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Author Archives: Rick Steinbrenner

About Rick Steinbrenner

I’m a global consumer brand AND product marketer – the global “brand guy”. I lead and manage leading global brands like General Mills, Kraft, Remington Products and Black & Decker, just to name a few. I have P&L responsibility with consumer product businesses as large as $200MM in multiple product categories. More importantly, If you talk with people who know me, they will tell you I have a REAL passion for identifying and creating new product opportunities from “blank sheets of paper” and exploiting these into multimillion dollar businesses. In fact, my teams and I have developed and launched over 20 new products generating over $200MM++ in sales – both in the B2C and B2B spaces.

Rick Steinbrenner

Is Product Commoditization An Issue For You?

First published on January 6, 2016 on www.marketingprofs.com – a preminent resource on best practice marketing techniques for the benefit of the members. What is MarketingProfs? Individual marketers, teams, and entire marketing organizations at the world’s largest corporations rely on us to cut through the chaos to find the marketing experts you can trust and the information you need. Trusted by 600,000+ professionals globally, MarketingProfs is the only resource you need to stay ahead of the curve. Read more:

Is Product Commoditization An Issue For You? And What Can You Do About It

January 6, 2016

Commodity Graphic - 123rf
Your company sells unique and differentiated products – or at least that’s what you think. However, your competitors have been trying to match you or maybe offering similar products at a lower price. You also think your consumers/customers are loyal and won’t switch if given an opportunity. Yet, they are much smarter – and are rationalizing purchases more – than ever before.

Marketplace competitors – either direct or substitutes – can easily make your products or services a commodity where everything comes down to price.

How do you know if you’re being commoditized? And how can you avoid that undesirable fate?

Let’s examine what defines various states of product commoditization.

a) Your product is offered by many:
Examples include things like some food and non-food items, restaurants, law, financial services, even personal services like fitness and hair cutting, etc. Meaningful differentiation is essential to deflect lower prices. What do you do?

  • Be the #1 or #2 share leader. Being so gives you critical mass since it implies customer satisfaction and allows you to build entry barriers due to your size.
  • Have third parties talk good things about you – either in social media, product ratings or customer awards. However, don’t just rely on Facebook pages. Not everyone looks at Facebook all the time.
  • Don’t focus just on price. Remind customers/consumers of your products relevant features/benefits.
  • Be the marketplace expert and offer free advice/counsel. Doing so might not result in an instant sale, but people remember who’ve helped them in the past.
  • Be easy to do business with. Customer service/convenience can make or break a sale. Time, too, has value to your users.

b) Your product is offered by some:
You have a somewhat unique product. Also, your product category has substantial barriers to entry limiting competitive entrants. Examples may include utilities, cars, travel, telecommunications, capital equipment, etc. What now?

  • Offer aftermarket service. Buying a car, computer, or telecom services is more than a one-time transaction relationship, offering you a continuing opportunity to build future purchases or upgrades.
  • Off a full-line product/service. Depth can offer consumers/customers a “one-stop” shopping experience, “locking-out” competition. Wal-Mart is ALWAYS looking for “one-stop” suppliers/vendors.
  • Product availability is important. Nothing frustrates people more than being ready to buy but finding out what they want is unavailable – or they have to wait a long time for it. Be sure the logistics side of the business is in sync with the sales/marketing side.
  • Be sure your pricing is still competitive. Even though competition is limited, you can easily price yourself out of the market. Know what your competitors’ prices are, and respond appropriately.

c) Your product is very new, unique & different:
Congratulations! what you offer is new, solves real consumer problems, and is not easily copied (i.e. hopefully patented). You have a great advantage, but you still need to sell.
Ÿ Highlight your differentiation in a meaningful way to consumers/customers. Be sure product or service claims are accurate and relevant to them – not you.

  • Focus on core benefit(s) – not features per se. It might have a different feature, but does it REALLY matter to your customers/consumers?
  • Be sure you proudly communicate your differentiation. Do some type of advertising and/or event marketing to “tell your story” and build awareness.
  • Keep it simple. Differentiation can be very technical. Don’t assume your consumers/customers understand what you’re saying. Avoid jargon. If they don’t understand what you’re saying you can’t expect them to buy your stuff

The bottom line is that you and your sales force need to remember three basic rules when managing your offering in the marketplace.

1) Stay Relevant.  Can your customers/consumers see the value in your product benefits? Remember, they tend to look more at benefits than product features. Are your products still relevant and provide value?

2) Be Sure You Can Measure Your Differentiation.  If you can’t measure how you’re different, how can you expect consumers/customers to see it? Are your product claims accurate? Are you getting third party recommendations and/or awards? Visible differentiation is always better than conceptual.

3) Continuously maintain/upgrade your product line.  Competition is always out there, hard at work trying to gain a competitive advantage over you. Don’t assume your competition is standing still and doing nothing.

If can keep these basic rules in mind, you can avoid competitive lower pricing – and commoditization – you will maintain a profitable and sustainable business.

Rick Steinbrenner
Global Marketing Officer
Brand Marketing Advsiors
www.globalbrandguy.com
_____________________________________________________________________________________________

Brand Marketing Advisors are specialists in global brand marketing and new product development.  We help consumer product companies to more effectively compete in product categories in/around the home.  We strive to uncover unmet consumer “need gaps” while partnering up with R&D/engineering to come up with true innovative product and marketing solutions.  We accomplish this through a combination of marketing research, consumer insights and creative thinking.  In most cases, this leads to a strategic and sustainable competitive advantage for our clients.

Rick Steinbrenner Head Shot - Cropped w/red borders

Our team is led by Rick Steinbrenner – Chief Marketing Officer / Principal.  He’s led and managed leading global brands like General Mills, Kraft, Remington Products and Black & Decker – just to name a few.  He’s worked as a brand leader and general manager in both small & large companies up to $12 billion in sales.  His track record speaks for itself – developing and launching over 20 new products that are generating over $200mm+ in sales – both in the B2C and B2B sectors.

Do Your New Products Have Real Competitive Advantages?

First published on 09/02/2014 on www.marketingprofs.com – a preminent resource on best practice marketing techniques for the benefit of the members. What is MarketingProfs? Individual marketers, teams, and entire marketing organizations at the world’s largest corporations rely on us to cut through the chaos to find the marketing experts you can trust and the information you need. Trusted by 618,000 professionals globally, MarketingProfs is the only resource you need to stay ahead of the curve. Read more:

Do Your New Products Have Real Competitive Advantages?

