director of consumer products, Clarkston Consulting
"TPO touches many areas of the supplier/retailer relationship. You must have a clear business strategy aimed at achieving savings or becoming more effective with mixing promotional elements. The strategy should be supported by mutual objectivity in understanding the financial impact of what both partners want, which is to create a better shopper experience on both sides.
"We had one client, a significant supplier, where there was no common financial language with the retail partner. Each was looking at ROI differently. We were able to boil everything down to a common financial language, take things to the next level and share with more transparency what wasn't working. We got away from things they thought were good for both parties but weren't.
"Another pitfall is that it takes time to realize benefits, and this isn't always realistically taken into account. Benefits are significant, but you need to be mindful that it won't all come at once. It's also important to see where you started from and what that can lead to."
"It takes time to realize benefits, and this isn't always realistically taken into account."
global managing director, retail practice, Accenture
"Corporate culture can be a big problem. One challenge is that for the longest time, retailers as a collective group didn't always trust manufacturers. People's incentives can be different, and there are cultural challenges, such as when retailers are more collaborative at the beginning of the planning cycle.
"You must also create variety in how you think about individual stores and customization. At store level, some retailers give managers a lot of autonomy and some give none. It's hard to get that balance right. I've worked with retailers that have lots of autonomy and made really smart decisions and some that had autonomy and didn't. There was one company, for example, where managers could override automatic re-ordering. Ninety percent of the time, they were wrong."
"For the longest time, retailers as a collective group didn't always trust manufacturers."
CEO, Promotion Optimization Institute LLC
"Corporate culture is one of the most underestimated, forgotten pieces of the puzzle. With TPO, some call it 'change management,' but it's really a transformation, a new way of doing business. It's not a tweak or adjustment. Like any new process, it requires dedicated efforts, resources and learning. Companies must market the new capabilities and tools to their user base and trading partners. Effective, strong leadership and a promotional optimization champion must evangelize this to the user group and all stakeholders up front and throughout the organization.
"There are areas where retailers and suppliers should collaborate and other areas, going back to the culture and competition, where they shouldn't. Laying out that groundwork up front, spending time identifying areas where they should collaborate, and understanding sales, SKU counts, brands, base and promotional volume can foster success.
"The hard part is getting down to understanding the business. Once we've benchmarked the current state and performance, it's important to develop 'guardrails' – or limits – up front to outline acceptable results. We can't just say we're going to collaborate. We'll track and measure and, if necessary, cross-correct.
"In the past, people set goals but they set them as a manufacturer or as a retailer. They weren't mutual goals with the understanding that we're investing resources and this is a benchmarked relationship. If you rely on technology alone without goals and processes, technology will only allow you to fail faster.
"This isn't going to happen via osmosis; hence the creation of a curriculum and certification on how to collaborate – the POI Certified Collaborative Marketer (CCM). The CCM demonstrates your command of the critical sales, marketing and merchandising collaborative skills demanded by today's evolving retail/CPG environment to create and optimize promotional plans, assortments, brand/category/store sales and profits."
"If you rely on technology alone without goals and processes in place, technology will only allow you to fail faster."
customer segmentation director,
Maverik convenience stores
Simpson discusses the role of vendor partnerships in launching Maverik's Black debit card, a debit/loyalty program that consolidates and tracks all promotions and incentives. See page 52 for more information.
"Early on, when we looked at developing a new loyalty program, we knew getting vendors involved was important. Going in, we had everybody aligned with the objectives and communicated all the way through to make sure it was right. We shaped it so it wasn't just good for Maverik, which was really critical.
"I don't know if the Black debit card is helping vendors spend less on promotions. But it can help them shift resources to get the biggest bang. Vendors are becoming more sophisticated about spending. They're looking for payback and to optimize dollars. We can track everything and show them how they got a return and why it's worth it to spend with Maverik. It's also a good way for them to create quick awareness and get new products into people's hands. At the end of the day, they will bring more to the table. But if we didn't have a culture where people worked together, none of this would work.
"As for individual vendors, the big categories will probably have the most Black card involvement, like soda, beer, candy and food service. In CPG, the card drives brand loyalty.
"In the future, with better purchasing data, we may be able to take more pinpointed, calculated risks. But if we offer a really hot deal and don't know what's in the market basket and who's buying it, it's much riskier. We can also track the purchasing of gas with other products."
"But if we didn't have a culture where people worked together, none of this would work."