Knowledge Bank Blog, New Product Launches, Pricing & Promotions, Range & Portfolio

Kill Criteria

What do you think the hardest part of climbing Mount Everest is?

It’s got to be the ascent, right? Making it to the summit, 29,031 feet above sea level.

That’s really hard. But it’s not the hardest part.

The descent is harder. In fact eight times more people die on Everest on the way down, than on the way up.

What is probably even harder is getting so close to the summit that you feel like you’re within touching distance. Maybe only 30 minutes to go. Then you are told to turn around.

The Everest descent is so dangerous that, at Base Camp, expedition leaders tell climbers the importance of having a strict turnaround time for the climb.

If you haven’t made it to the summit by 1pm, you can’t descend to Camp before dark. So you must abandon the climb.

In that situation, what would you do?

Make a final push for the summit? If so, you will probably get there. But you are very likely to die on the way down.

Turn around? If so, you’re not making it to the summit. But you are very likely to get back down alive.

The 1pm turnaround time is an example of “kill criteria.”

You kill the ascent, to ensure you don’t kill yourself.

Why are we talking about this? Well, in the FMCG world we rarely face life or death decisions. But we often face decisions about whether to carry on with something or to stop.

It could be the big innovation project. That looked like a game changer but now is at best a game nudger. Or the brand new strategy. That launched with a fanfare but landed in the market with a whisper.

These decisions are really hard to make. You’ve usually made a big financial, emotional and (sometimes) reputational investment in the project.

The temptation is to push on. To try to make it to the summit.

To resist the temptation to use some kill criteria. Things that will tell you to stop, or at least, change course.

So, how can do you do this?

Portfolio & Range. Too often, time and resource is spent trying to defend weak SKUs at the expense of driving strong SKUs. The weak SKUs limp through the latest range review. However, it’s only a stay of execution. Next time they’ll be gone. But not before you’ve spent more resource propping them up.

What could you do instead? Well you could set a hurdle rate for all SKUs in your portfolio. If they don’t hit the hurdle rate, they don’t survive. You could be even more ruthless and follow the Jack Welch rule. The former CEO of General Electric had a “20-70-10” system for his workforce. The top 20% were the most productive. The next 70% were productive enough. The bottom 10% were non productive. They were fired. Pretty harsh for a workforce. Pretty effective for a range.

New Products. In most companies, there will be multiple “innovation projects” on the go. They often start out focusing on the “innovation” part. You have an exciting idea. You think it can make a real difference. You can’t wait to bring it to market. But after a while, the “project” part kicks in. You start de-risking the concept. Making sure it can get through the next gate stage. Then the next. Then the next. You end up with an ultra light version of the original idea. However, you’re a long way down the road. So you spend a load of money launching it. Then the next 2 years trying to defend it from being de-listed.

What could you do instead? Here is a simple idea. At each key stage of the process, ask a simple question “if this was my money, would I still launch it?” If the (honest) majority answer is yes, keep going. If it’s no, stop (or seriously course correct). Sometimes you need to kill the project before it gets killed in the market.

Price & Promotions. The majority of brands sell the majority of their volume on deal. They have a base price – e.g. £1.50. But this is notional. They know that the promoted price – e.g. £1 – triggers the uplifts. So, they do another £1 deal. Then another. Then another. It works. For a while. Until you realise that shoppers are only buying you at £1. This has effectively become your base price.

What could you do instead? You could properly track the average price you sell at. Look at whether your average price is closer to your promoted price than your base price. If it’s closer to the base price (£1.25+ in the example above) you’re OK. If it’s closer to your promoted price (e.g. below £1.25) you need to turn around. Reduce the depth of promotions. Reduce the frequency. Be less predictable. Kill the promotional strategy before it kills you.

Kill criteria are simple rules. That everyone should know. That everyone should follow.

That help take the emotion out of a decision.

If it’s 1pm, you turn back.

No matter how close to the summit you are.

One final thing… Last week we launched The Recession Sessions. Covering 5 topics to help companies tackle the challenge of giving shoppers value whilst maintaining category and brand value. If you’d like to know more, please email naomi@insight-traction.com

Feel free to forward. Have a great weekend. Speak to you in fortnight.