Think Outside The Box Image
It’s a well known fact that brand marketing and new products have radically changed as portrayed by Don Draper and his team in AMC’s “Mad Men” TV series. Back in the 50’s/60’s, mass marketing / advertising / new products seemed to be more of an art than science. Things like intuition, gut feel and luck seemed to have more to do with brand and new product success than a disciplined process. However, since then marketing / advertising / new products have “grown-up” with sophisticated analytical and process models. While a lot of these new tools certainly have their place I would argue some have been at the expense of solid strategic and creative thinking. This thinking “gap” means brand and new product innovations have not been as “disruptive” enough relative to the past – and thus lack real competitive advantages. Reasons include:

  • Retailer and manufacturer consolidation – Unfortunately, stock price pressures from Wall Street have created a myopic view of how to effectively manage and grow businesses – particularly in consumer product companies. The number of retailers and manufacturers serving consumers has radically dwindled since the 60’s. A lot of companies and retailers either no longer exist or now part of bigger concerns. The result has been lower headcount, lower tolerance for long term payback and lower new product activity (source: Nielsen).
  • The retail landscape continues to shift – Brick and mortar outlets have been losing share to online outlets due to consumer “show rooming” purchase behaviors. Moreover, private label / control brands now comprise roughly 25% of all retail sales dollars (source: Private Label Manufacturers Association) decreasing the importance of national brands. Finally, lack of store buyer continuity and buying habits continue to put downward pressure on retail prices – even if a disruptive new product is launched
  • Consumer demographics have shifted – Millennials are changing the face of marketing forever (source: Boston Consulting Group). Millenials will likely outnumber baby boomers 78 million to 56 million by 2030. This segment will have different habits and purchase behaviors vs. boomers and will impact marketing activities to reach them.
  • Marketing and information technology are merging – (if not done so already) – The growth of social media along with more sophisticated analytical tools are bringing these two separate functions together. Older marketers need to better understand social media and tactics and become more “tech savvy”; while younger marketers need to have a better understanding of strategy since more media is now BOTH traditional and digital. Allocation of marketing dollars to the most effective media channel to drive sales is critical since consumers are harder to reach
  • Idea generation/intellectual property have become too narrowly defined – Historically idea generation and intellectual property were sequential activities. This meant you had to have good ideas BEFORE you had a patentable intellectual property. However, some companies have recognized good ideas can come from anywhere – both from inside and outside. As a result, they have formalized their idea generation and intellectual properties processes to ensure they have both sustainable and robust streams of new product/business ideas (i.e. P&G).

As a result, many consumer product companies are losing/lost their competitive edge / advantages and not really innovating any longer. This can be seen in the Boston Consulting Group’s latest white paper: “The Most Innovative Companies 2013”. In this report, BCG continues to track the state of innovation via interviews with 1,500 senior executives which rate and rank their views of their own innovation plans and competition. They rank the 50 most innovative companies and their movement up/down this list over time. The sad fact from their latest report is only 5 consumer product companies are listed:

Boston Consulting Group’s Most Innovative Consumer Product Companies

Boston Consulting Group's Most Innovative Consumer Product Companies

So what can you do to make sure your new product programs have the right kinds of competitive advantages? I would argue you need to think big and “outside the box”. You need to persuade your CEO and CFO that investment in new product initiatives are worth the time and effort – despite the risks. However, that being said you do need to prepare compelling case(s) or basis of interest(s) so other senior line managers can better see opportunities. You can do this by following 10 steps:

1). REALLY understand your consumer / customer – Figure out what really motivates your customers / consumers to purchase your product or service. This could mean going beyond just focus groups to real quantitative analysis that gets to the core of purchase behaviors and attitudes.

2). Think big – Be creative and think outside the box. Remember the customer / consumer might not think about your product category in the same way you do. This is where creativity, intuition and gut feel really counts – if you need help get it.

3). Involve more than just marketing people – While marketing people usually drive new products, they don’t know everything. Good ideas can come from other functions beyond marketing….and also listen to your customers who resell to the ultimate end user. They see what your competitors are doing.

4). Test the validity of your ideas/concepts and prioritize them – Once you have a range of ideas you need a way to quickly screen them with the right target consumer. Quick concept market research screens are usually the best way.

5). Put together alternative business proposition(s) – At this point you need to summarize your top product ideas so senior management can better judge their attractiveness relative to other options. I recommend “single sheet of paper” approach summarizing the a) opportunity, b) barriers to entry, c) product line strategy/expansion potential and d) rough unit/$ volume potential.

6). Use a new product development process – If you don’t have a new product development process – get one. There are many staged tollgate new product models that can fit your business. Each “approved” business proposition should have its own tracking model and metrics for go/no-go decisions.

7). Put together new product roadmaps – Product life cycles are now incredibly short due to a combination of changing consumer needs and competitive offerings. You should plan a multi-year new product roadmap outlining what could be follow-up innovations to extend their new product life cycle.

8). If you sell to a reseller – be sure to highlight the opportunity from their perspective. – You need something to give your reseller (i.e. retailer) a reason to stock and carry the product. Otherwise, end users might not never see your idea.

9). Put together a comprehensive marketing plan – You will need to “broadcast” your new product news so customers/consumers can see it in the marketplace. Don’t just assume consumers will “find” your product on the internet or word of mouth.

10). Go back and re-evaluate if your new product programs were successful – Once you launch a new product or service it should be re-evaluated to see if it performed as expected and if not why?

Developing and launching new products are challenging – no doubt about it. However, if your business follows the above steps you should have much greater probability of success. You need to assume your competition ALWAYS knows as much or more than you with end users. If you keep this in mind don’t be surprised if you show up sometime on future Boston Consulting Group’s most innovative company lists. This is a great way to measure your success/failure as an innovator – because it from your peers.

Rick Steinbrenner
Global Marketing Officer
Brand Marketing Advisors
www.globalbrandguy.dot.com

Which Is Better? – Marketing or Unmarketing™

Post first published 4/2/13 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise. 

Which is Better? – Marketing or Unmarketing™ 

Does Marketing Really Work?

