Following the global financial crisis, a key development has been the retreat from ‘global’ to ‘national’ by countries and their citizens in seeking satisfaction of their needs.
Indeed it might also be said that the global uncertainty has caused businesses and their employees to go even further in that they have become even more ‘parochial’ in the conduct of their business relationships… In other words, businesses and buyers have had to become selfish in order to survive.
Whilst ‘selling’ ideas to a ‘selfish’ buyer may appear to be the problem, making a change to helping the buyer to ‘buy’ can be a solution…
Given this scenario, perhaps successful account management is now more about tailor-making than ever before, with an upfront and overt appeal to self-interest a way of encouraging a buyer to study and buy the total package…
A key starting point has to be an analysis of the customer’s latest annual report, wherein lie the key ratios that determine the buyer’s ultimate needs from suppliers: ROCE, Net Margin, Stockturn, Gearing and Sales/sq. ft. Comparing these results to those of the customer’s competitors will reveal their financial strengths and weaknesses, and the areas that need improvement.
Strictly speaking, buyers are driven by Gross Margin and Sales increment, but in practice most realise that a product that ‘handles well’ and does not suffer more than average shrinkage, will usually deliver a good Net Margin, certainly above a retailer’s average Net Margin of 3%. Think about it, a brand with a retail Gross Margin of 30%, less typical handling charges of 15%, a typical shrinkage level of 2%, a contribution of 5% to cover head office, will leave 8% on the bottom line…
But, as most NAMs – and buyers – know, Net Margin is only half the story. The key drivers in retail are margin and rotation, in combination producing Return On Capital Employed, ROCE (as you know, a purist will also want to factor in credit, the other key ingredient of Capital Employed). So, linking the stockturn of the brand with the margin will help the buyer to see that a NAM’s weekly delivery will produce an annual rotation of 50 times, more than double a retailer’s average Stockturn.
The other concern of the buyer can be the company’s level of Gearing, the extent to which the retailer is reliant upon outside borrowing upon which interest is paid. Given that retail is a cash business, then any gearing above 30% should be an issue for the buyer. Moreover, allowing for the fact that UK retailers pay their suppliers in 45 days, your free trade credit is saving the buyer the burden of paying interest to banks, even more so if you allow credit of over their average payment period.
Finally, as retailers measure selling intensity by dividing their total sales by their total selling area (i.e. space between the walls multiplied by the number of shops) to produce their average sales/sq. ft. of approximately £1,000/annum, in our experience a brand’s in-store footprint performance can be shown to exceed a retailer’s sales per sq. ft. by a factor of four +. Thus it can be shown that the buyer’s upfront needs of Margin are being met by the brand.
Now that you have the buyer’s attention, the way is open for a discussion on how your Trade Investment budget can be deployed to drive incremental sales… Incidentally, because social niceties (!) may prevent buyers from spelling out the extent to which they are personally motivated, it has to be assumed that most buyers need to hear details of the personal payoff ‘upfront’ in order to give your ideas sufficient head-room.
It is now hopefully obvious that in no way are we talking about bribery in this instance. Bribery is quite clearly an overt inducement to the buyer to over-ride the logic of a buying decision where a supplier’s competitor is patently offering a better deal on a like-with-like basis. In other words, the supplier’s offering is equal with that of the competitor except for the additional £10k on the price to fund the bribe.
In the current climate, coping with the short-term buyer’s ‘hidden’ agenda, limited attention-span, apparent apathy or even persuading them to listen to your ideas are becoming key resistors in effective management of major customers….
Also, it can be useful to remember that buyers are not interested in you, your company, or your products in themselves, but more in terms of what those products or services can do for them.
In which case, translating your offer into bespoke financial links to the buyer’s personal needs can be a good starting point…
