discovery: Process which uncovers key account issues and priorities. 2. Innovative analysis: Including category concepts, account data and logical conclusions. 3. Linkage of supply-driven disciplines (e.g., logistics, customer service) with the demand side (e.g., shelf promotion and advertising).

Finally, follow-up is critical. Too many excellent programs are lost because execution is poor and feedback is not provided.

Demonstrating successful ways for retailers to earn more money and sell more products benefits all concerned. In the harsh realities of the packaged goods industry in the 1990s, building brand franchises with consumers and customers is the fundamental that really counts.

Kenneth Harris is a partner at Cannondale Associates, a marketing consulting firm based in Wilton, Conn., and Evanston, Ill.