Does branded marketing and/or national brands really work anymore? Some people don’t think so. Whatever your point of view is you can’t ignore this simple truth. The combination of retailer and manufacturer consolidation combined with shareholder pressure to have successive quarterly earnings growth has done a lot to commoditize consumer product businesses. This has led some consumer product companies to stop innovating/marketing altogether because some don’t see it working anymore. There are many reasons why, but here a few big ones:

Innovation activity has and will most likely continue to decline:

According to the Nielsen company (a major consumer products research firm), of the 11,000+ new products they’ve evaluated over last three years less than .5% of all new product introductions met their breakthrough innovation criteria for success – that’s only 34 new products! While it’s always been true only a small % of new products ever achieve commercial success even during good times, there’s no question companies have been dialing back new product programs at an ever increasing rate. Nielsen also found the total number of new product initiatives decreased 6% annually since 2008 in the consumer packaged goods sector. While some of this decline can be attributed to lower economic activity there can be little doubt companies are innovating less not more. What I’ve also personally noticed are companies have radically changed their new product initiative risk profiles due to continuing Wall Street pressures to have these programs payout in less than 12 months!!

Decreasing importance of “national” brands:

National or manufacturer brands are having a hard time holding their own these days. According to Nielsen and the PLMA, store brands now account for almost ~25% of ALL retail supermarket, drug chains and discount store sales and growing. They also state 80% of consumers now believe store brands’ quality is equal to/exceed that of their national brand counterparts. This has led to the “commoditization” of many product categories. In some categories, retailers have “kicked out” the national brands altogether in favor of their own brands. While I don’t believe store brands will ever be 100% of sales, what is true is that national brands share of retail sales is decreasing and will continue to do so in the future. This is clearly a competitive threat.

Consumers don’t really believe what brands say anymore:

According to the Futures Company, the global strategic insight and innovation consultancy, a poll of 28,000 adults in 21 markets found 86% thought big business maximized profits at the expense of customers and communities. In Jonathan Salem Baskin’s e-book “Branding still only works on Cattle”, he takes this fact one step further by saying – “Brands are suffering the same declines and shortfalls we’re seeing in corporate reputations. Trust is a synonym for BELIEF and perhaps the strongest indicator of PURCHASE INTENT and subsequent LOYALTY”. Branded marketing clearly has a integrity problem today leading more people choosing NOT TO BUY vs. buying brands that supposedly have the right feature/benefit package.

These factors and others have many now saying “Branded Marketing is Dead”. It’s obvious we need to come up with a new way of thinking about branded marketing for the 21st century.

How about Unmarketing™?
Mr. Baskin goes on to say in his e-book “the 21st century model for brands will shift the emphasis from getting consumers to say YES to entertaining but otherwise meaningless engagement, and engaging with them on substance to which they’re allowed to say NO”. This is because people don’t really want to be sold on anything anymore, they want products/services that will help solve their unique problems – even if it means you might not make a sale today.

On the sales side of things, Peter Bourke: Principal & Vice-President of The Complex Sale, Inc. – a sales leadership team consultancy (www.complexsale.com) – makes the argument sales teams (closely allied to marketing teams) needs to unsell in today’s marketplace “selling more by Unselling™” as he coins it. This is because selling has become what the buyer REALLY expects in a sales call. The problem is most buyers/clients don’t want to be sold. The goal should be to make the buyer more receptive because they don’t feel like they’re being sold. It might appear to be obvious, but many companies still resort to the “old” way of selling.

Old approach to making cold callsUnselling™ approach to cold calling
“I have a product/service that best fit your needs” (presumptive at best).“I have a product/service that MAY fit your needs and if you’ll allow me to ask a few brief questions about what/whom you’re using now I may help determine if my product/service is even worth your time evaluating.”

It’s funny; this selling approach has been used very successfully on the marketing side in the past. Please see the short video below on how 7Up developed and executed the “Uncola” campaign in the early 1970’s. It featured Geoffrey Holder before he played Punjab in “Annie,” as well as playing a supporting role as Baron Samedi in the 1973 James Bond 007 movie – “Live and Let Die”.

Case Study – 7Up – The UnCola


Geoffrey Holder – “Cola vs. Uncola Nuts”

As you can see the account team & creatives at J. Walter Thompson (7Up’s agency at the time) correctly identified a unique consumer solution – a clean, light, wet and wild refreshing soft drink that wasn’t a cola. It was also strategically correct since it allowed 7Up NOT directly compete against the soft drink giants – Coke & Pepsi. The result was increased sales and brand equity for 7Up.

Bottom Line:
It’s time for branded marketing to re-define itself. We need to start Unmarketing™ our initiatives/products focusing on a more collaborative approach helping consumers solve their problems – even it means we don’t sell anything today. This means creating programs and products that builds trust and credibility. I know this is a long term approach that might not payout in “10 minutes” as required by most Wall Street/Finance people. However, what’s the alternative – continue to do marketing the same old way and then say it doesn’t work? We need to break this self-fulfilling prophecy and really change the way we do branded marketing going forward. If we do this, I think we might find a new renaissance in marketing because it will “work” again. The question is: what are you doing in your organization to make this happen?

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy

Ten Thoughts On How To Develop High Performing Teams – Leadership

Post first published 2/27/13 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise.

Ten Thoughts On How To Develop High Performing Teams

Team Graphic

The word “team” has been used a lot in organizational motivational materials in recent years.  However, there is big difference between just a group of people calling themselves a “team” vs. a high performing one.  A team that doesn’t perform or work well together will, in most cases, not be able to help the organization achieve their objectives.  Moreover, de-moralizing team leadership can result in pushing all decision-making upwards to avoid “getting into trouble” and stifle new ideas.  I’ve been fortunate over the years in leading many cross-functional teams in multi-million dollar consumer product businesses.  So I’d thought I’d share with you my 10 ideas on how to develop high performing teams.

1.   Encourage “outside the box” thinking:

It’s important not to tell your team members “how” to do things.  Just establish the “goal line” and make sure they get any help they need.  Moreover, it’s also important you teach/train your team members on how to think “outside the box” to help them look at problems from many different points of view.  This is how seasoned leaders think and it’s a skill that can be taught.  It starts by asking different types of questions to uncover any gaps in team members thinking about the problem.  This helps to get your team to think.

2.   Delegate till it hurts:

The only way team members will grow if they learn by their mistakes as well as successes.  If you micro-manage all it will do is push ALL decision-making up to your level and they will never grow.  You can provide direction on what’s “in/out” of bounds, but don’t do the work for them.  My motto is “It’s OK to make a mistake; just don’t make the same mistake twice”.

