Kam-outsourcing…?
Using outside help in managing the middle and tail end of the trade
By Brian Moore, Global retail consultant and CEO EMR-NAMNEWS & Kamcity.com

With increasing trade polarisation resulting in fewer, larger customers each demanding  specialist team-management using best in-house talent, it is perhaps wise to try to counterbalance the growth in trade power by investing in the middle and tail end of the trade.

Simply attempting to reduce service level to major customers in order to limit their growth is obviously not an option. In fact a company should devote all of its available talent to optimising business potential within its key trade-partners, and in effect, follow the money.

However, in the process, this approach, coupled with restraints on increases in headcount, can limit a company’s ability to devote manpower to realising the full potential of the brand within the rest of the trade.

Whilst some companies may wish to rely upon wholesaler support to maintain or increase distribution, for many suppliers KAM outsourcing may provide a more focused and manageable approach.

How third party KAMs can add value

Apart from the obvious benefits of spreading risk, the use of third party KAMs can give a supplier access to expert KAM-talent.

It can work as follows:

Essentially, an in-house KAM becomes expert in the category, the company culture and the key customers, and in time becomes a valuable resource in terms of helping to optimise value via the company’s major customers. However, as this talent moves up the company, lesser customers may be neglected in the process. A solution may be to employ third party KAMs. Because of the spread of categories managed by outsourced KAMs, coupled with the need for fast, focused coverage of ‘available’ customers, the customer management skills of these KAMs are rapidly developed to optimum level. Moreover, if the relationship with the agent is commission-based, then all-round business management skill development will be added to the learning process and further accelerate KAM growth. This same spread of categories and resulting business will help to cover the overheads and thus make it possible for smaller customers to be handled cost-effectively, using high-grade talent.

As a result, the KAM will then be able to devote more time to developing the customer relationship and move it more rapidly through the pre-KAM, early-KAM, mid-KAM, partnership-KAM and even synergistic-KAM stages.

Driving personal development…

In effect, the KAM becomes a business consultant who happens to carry a transient mix of brands on behalf of several Principals, accessing a product combination that offers a range of flexible business solutions. This is not always possible with a portfolio of single-company brands.

Apart from the resulting credibility, and potential leverage with the customer, the resulting objectivity can also be a valuable source of feedback on brand acceptance and improve compliance in the trade for the Principal.

In fact, far from seeing outsourcing as simply a way of improving access to the trade, the proactive supplier should consider re-engineering the business to accommodate outsourcing as a strategic route to realising the full potential of the brand, within existing and emerging channels, cost effectively.

Alternatively, why not concentrate available resources, especially trade funding, upon  further polarising of the customer portfolio, ignore the rest of the trade and dilute what remains of brand equity in the process…?

How to optimise KAM-outsourcing…

Getting the best from outsourced KAMs depends upon selecting the right Agent.

In choosing a good trade partner it can be useful to select on the basis of the following criteria:

Potential
Given a probable lack of history in dealing through third parties, a realistic view of potential business via the outsourced team provides a workable basis for assessing invest/return relationships in selecting Agents. The potential partner, having experience of a variety of channels and categories will provide a realistic perspective, along with appropriate references and results, in an effort to manage the Principal’s expectation from the contract. Choosing an Agent with 10-15% and growing share of the outsource-market will help in selling the change internally.

Partnership
As this type of relationship requires considerable upfront investment, it is important that both parties have similar strategic timeframes of at least three years duration. Moreover, it is essential that a reasonable degree of compatible chemistry exists, coupled with shared value systems is present as a basis for mutual trust. Like most good marriages, respective risk profiles can be either matching or complementary. This means that both can be risk-seeking, risk-neutral or risk-averse, or perhaps it will be a case where opposites attract.  Finally, compatibility of Principals, categories and customer portfolios and consumer-profiles will help to minimise possible conflicts of interest..

Profit
If the Agent represents equal shares of the Principal’s profit and sales, then the risk-reward ratio is probably appropriate.

Performance
In order to optimise the value of meeting the above criteria it is important that the Principal’s relative appeal to the Agent is greater than that of the other Principals.

This is such an important criterion that it is worth assessing that appeal on the following basis:

• Product: measures such as brand share, rate-of-sale, NPD/innovation should be considered

• Prices and terms: trade margin (cash & %), commission, bonus, payment terms, and trade funding will help to add appeal

• Presentation: adequate ATL/BTL budgets, support and promotional packages will ensure willing support and aid compliance

• Place: It is crucial that adequate supply-chain and fulfilment capabilities complement the sell-in process, and at least match other Principals’ performance

Systematic and objective assessment of appeal to the Agent will help in identifying overall attractiveness of the match, besides revealing strengths and weaknesses which can be addressed as the relationship matures.

A detailed check of current Principles’ experiences with the Agent, along with selective trade enquiries, should help in finalising the agreement.

Sharing company vision, both ways..

Having chosen the Agent, moving from square one means sharing company visions of each party, regarding brand/category positioning, role of KAM, trade strategies, brand/own-label balance, and consumer funding/trade funding, will help in optimising complementary strengths. A good Agent will have elicited much of this insight in the vetting process, but a more systematic exchange of insights will not only allow the Principal to avail of the Agent’s breadth of experience, but will also add to commitment in the new team.

Whilst the above approach will help to secure many of the advantages of working through third party sales resources, the real benefits will come from using the outsourced KAM as a two-way channel, not only transmitting ideas to the trade, but also providing a valuable source of objective feedback on trade acceptance, and latest competitive position, all from a far wider perspective than is possible via the in-house team. Moreover, their direct participation in KAM team-meetings will enhance company perception of complementary nature of the combined resources, besides providing healthy stimuli for both parties.

Alternatively, why not keep everything to your chest and focus on trade concentration…?