Knowledge Bank Blog, Channel Execution

To Play Or Not To Play

On 1st May 2011 President Obama made a live television address to the US nation.

He announced the death of Osama Bin Laden.

The operation took minutes to complete, but had been months in the planning.

It started in August 2010 when a call to a trusted courier of Bin Laden was intercepted.  It was traced to a heavily guarded security complex near the Pakistani city of Abbottabad.

US intelligence began an intensive period of surveillance on the ground and in the air. They regularly saw a tall man resembling Bin Laden walking up and down outside the house.  Agents called him “The Pacer”.

The CIA was unable to positively identify Bin Laden.  They thought it was likely to be him.  But they couldn’t prove it was him.  President Obama said that it was a 55/45 decision.  To play or not to play – that was the question.

Eventually, on the morning of Friday 29th April Obama gave the go ahead for the mission.  Two days later, two Black Hawk helicopters, with 23 Navy Seals on board, flew into Abbottabad.  The operation had a few hitches (one of the helicopters crashed whilst landing) but twenty minutes after arriving at the compound, Obama received a message.

“We got him”.

Why are we talking about this?  Well, fortunately, in our industry, we don’t have to make life or death decisions.  But we often have to make important ones.  Some of the most important ones right now are about where to play.

We talked last week about how the retail landscape is changing.  Channels and retailers that weren’t that important a few years ago are becoming increasingly important.  Where the shoppers are, is changing.  Where the sales are, is changing.

This presents a challenge for many manufacturers.  Many are set up to serve supermarkets and hypermarkets.  They have the supply chain, distribution, range and pack sizes for that.  But most of the growth is elsewhere.  Different people have different views on how to adapt.  The sales team might want to go after the opportunity in Discounters.  The brand team might not.

To play or not to play – that is the question.  So, how can you answer it?

Properly understand the opportunity.  The opportunity in a new channel or retailer is based on a combination of size and fit.  Size is clear.  How big is the channel or retailer?  How quickly is it projected to grow?  Some channels (e.g. Discounters) have grown rapidly and have critical mass.  Other channels or retailers (e.g. Amazon) are still small for FMCG but have the potential to grow quickly.

But fit is also important.  This can be about category fit – if you are a snacking brand, Vending will be important.   It can be about shopper fit – if you are a brand bought by families then Online is important.  It can be about brand fit.  If you are a premium brand that wants to be sold in a certain way at a certain price, Discount will probably not be for you.  So, to properly understand the opportunity, look at size and fit.

Properly understand the rules of engagement.  Many channels and retailers have clear rules of engagement.  Discounters are typically looking for lead SKUs in mixed cases and in retail-ready outer packaging.  If you want to play in Discounters, you will need to be ready to deliver against these requirements.

It is also about your rules of engagement.  What are the guardrails around how you play?  We’ve seen a few brands enter the value channel – the channel was growing, sales were up for grabs, why wouldn’t you?  You go in and you need to hit price points.  You might play with pack sizes to get there.  But you are still cheaper than you are elsewhere.  It can store up trouble.  With shoppers – who figure out the cheapest place to buy you.  With retailers – who question why you are cheaper elsewhere.  As you look at where sales will come in the future, don’t lose sight of where they come from now.

Properly understand how to compete and win.  Firstly, this is about what you sell.  Have you got the right products to meet shopper needs in the channel?  For instance, do you have the right pack sizes or formats to serve shoppers in the convenience channel – single serve, portable, easy to consume with one hand?

Secondly, it is about how to sell.  Take Online.  Things that are not important in store, can be very important Online.  Things like product image.  Is it a hero image, not a pack shot?  Things like the product name.  Does it appear in key search results?  Things like ratings and reviews.  How do you stack up versus the competition?  We still see premium brands right next to a lower priced competitor and the lower priced brand has better ratings.  Which would you buy?

To play or not to play?

You will probably never have all the answers.  But you can ask more of the right questions.  Then you have to decide.

The “pacer” was Bin Laden.  They got him.

On a separate note, our monthly article for The Grocer goes out tomorrow, here’s a sneak preview…

What can be learned from the success of Poundland?

#channelstrategy #convenience #discounters #online