3.   Be open to new ways of thinking:

Yes, you’ve been successful or you wouldn’t have been made team leader in the first place.  However, as Albert Einstein so cleverly stated “We can’t solve our problems with the same level of thinking that created them”.  So don’t be insecure to think you know everything – you don’t.  In addition, ask for volunteers with new ideas.  They will be most motivated to come up with new ideas and/or thinking.  This helps with idea #1.

4.   Never talk down to your team members:

Even if you think you know everything, never talk down to team members to show them how smart you are.  The workplace is not a forum on who’s the smartest.  It’s more about learning, letting go, performing, and motivating others to do great work.  Moreover, who wants to perform for someone who is always talking down to them?  Team members have feelings just like you.

5.   Give credit where credit is due:

While you are responsible for the ultimate product of your team, be sure you never “steal” their work.  Nothing demoralizes team members faster than bosses claiming their work as their own.  Don’t worry, you’ll get credit for your team’s work since your boss will give YOU credit for leading the team that came up with the idea in the first place.  That’s leadership.

6.   Promote your team members:

Be an advocate of your team.  Support and promote their work throughout the organization.  Remember, their work is a direct reflection of your leadership.  If you promote your team you will get promoted in the long run.  Moreover, you will build solid relationships with your team members for life.  They will remember how you promoted them and thus they will promote you – especially when you’re not looking.

7.   You must be authentic:

Everyone wants to be liked.  This means you need to be “real” and listen to your team members concerns and issues – even if you don’t really have the time.  You need to make time.  Moreover, no one wants to be “sold” or coerced into thinking you’re someone you’re not.  People can easily spot a phony and this leads to mistrust and ill feelings.

8.   Be sensitive to team member personal issues, but be careful:

While it’s important you’re sensitive to team member personal issues (this is part of being authentic), you need to be careful and not get “sucked in” to solving their problems.  Some people can be too “needy”.  Listen and try to make some relevant suggestions, but remember you’re not a psychologist.  This is work and if your team members need additional assistance suggest they seek outside counsel or contact your company’s employee assistance program (EAP).

9.   Train team members to do your job:

If team members request any developmental help be sure you do your best to get them the help they need.  This includes spending money on training.  The goal here is help train team members do your job; so you can have time to do your bosses job.  Everyone on the team should have the goal of continuous improvement so they can remain employable and take themselves to the next level of development.

10.  If your team doesn’t have the right skillsets – seek out new team players:

It’s your responsibility to make sure the team has all the right skillsets that get results.  Today’s marketplace is changing daily and your team needs to step up and consistently produce results for the company.  If your team is unwilling or unable to address any needed skill gaps you need to find people who have them.  Don’t be afraid to re-structure your team as needed.  Your boss is looking for you to get the job done.

Team leadership that produces results isn’t easy .  However, if you follow some or all the principles I’ve mentioned you will have a better chance of producing a team that can exceed your expectations.  Moreover, you will build relationships for life even after you’ve moved onto a new team.  You never know when you might need THEIR help down the road.  What are you doing today to produce a high performing team in your organization?  It should be one of your most important priorities.

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy
 

How To Make Sure You’re Working On The Right New Products

First published on 1/30/2013 on www.marketingprofs.com – a preminent resource on best practice marketing technigues for the benefit of the members. Their editorial team cuts through all of this marketing noise to  find the experts and in-the-trenches marketers who know what they are talking  about. Then we take their know-how and mix it with our marketing smarts to turn  it into practical advice that you can actually use through our newsletters,  conferences, seminars, podcast, articles, and webcasts. We must be doing it  right, because we’re a multi-million dollar company that serves a community of  more than 496,000 entrepreneurs, small-business owners, and professional  marketers at the world’s largest corporations. Read more: http://www.marketingprofs.com/about/#ixzz2IHCDaHq8

Product Portfolio Management

It happens all the time.  You learn your active new product programs are either falling behind or the scope of the project has radically changed.  Your teams are telling you they don’t have enough resources to do ALL programs.  Moreover, they seem to be working at cross purposes to one another and have different opinions on the probability of getting the idea to work.  You need to figure out a way to get everyone on the same page so you can keep your new product programs on track and get your ideas to market in a timely fashion.  In this article we will discuss ways to make sure you’re properly resourcing your new product portfolio and then develop tracking tools to make sure they launch on time.  In a prior article (Are your new product ideas attractive enough?), I discussed the major types of new products as well as their differing risk/reward profiles: Type 1:  Simple derivatives/new models of current product lines – easiest to do, lowest risk. Type 2:  Line extensions. Type 3:  New products/innovations in a company’s core category. Type 4:  New product platforms in a new category (to the company) – hardest to do, highest risk. I then recommended using an objective assessment tool to help rank alternative new concept attractiveness from high to low.  The goal is to prioritize your new product portfolio – just like your individual financial investments.  Once completed you then need to determine if your new product portfolio is “balanced” and can potentially deliver results vs. expectations.  There are three critical elements to consider to make sure your new product portfolio is “balanced”.

  • Are your new product ideas strategically aligned with business and innovation growth strategies
  • Is your new product portfolio balanced across product type, risk, time and resources
  • Can they deliver against new product revenue growth expectations – are they sufficient?

One tool than can help in this assessment is development of a new product road map.  A graphical hypothetical product road example is shown below:

New Product Portfolio Management - Product Road Status

 Click On Image To Enlarge

As you can see this graphical plot shows the type of new product, the size of the opportunity, where it is in the new product process as well as its estimated development timeline.  This tool can then be used to help allocate limited development resources to achieve the desired risk vs. reward balance requirements. 

Fortunately, this same tool can also help you track and manage your new product portfolio.  All one needs do is plot progress along the launch time line as well as its current status in the new product development process at different points in time (i.e. quarterly reviews) as shown in the example below:New Product Portfolio Management - Product Road Quarterly Update

 Click On Image To Enlarge

As you can see, these tools are straightforward, easy to understand and really helps to get everyone on the same page.  One minor caveat – in very large/global organizations there can be literally hundreds of new product initiatives making tracking more of a challenge.  Fortunately, there a number of available automated product portfolio management tools on the market.  Once such program is called “Clarity” owned by Computer Associates.  This type of automated tracking programs use a dashboard concept to assist in tracking a large number of new product programs.  See screen shot examples below show how this can be used in larger organizations.

