The other day I attended a 2-day Business Account Management workshop in order to ‘broaden my skills profile’ - or some other such jargon beloved of self-help books – and came away having both learned and been reminded of much.

The key “learning” was the confirmation in my mind that which I always knew but had never fully crystallised. The role, skills and capabilities required of a modern Business Account Manager (business management, consumer/shopper insight understanding, and product & customer life cycle management) are, with some nuances, identical to that of a Marketer (business management, consumer/shopper insight development, portfolio/product life cycle and agency management). I emphasise the word “management” as high quality sales & marketing personnel recognise that their role is one of a conductor - to integrate, lead and motivate a team of diverse internal and external functional experts to deliver a profit driving benefit to the organisation.

Optimising output from trade partnership

When put like this, it seems obvious and yet few of my sales colleagues over the years seemed to realise the true worth of effective planning in developing profitable trade partnerships. Consider for a moment that in excess of 50% of the retail sales value can end up with your customer in fixed (trade margin) or variable (overrider, settlement discount, space, promotional space, displays etc) cost. Think then about your own operating profit margin - between 5% and 10% for many of you. That doesn’t leave much margin for error between profit and loss.

Therefore, creative (or irresponsible) use of these monies can literally determine success (or failure) of a brand. We would all rightly criticise marketing colleagues if they delivered a brand plan lacking in consumer, competitor and customer insight. Yet those who have the greatest opportunity to make or destroy a brand’s/product’s economic value quite often have big gaps in their knowledge that prevent successful implementation with a customer. These can be as varied as the functional benefits of the brand/product, its role in the company’s or customer’s portfolio, who their key contacts should be outside of the buyer, when range decision/change dates are, what key financial measures their customer or their own business use or what negotiation/in-store levers they can pull to deliver sales growth.

Measuring trade funds

Take for a moment your trade terms. You probably haven’t had a price increase for 3 years and are consequently deeply concerned about the never-ending increases in investment you feel you have to make. Most of you will envy the economies of scale enjoyed by the leading brands in your segment that seem to enable them to promote at will. Some facts you can’t change: the brand leader is likely to enjoy the lowest trade margins and they will have economies of scale in (amongst others) purchasing, selling, networking and promotion spend. Your funds have to work so much harder for you yet, hand on heart, you probably don’t know which are adding the most value to your business.

So you need to think differently. You probably have a customer P&L down to at least contribution level. All of you will think of the starting point in terms of net sales value (NSV); many will think of it in terms of invoiced sales value (ISV) but few if any will think of it in terms of retail sales value (RSV). This isn’t surprising because your Finance colleagues tend to control the means of internal reporting, yet starting at RSV gives you a huge benefit. You have total transparency of how much you are ‘investing’ in your customer. More importantly you can determine how much harder your ‘investment’ is actually working for you. Does the customer really deserve that 25%/35%/45% margin? Are you really enforcing the over-rider terms; indeed have they got out of control - 3%, 4% or even 6% or 7%? What is the return on promotional investment? What is the true worth of that settlement discount? What is the value of that price roll-back ‘investment’?

More creative use of trade funds

Buyers will naturally keep asking for more and, at the same time, can be made to realise that they could well be destroying a supplier’s long term competitive situation. So you need to resist by diverting the buyer into more creative use of the monies available. You will be surprised how many will work with you to do so if approached properly. Our manufacturing colleagues spend hours trying to turn fixed in to variable or unnecessary costs in order to drive down cost of production and increase factory productivity. Why should we treat retailer investment in any other way? It has to become more productive if we are to sustain strong businesses long term. This is not a choice; it is a necessity.

So when you are considering your customer P&L, think about it differently. Start out at RSV, quantify how much ‘investment’ you are making and then think about how it could be cut differently to add real value to you and your customer. If your customer is making 35% margin, could it be cut to 30% with the 5% re-invested in incentives? …for the breadth of your current range? …for your latest new product? …for maximising the visibility of your brand on shelf? …for early payment? If you think this is impossible, then think again as your competitor is probably working on it right now.

In other words, you need to plan your customer business, with a rigour expected of other functions, in order to ensure the long term success of your organisation. Presuming your execution is already strong, these planning skills are what will set you and your organisation apart. These are the skills that will help you deliver an outstanding performance and drive your career. They are skills that are 100% transferable (why should negotiating with a marketing agency or an ingredients supplier or a union representative be much different from negotiating with a retailer…?) making you a highly prized individual when your organisation is undertaking its annual talent review.

By Richard Nall - Managing Consultant, Hawden Leigh - rganall@yahoo.co.uk

Date article published: November 2005

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