FD Buyer: Vendor Venting

Promotions are a frequent headache for vendors. Retailers want them to help differentiate their brand from others. Consumers like them because they offer price discounts. Vendors use them to increase trial and sale. You would think that this alignment of interest would ensure that promotions are presented well in-store, but this is often not the case. Brands and retailers need to work closely together to ensure that displays are properly set up and product is in stock.

Max Goldberg, Founding Partner, The Radical Clarity Group

For my client companies, I have developed the right dialog with retailers over the years to know and understand that retailers need "promotion funds" more than they really need "promotions."

For many vendors the types of promotions that retailers do are irrelevant and have little value for certain types of brands. In fact for certain niche and specialty brands, the scans and discounts are actually counter-productive.

But retailers and vendors need to sit down once or twice each year and have an honest dialog about what really works best for all parties involved. We can find common ground and get it done!

David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates

Call it category management, call it shopper marketing, or just call it sales, the vendor should be providing clear guidance on the sales expectations of a given marketing action. The vendors should be getting this from marketing or marketing research at their own company. If the retailer is not paying attention, it's the vendor who's missed something--either they lack credibility, they've been wrong in the past, they are asking for too big an upfront incremental commitment, etc.

Dr. Stephen Needel, Managing Partner, Advanced Simulations

Generating the desired results from promotional activity has been a struggle for vendors for years. But I'm not sure retailers "cause" it. The fact that retailers treat the goals of maximizing:
1) unit sales,
2) retail revenue,
3) retail sales margin dollars and
4) net landed cost or (net generated revenue)
from any given promotional offer very differently should not be new news to any vendor.

The question is, why do vendors keep going back to retailers who's goals are clearly not aligned with their own with promotion dollars?

As long as vendors continue to offer those retailers incentives to buy more product to meet their quarterly volume targets, hit their quotas and make their bonuses, nothing will change.

And as long as senior management of these vendors use the same old sales management tools and incentive systems, their own sales forces will not change this behavior--they would be cutting their own financial (and probably career) throats.

The only real answer for vendors lies in building brand value through innovation and consumer loyalty that goes beyond promoted price. The brands that will survive the current onslaught of private brands will be the ones that do 90% of their volume off the shelf--not the ones with 400% lifts in "incremental" promoted volume.

Ben Ball, Senior Vice President, Dechert-Hampe

When a buyer (category manager) will not do something, there is a reason for it. They don't believe the sellers pitch. They don't understand the program. They don't care due to another decision they made. Most importantly, the program does not support how the buyer is evaluated. Over the years I have seen many pitches that were rejected due to not being in the buyer's personal best interest.

I have preached quit trying to sell the wrong deal. Unless the seller understands how the buyer is reviewed and compensated they are just throwing it against the wall. For example damage & unsalables are a profit center, plain and simple. The buyer does not care as it is not linked to their performance, so playing this card is useless. On the seller side unless the purchase makes profit sense, don't do the deal. This is a hard one to accept, but simply moving unprofitable or less profitable cases is rarely the answer.

W. Frank Dell II, CMC, President, Dellmart & Company

Failure to control "shrink" in the store generates larger problems than failing to properly support a promotion. If one looks at shrink as an operational failure, then one can look at failure to properly work promotional opportunities as an operational failure as well.

Operational failures have to be identified and rectified to achieve positive results in all areas of the store, to include promotions. A primary cause of shrink in many stores is "promotion" failure. Wrong signage, wrong pricing, over-ordered, heavy volume in back rooms, etc. Store management and the vendor representative have to be engaged and know what moves in the store and how fast it moves, promotions should be brought in and sold out within two weeks, displays should be built to move product. A solid promotion strategy will work wonders when all parties are actively pursuing the same goal.

Robert Bunch, Chief, Customer Service Division, DeCA

I'm with Ben. The key word is "alignment." I've seen major brand launches turn into tragedies when the vendor/brand assumed that a certain amount of time would be given for a new program, product or brand to "take" or that one retailer's promotional plans, ordering patterns and appetites for particular brands or products should or would be the same as its nearest competitor (which the vendor may also define inaccurately).

Also, a product or program may be far less important to particular retailers' or buyers' bottom lines than it is for the vendor. Therefore, running low or running out, however devastating to the vendor, may be nothing more than a blip for the retailer.

Carol Spieckerman, President, newmarketbuilders

All these issues are caused by suboptimal planning between retailers and manufacturers. Clearly "partnership" only goes so far whether under the guise of category management, shopper marketing or just good old-fashioned buying & selling. But, a rising tide lifts all boats and the retailers and manufacturers that are planning better together reduce these frustrations. That joint planning needs to be at several levels: long-term strategic alignment at the top of the house, medium-term category business planning, and short-term, store-level inventory management.

Alison Chaltas, EVP, GfK Interscope