Computer Associates Clarity Program Dashboard Example

 Click On Image To Enlarge

 Computer Associate Clarity Product Portfolio Dashboard Example

Click On Image To Enlarge

One final note.  It’s VERY important both senior and line managers be consistent in their new product resource management decision-making process.  What this means is line managers need to have “straight talk” with their senior leaders regarding realistic risk vs. reward opportunities.  Senior managers also need to realize their teams can’t do everything.  If priorities change too much this sends confusing messages to the organization which can easily cripple getting anything out the door.  Finally, the type of tracking tool that’s used is not as important as having A tool to help manage and track alternative new product concepts.  Product portfolio tracking roadmaps are considered “best practice” at many leading global companies like Proctor and Gamble, General Mills, Coca-Cola, Whirlpool, General Electric and Stanley Black & Decker, etc.  They consistently manage and track their portfolios to make sure they’re delivering the right mix of big and small ideas sufficient to meet the strategic growth objectives of their organizations.  It’s little wonder then that many of these companies are #1 or #2 in their respective product categories.  Can you say your company is on this list? 

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy  

Are Your New Products Concepts Attractive Enough?

Post first published 1/16/13 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise.

Assessing New Products Concepts Attractiveness

It’s a common dilemma for most companies.  You have multiple new product ideas, but how do you know which ones are the most attractive in terms of consumer/customer interest, market size and growth and where you and your customers can make the most money?  In addition, how long would it take to bring the idea(s) to market and does the company have the right design and build capabilities to make it happen?  The key is to figure out an objective way to assess the attractiveness of alternative new product concepts so you can prioritize those first.  In this article we will discuss the different types of new products and the process you should use to prioritize your new product portfolio.

Many reasons exist on why you need to prioritize your new product portfolio.  Some are:

  • Not all new product programs are the same.  There is a big difference in developing simple model derivatives vs. “disruptive” new product ideas.  You need to tailor your new product process to match the types of new products being developed. 
  • You can’t do everything.  You have limited time, people and development dollar resources.
  • While you might have a great new product idea, new functional technologies might not be developed enough yet to have it work.
  • ŸYou want to be “first to market” vs. competitors.  Studies have consistently shown leading the market with new products is more preferable than following.
  • ŸYou need to make sure your new product development portfolio is aligned with business strategy and goals as well as being sufficient to meet new revenue growth expectations.

The first thing you should do is assess the strategic and technical difficulties in developing your new product ideas.  There are four major new product types groups:

Type 1:  Derivatives/new models of current product lines.  They are just additional product features, color, flavor, scent or size products etc.  Easiest to do and low risk.  Examples include: 10 vs. 12 cup coffee-makers, diet sodas or different cake mix flavors.

Type 2:  Line extensions:  These are current product lines moving into an adjacent category based on the same branding or product platform(s).  Examples include:  Clorox disinfectant wipes, Velvetta’s cheese skillet dinners, or Kellogg’s pop-tarts.

Type 3:  New products in company’s core category:  These include new platforms or delivery systems offering new innovations in the company’s core business.  Examples include: Tide detergent pods, DeWalt cordless power tools and General Electric’s compact fluorescent light bulbs (cfl).

Type 4:  New platform in a new category (to the company):  These concepts have the highest risk, but have the most business impact – i.e. game changers and/or market category creators.  Examples include: Swiffer quick cleaners, iphones/tablets and Keurig K-cup single serve coffeemakers.

These new product types have very different risk vs. reward profiles as conceptualized below:

New Product Types - Risk vs. Reward

Click On Image To Enlarge

Thus, it’s important to know the new product type you’re considering so you can more accurately assess its attractiveness to the company.  Then you need an objective way to assess the attractiveness of alternative concepts since people, time and dollar resources aren’t unlimited.  Fortunately, this step doesn’t need to be 100% accurate or highly complex.  A consistent qualitative ranking assessment will do just fine at this stage.

There are at least five major attractiveness criteria measures you should consider:

  1. Consumer Interest:       Is the concept unique?  Can consumers easily see demonstrable results?
  2. Design & Build Capabilities:  How easy is it to design/build?  Is engineering/R&D familiar with the  technologies involved?  Should you make the product or source it elsewhere?
  3. Market Size/Growth & Competitive Offerings:  How big is the market?  Is it growing and sustainable?  How many major competitors are out there      already?
  4. Financial:  What is the net margin $ potential?  Does the concept require substantial development dollars?  Will it require substantial marketing      communication dollars beyond the launch?
  5. Risk:  Is your concept patentable?  How long will it take to develop?  Will either qualitative and/or quantitative market research be required to help reduce  business risk?

You should weight these measures and combine them into a new product ranking assessment tool similar to the one below.

Concept Attractiveness Scoring Template

Click on Image To Enlarge

Then you grade each one of your initiatives and rank them high to low based on these concept attractiveness scores.  While you could use the above example, you should design your own new product ranking assessment tool consistent with your overall business model since attractiveness criteria can vary from industry to industry.

In sum, it’s not enough just to have great new product ideas.  You need to know what type of product it is and then objectively assess its appeal relative to multiple ideas.  You then need to prioritize your ideas so you can make sure your product portfolio is diversified similar to any financial investment.  This tool can help you and your company manage the “fuzzy front end” vs. it managing you.

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
A Consumer Brand & Product Marketer 

Digitizing Your Personal Brand Series – Part 2

Post first published 12/27/12 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise.

Building Your Own Professional Website

In part 1 of my series – Digitizing Your Personal Brand – I made the argument having a specific and unique positioning statement could help you stand out from the competition.  In part two of this series I will focus on using the power of the Internet to take your career searches/lead generation programs to the next level.  Now with advances in CMS (content management systems) it’s easier and cost effective than ever to build and manage your own website.  Moreover, most career experts now agree developing your own personal website is the best tool going forward to build up your brand name awareness.  I will show you an easy step by step process for the average “non-techie” to build their own professional website.

