Retail Customer Experience: Retailers, Manufacturers Need to Work on Collaboration
Through a special arrangement, presented here for discussion is a summary of a current article from Retail Customer Experience, a daily news portal devoted to helping retailers differentiate the shopping experience.
Collaboration between retailers and manufacturers shouldn’t be exclusive to a new product launch, promotion or supply chain initiative.
A disconnect between the two parties develops when the retailer or manufacturer believes they can only maximize their own position at the expense of the other. This misconception limits thinking about what the improved outcome could be and how, by working together, both can win and achieve something that neither could accomplish alone.
Collaboration between the retailer and manufacturer starts with creating a new common language to describe the business. Discussions between the retailer and manufacturer should start with: How many customers are shopping in stores or buying a category? How often are they shopping? When do they shop? How many units do they buy each time they shop? How does this differ for customers who are more price-sensitive as compared to those that are less price sensitive? How are these metrics changing over time?
Collaboration between the retail and manufacturer means:
- We measure promotions by the number of customers they engage rather than only the number of cases sold or incremental sales created.
- We make assortment decisions to ensure that we offer products that appeal to the most loyal customers that shop with us rather than focusing on carrying the products that comprise the most sales.
- We understand how products within a category are cross-shopped so we understand which products are complementary vs. which are substitutes for one another.
- We measure category and department success by understanding if we’re growing the number of customers who buy our categories over time and how much customers are spending with us.
Sales or profits are not bad words. Long term sales and profits are the positive outcomes you achieve when the starting goal is to win with the customer.
This next level of collaboration is a more advanced step on the customer-centric journey and it involves defining customer and category strategies that are manufacturer agnostic. Individual manufacturers then define the actions they must make to support this broader customer category plan. The objective must be about increasing how customers engage in the category vs. how individual brands or products perform.
Challenging times are just that — challenging. This disruption in the status quo means we must also change. There are tremendous benefits when we embrace change and look for a new approach that is more effective. Customers will guide the way, we just have to be good students, do our homework and act.
Collaboration and customer-centered decision making may be the “right” things to do. A more pragmatic view is that collaboration around the customer is the only sustainable way for a financial win-win for the retailer and manufacturer in the long run.
Discussion Question: How do conversations between retailers and vendors have to change to drive true collaboration?