The good news is you can easily customize your site consistent with the content you’re willing to share and/or have to share.  The major types of websites include:

  1. Simple career/client experience summaries/case studies – including videos.
  2. Marketing portfolios (i.e. TV commercials, print ads, brochures, websites etc.)
  3. Blogging –sharing your content with others.
  4. Online news magazines – i.e. Huffington Post
  5. E-commerce
  6. Hybrids of 1-5

Once you’ve identified out they type of site you want it’s time to get started:

Step #1 – Developing your site layout/content/budget:

First, you need to identify what you want out of your website – what do you want to accomplish?  Second, you need to decide how much you want to spend.  There will be some costs associated with web host providers, domain names, etc.  Finally, you need to develop an outline of your site and begin gathering your content – especially if you need to digitally convert images from hard copies/film/videos.  A simple outline will do at this point.

Step #2 – Decide on the web content management system (CMS) you’d like to use:

A content management system is online software which allows “non-techies” to easily set up a website without learning difficult code language like HTML, Java or Visual Basic.  A CMS usually elements like:

  • Online document management and other media
  • Automated coding templates – called “themes”.
  • Extensions to help with site functionality – i.e. plug-ins, widgets, modules, components
  • Edit control
  • Collaboration/posting capabilities

The most notable CMS’s out there include WordPress, Joomla! and Drupal.  WordPress seems to be the most popular.  You will also need to decide whether you wish to use an “off the shelf” theme vs. customized design.  Customized sites are more complex and will cost you 2-3 times more than an off the shelf theme.

Step #3 – Developing and selecting a domain name:

Domain names are simply the name you give to your URL/website. There are two basic types:

a)  Organic:  This means you’re relying on people to find your site “organically” via Google and other search engine providers.  You can either choose your unique name like www.johnsmith.com and/or develop a unique and memorable brand name (i.e. www.marketingguy.com).  This is also called a “parked domain”.

b)  Paid:  You’re paying for a name already developed and owned by someone else which means it should have a well established search profile.  Caution: it can be pricey.

Domain name providers include www.godaddy.com, www.register.com, and www.networksolutions.com.  Go Daddy seems to be the most popular.  You can register a domain name for as little as $2.95/name for the first year.

Step #4 – Deciding Where Your Content Resides:

You can either a) host your own site on your computer (not recommended due to hardware/software costs, 24 hour connectivity issues) or b) sign up with a web host provider.  When selecting a provider you need to consider USA based 24/7 toll free support, operating reliability, traffic/bandwidth issues – especially important if you’re using videos/large files and want e-mail capabilities.  E-mail capabilities allow you to promote your site via use of your domain name in email addresses.  The top 3 providers include www.hostgator.com, www.rochen.com, and www.rackspace.com.  The most popular being www.hostgator.com.  You can sign up for as little as $3.96/month for the first year.

Step #5 – How do you want to build your site:

Now it’s time to build your site.  You can either “Do It Yourself (DIY)” or “Do It For Me (DIFM)”.  You can build your own site for as little as several hundred dollars to a couple of thousand – depending on your content/design.  However, if you don’t have some basic computer skills and are somewhat proficient in Powerpoint, Photoshop, etc. you might be challenged.  In this case, DIFM (hiring a web designer) is a good idea.  You should get exactly what you want from a design perspective, but downsides include a limited technical knowledge of how your site actually works.  This may hinder you with any down the road changes and/or maintenance.  Moreover, it can cost you 2-3 times more than doing the site yourself.  Best approach might be to use a web designer to help build the site, and then let him/her teach you on how to maintain/make changes going forward.  This is what I did for my site.

Step #6 – Importance of search engine optimization (SEO):

The goal for any website is to be found – that is showing up on page 1 of any search engine result like Google.  This is often time overlooked, but a very necessary step.  First, you will need to develop a sitemap XML file and register it with Google, Yahoo, MSN/Bing.  Most CMS’s provide a plug in extension to help you here.  This needs to be done BOTH with and without the “www” in front of your domain name.  Second, pick a SEO extension plug in for your site.  Popular ones include Yoast or All in One SEO pack – both can be free.  Third, you need to edit the SEO copy for each of your pages and/or posts.  Things like a) Permalinks (permanent URL’s for your pages/posts), b) key phrases and/or words, c) tags – specific descriptions for items, thing or persons on your pages, and d) Meta descriptions – which are the permalink page descriptions.  Finally, you need to actively promote your site to generate “inbound links” – that is getting your site mentioned on other sites more popular than yours.  You can do this via blogging on other people’s sites, Facebook and/or Google+ pages etc.  The more you do this, the higher your site will be ranked from a search engine perspective.

Step #7 – Protect/Maintain the site:

Finally, don’t forget to protect your investment in time and money – backing up your site and protecting it from technical issues.  Back-up software is usually included in web host provider packages.  It’s critical to protect your site from hacking, technical glitches or CMS’s version upgrades.  It’s an insurance policy against having to recreate your site from scratch.  How often you back up your site depends on how often your change or update your content. In addition, subscribe to a SPAM protection service like www.akismet.com – especially if you use your site for blogging.  It’s cheap, only $5/month – well worth it.

In sum, having a differentiated personal brand combined with a personal website can really help build up your brand name awareness.  Fortunately, none of this is technically hard or extraordinarily expensive, you just have to be committed and have patience to go through this personal discovery process and be open to new ways of communicating.  It will go a long way to put you ahead of others who just rely on traditional search techniques.  It will also position you more effectively in today’s competitive and commoditized career marketplace.

Rick Steinbrenner
Chief Marketing Office/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy

Digitizing Your Personal Brand Series – Part 1

Post first published 12/26/12 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise.

Building Your Unique Personal Brand

As great marketers know, a clear and concise branding strategy is critical to successfully building a consumer/customer franchise.  However, it always amazes me how few marketers apply these important concepts to the building of their own professional/personal brand.  Building your own brand has never been more important – business cards, resumes and even Linked-in profiles simply don’t cut it anymore.  Moreover, with advances in CMS (content management systems) it’s easier and more cost effective than ever to build and manage your own website.  If used correctly, these tools can help you build your own personal brand awareness which can showcase what you can do to help solve employer’s/client’s problems.  In part one of this article I will briefly show how easily you can build a distinctive personal brand and in part two I will provide a step by step process on how you can communicate it via building your own professional website.

The major driver behind the need to identify your own brand is the fact career search has REALLY changed.  Negative marketplace dynamics, candidate/social media commoditization, and search engine UNDER-optimization makes it harder to stand out vs. the competition.  This is especially important for those who haven’t searched for a position/secured new clients over the past few years.  Factors behind this change include employers who REALLY want specific industry experience – and are not really interested in transferable skills anymore and most importantly your competition is working harder than ever to get marketplace visibility (source: Execunet). 

Career experts like Don Schwabel, William Arruda and even Tom Peters all talk about creating something called “Brand You” – messaging highlighting your key areas of distinction.  You can think about a personal brand in terms of a business’s hierarchy of needs as diagramed below:                  

Business Hierarchy Of Needs

As you can see focusing your communications is less on jobs and/or specific skills/experiences and more on results oriented performance critical for differentiation.  It essentially answers the question “Why I should hire you vs. someone else?”  To get started, you need to map out/identify your strategic or sustainable competitive advantage.  The process is briefly outlined below:

Personal Branding Processs

You first start with your core competencies – that is your problem, action, result stories (PAR) surrounding your key career accomplishments.  This process leads you to identifying your strategic or sustainable competitive advantage (SCA).  A strategic or sustainable competitive advantage consists of three elements.

  1. It’s something you exclusively have vs. others
  2. Your competition doesn’t have it (or don’t realize they have it)
  3. Your target companies want it.

If you can’t say you have all three elements, you need a plan to address this shortcoming.  You then still need to determine if your SCA addresses key industry needs or if you need to adjust it to make sure it’s relevant.  This will lead you to your final SCA which will drive development of your positioning statement.

Positioning is a concept first developed by Jack Trout and Al Ries – formerly of Trout & Ries – that originally developed this concept in the 1980’s.  In their book – “Positioning– The Battle For Your Mind” – they said positioning is: “not what you do to a product or service – it’s what you do to the prospect’s mind to CONDITION how he/she thinks about your product or service”.  This concept has been translated by others into a positioning statement template below:

To: TARGET MARKET, X (You) is a brand in the FRAME OF REFERENCE (usually industry) having a BENEFIT/POINT OF DIFFERENCE. Supported by the following reasons why:

a)

b)

c)

Below is an example of how this can be translated into a career positioning statement. How to develop your brand positioning statement

As you can see development of a personal brand positioning statement can be very powerful in communicating your key areas of distinction.  It helps you in fighting the battle for your employer’s/client’s share of mind.  It’s not a hard concept to grasp, however what’s hard is the kind of thinking required to make an effective positioning statement for yourself.  Unfortunately, what I observe with most people’s positioning statements (sometimes called an elevator pitch) is they try to be all things to all companies – generalists so to speak.  Companies are looking for exactly the opposite; they are looking for folks who have 1-2 key unique competencies vs. other choices they can make.  So I would argue the more specific your positioning statement is the better the chance for you to stand out vs. your competition. 

In my next article, I will discuss how you can take an effective personal brand/positioning statement and use the technology of the internet to increase your marketplace visibility with your own professional website.

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy

How To Make Sure New Products Don’t Fail

Post first published 11/20/12 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise.

Improving Your New Product Success Rate

How can you make sure your new product idea doesn’t fail?  The answer is: do your upfront homework to fundamentally understand how your consumer/customer thinks/feels/uses your products, not just what they say or tell you in person.  The marketplace “wasteland” is literally littered with failed new products because companies didn’t do the right homework/research and/or took short cuts because they thought “we know what the consumers/customers wants better they do”. As most general managers know, alot of new products fail in year one of their launch.  According to Schneider Associates and other leading marketing professionals, nearly 3/4 of consumer products launches fail to achieve to $7.5MM in sales; and only 3% of launches achieve ~$50MM of “critical mass” and/or distribution.  The main reason seems to be most consumers tend to buy the same 150 items, which can constitute as much as 85% of household needs; thus it’s hard to get something new on the radar – according to Jack Trout – formerly of Trout & Ries. Doing the right kind of homework/research can dramatically improve your chances of new product success.  However, not everyone agrees research is the right answer.  Much has been written about the late Steve Jobs of Apple not believing in marketing research.  In Mr. Job’s obituary on the New York Times Web site, John Markoff quoted his aversion to market research this way: “It’s not the consumers’ job to know what they want.”  In other words, while Mr. Jobs tried to understand how technology could solve problems for his consumers, he wasn’t going to rely on them to demand specific solutions, just so he could avoid ever having to take a risk.  He referred to this as “leading”. I agree with Mr. Jobs to a point.  Research never really can “lead the way” to success – it never has.  Only creativity, ingenuity, enabling technology and yes, intuition are the only real ways to achieve new product success.  Research really only helps sort the “wheat from the chaff” and can help point the right way and/or reduce risk.  Market research is simply a tool; it doesn’t replace – and never has – good solid thinking.

The question is how a company can encourage outside the box thinking which could result in new product success.  One way is to break-through functional “silos” is use of cross-functional teams focused on the problem(s).  Kraft Foods taught a powerful strategic planning framework that assisted in the idea generation process to many of its senior managers.  It was called STEPS – short for Situation Analysis, Tracking, Execution, Plans and Strategies.  This technique either a) assisted solving complex problems and/or b) help identify new areas of opportunities.  The concept is summarized below.

Click on image to enlarge

When used effectively this framework could help identify a company’s or brand’s “strategic competitive advantage” based on marketplace differentiation and value.  You knew you had a competitive advantage if you could answer “yes” to the following: a) do we have an advantage?, b) do competitors want it?, and c) do consumers really need or desire it?  If you couldn’t answer “yes” to all three criteria you didn’t have a “SCA”.  This usually drove the next step – idea/concept brainstorming – commonly called the “fuzzy front end”.  This is where creativity, ingenuity and intuition come together to develop product concepts potentially addressing gaps in the strategic competitive advantage or “SCA”.

It starts with identifying consumer/customer, competitive and enabling technology trends for specific product categories and individual product concept opportunities.  You then move down the “funnel” using various marketing research tools to verify you’re using the right brand name along with the right product concept.  A concept needs to be specific – meaning how should it perform, what brand should be used, how does the product look, taste, smell, touch, to be substantially different vs. its competitors.  Product concept screening is the primary tool for this part of the process.  Below is a schematic of the opportunity identification/discovery “funnel” framework for the “fuzzy front end”.

Conceptual Framework

Click on image to enlarge

One thing to remember – while its fine to conduct monadic concept tests to help screen winners from losers; this is usually not sufficient to determine final marketplace viability.  Concept testing only yields simple purchase intent scores and other measures, but the key issue is how the concept(s) would perform in the marketplace relative to other consumers/customers product choices.  Once you identify “good” ideas via branded product concept testing , the next step would be to test these concept(s) by placing them in simulated marketplace situation.

Finally, one must also remember not all market research methodologies are created equal.  In my experience, I’ve found there seems to be a positive relationship between deeper levels of consumer/customer understanding and higher market share/volume.  This is because a substantial difference can occur between what consumers/customers say vs. what they actually do or think in purchase decisions.  Generally, qualitative research focuses on how consumer/customers describe themselves; while quantitative research facilitates can give insights into how consumers/customers think or feel – which tends to be more predictive of actual consumer behavior.  Below is an illustrative conceptual model: 

Conceptual Framework

Click on image to enlarge

Yes, quantitative research can be more expensive than qualitative.  However, I would argue the cost of bringing a bad idea to market and failing is FAR greater than doing the right research to help make the right decision in the first place.  You can actually save money via the right testing protocols.

So in summary, how does one make sure new products don’t fail or at least improve one’s chances of success?

1. Make sure your product/company is correctly aligned about your strategic competitive advantage.

2. If you don’t have one form a cross-functional team (usually led by marketing) to recommend how you can identify one.

3. If a new product is needed to help obtain a SCA, use the opportunity identification/discovery funnel to help focus the team’s creative juices to develop the right concept(s) with the right brand.

4. Finally, use the right  kind of research to pinpoint the strength/weaknesses of individual concepts  and ultimately how would it perform vs. competition.

If you follow this process, you will have a better chance of not having your next new product become one of those ideas ending up in the “marketplace” wasteland and also potentially detract from your company’s valuable reputation.  Good luck.

Rick Steinbrenner Chief Marketing Officer/Principal, Brand Marketing Advisors www.globalbrandguy.com The Global Brand Guy

How To Control The Trade Spending Monster

Post first published 10/24/12 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve. We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise.

It shouldn’t come as a surprise to anyone in consumer products trade promotion spending has been and continues to be out of control – $60B+ in the U.S and $500B+ per year globally and growing – according to the Boston Consulting Group.  A lot of reasons exist, manufacturer/retailer consolidation due to winners/losers, Wall Street pressures for quarter to quarter earnings increases, brand commoditization, growth of private-label – just to name a few.  The Boston Consulting Group published a white paper in September, 2012 called “Paying for Performance – Trade Spending for Profitable Growth”.  In it they found trade spending dollars grew faster than revenues in 75% of the surveyed product categories.  It also grew faster than volume in 90% of product categories outpacing growth in other P&L line items.  The net effect is retailers’ profitability continues to grow at the expense of the manufacturer.  This dynamic is driving more and more manufacturer consolidation and/or exit of product categories once considered core to a manufacturer’s business.

The study included nine U.S. based consumer product companies in four product category groups a) food and beverage, b) household and personal care, c) wine & spirits and d) other.  They found a fundamental disconnect between trade spending and retailer performance using these dollars.  The complete white paper is linked below and is a good read.

“Paying for Performance” – Boston Consulting Group

The study also found trade spending is widely dispersed – not only among channels, but also retailers in those channels – with sometimes the best performers not always getting the highest rates (e.g. Wal-Mart for example).  This is due in part many big box retailers are not necessarily reliant on trade spending to drive their business models.

The report identified 3 ways to improve returns on trade spending investments. 

1.    Prioritizing trade spending investments with “winning retailers” delivering profitable growth.

Not surprisingly, manufacturers can boost trade spending ROI by reallocating trade spending investment to “winners” – those customers providing the largest profits, distribution and/or volume growth.  Within bounds of legal requirements, these superior performers should get higher trade rates and weaker performers should get less. 

2.    Analyzing returns and applying insights systematically advancing retail event performance

In addition to prioritizing spending, manufacturers must understand how to design and execute promotional plans to yield the highest returns.  Alot of category management tools currently exist that can assist with pre-event planning, event execution, post-event analysis, and lessons/insights from prior programs events.  Surprisingly, manufacturers don’t effectively use these tools enough to help really analyze the success/failure of their trade programs.  The result is more and more dollars going to either price/enhancing retailer margins and/or customer relationships.  In addition, mature consumer products also helps to commoditize product categories which can reinforce price reductions and/or growth of private label.

3.    Designing a trade promotion structure to pay retailers for performance, rather than relationships/activities.

The survey identified 3 major trade structure types:

  • Pay for relationship: trade dollars negotiated with customers with no link to activities/performance.
  • Pay for activities: trade dollars based on event plans – a lump sum or accrual based spending program based on customer activities – no metrics.
  • Pay for performance: trade dollars “earned” based on retailer event performance metrics.

Eight out of the nine surveyed companies had either pay for activities or performance based trade structures – most seemed to have a blend of both.  In either case allocating trade funds entailed making choices and tradeoffs while adhering to three broad trade plan principles: simplicity, consistency and transparency.  If done correctly, this can build a level of trust between the manufacturer and retailer focusing on “win/win” issues vs. “win/lose”. 

Specifically, an effective pay for performance trade program had 4 major core elements:

  • Earning mechanisms: Differential rates based on distribution and/or good/better/best strategies
  • Spending guardrails:  Fund can be spent among brands in a business unit, but customers can’t overspend funds that aren’t “earned” within that unit.
  • Strategic and transition funding: Strategic funds capitalizing on competitive opportunities and transition funds addressing changes in product lines addressing customer inventories.
  • Administrative rules:  Earned vs. actual spending quarterly reconciliation, no forward buying and/or diverting. 

Caveat:

Obviously, the nine U.S. based surveyed companies had leading market positions in their served markets which provided enough critical mass to make effective trade structure changes.  However, situations exist where other mitigating factors can complicate process improvements in trade spending.

1.      Manufacturers/brands not having leading brands or have strong brand equities:  For example, investments in traditional/digital media spending and/or new product innovations should take priority before working on redesigning trade programs.

2.      New emerging retail channels like mortar/brick vs. online retailers:  Issues like growth in dollar stores, “showrooming” and declining trade classes may make some customers reluctant to implement trade spending improvements.  Balance sheet and/or credit issues might make these customers more focused on generating cash flow to support their operations vs. process improvements.

Nevertheless, if pay for performance programs are designed/implemented correctly it is possible not only to reverse the trend of growing trade spending, but also to reduce trade spending levels by 2-5% annually (according to the study).  This will go a long way to “rein in” the trade spending” monster.

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy