Customer Engagement 2008October 2008 IGD Overview Nick Downing, Sales Manager Customer Engagement...

October 2008

IGD OverviewNick Downing, Sales Manager

Customer Engagement

Understanding Retailers’ Expectations

Cecile Riverain, Senior Business Analyst

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• Over 600 members spanning the demand and supply chain

• Expertise in retail & market insight, international retail issues,

supply chain, category management and consumer trends

• Manage ECR UK & contributes to ECR Europe

• Non-lobbying & not-for-profit

Who is IGD?

International organisation specialising in grocery retailing, supply chain, category management and shopper research


How do we deliver our insight?

Strategic ReportsConferences

SeminarsTraining Courses

On-line Retailers & Markets


What are retailers’ and suppliers’ expectations?

What do buyers want?

Building Capability

Supplier-Retailer Relationships


IGD’s customer engagement survey

• Continuous programme of research into customer engagement since 2004

• Exclusive industry survey conducted in January/ February 2008

• Online retailer survey: 36 retailers replied (55% at Director-level or above)

• Online supplier survey: 127 suppliers replied including 45 multinational suppliers and 80+ local/regional suppliers

• 20 face to face interviews with senior retailer and supplier executives



Aims of the survey

• To understand what capabilities retailers expect from

their branded suppliers

• To benchmark the capability of suppliers against these

expectations

• To benchmark the latest developments in global trading

relationships



Retailers’ expectations of branded suppliers

Which of the competencies below do you expect your branded suppliers to display as a basic requirement? Tick a maximum of five.


72%

72%

67%

61%

47%

36%

28%

0% 10% 20% 30% 40% 50% 60% 70% 80%

New product development and innovation

Consistently high service levels that meet our expectations

Teams who understand our strategic direction

In-depth understanding of the total category and its future trends

Dedicated resource for managing the relationship

Ability to successfully manage and implement promotions

Consistent approach to managing our account across the business

Core competencies: NPD, supply chain, strategic alignment & catman

% Total Respondents

Source: IGD Retailer Survey, 2008


Retailers’ expectations of branded suppliers

Beyond these basic requirements, which additional competencies are most valuable to you? Tick a maximum of five.


58%

42%

42%

36%

33%

31%

0% 10% 20% 30% 40% 50% 60% 70%

Ability to analyse and anticipate future shopper trends


Dedicated resource for managing the relationship


Ability to implement complex category management projects

Consistent approach to managing our account across the business

% Total Respondents



Retailers’ priorities in terms of supplier competencies

72%

61%

72%

47%

67%

36%

11%

28%

36%

19%

42%

22%

42%

58%

0% 20% 40% 60% 80% 100%

NPD & innovation


Consistently high service levels that meet customers' expectations

Dedicated resource for managing key customers

Teams who understand customers’ strategic direction


Ability to analyse and anticipate future shopper trends

Basic expectations Advanced expectations

Key:

% Total Respondents




In their own words….

“Innovation is a must have for all brands. Branded suppliers must provide innovation in new products and processes.”

“Many branded suppliers have good category management capability centrally, although they still fail to take a full category approach and only focus on their brands. Their recommendations tend to exclude

our private label, which is an issue.”

“Service levels may be seen as a given but they are still posing lots of problems. In some of the emerging markets average fill rate was 80%, which can obviously be improved but even in our domestic

market some leading suppliers only delivered 85%-88%.”

Trading Directors, International Retailers



Consistently getting the basics right is key

Which five competencies would you like to see your branded suppliers develop further?

61%

53%

44%

39%

28%

28%

25%

25%

25%

25%

22%

17%

17%

0% 10% 20% 30% 40% 50% 60% 70%

Understanding of strategy

High service levels

NPD & innovation

Understanding future category trends

Complex category management projects

Processes for sharing best practice

Ability to analyse future shopper trends

Systems to interpret detailed shopper insight

Ability to manage promotions

Consistent account management

Aligned corporate & local objectives

Dedicated resource

Complex joint supply chain projects

% Total Respondents




Future direction of trading relationships

Looking ahead, which three areas will be the key focus of your trading relationships?

% T

ota

l R

espon

den

ts

72%

58% 58%

39%36%

33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Price & promotional

activity

NPD & innovation Category

management

Supply chain

initiatives

Data & shopper

insight

CSR & sustainability




Pricing pressures are not about to go away…

“The price leadership strategy we put in place at he beginning of the year was exactly the right

strategy for our customers around the world in a

tough economic climate.”Lee Scott, CEO Wal-Mart, February 2008

Price leadership is non-negotiable.José Luis Duran, CEO Carrefour, March 2008



Key take-aways

• NPD, supply chain, strategic alignment and category

management are the core supplier capabilities for retailers

• Getting the basics right consistently in all markets is key

before moving onto more complex projects

• This is particularly true in times of tough trading conditions

• Innovation continues to be the “life blood” of brands,

especially as PL products cover basic shopper needs



IGD Buyer Survey 2008

• Interviews with a large sample of senior buyers in 30+ retailers

• 5 major questions

1. In your view , what makes a good supplier?

2. What makes a bad supplier? What is the most frustrating?

3. What advice would you share with a supplier to improve his chances of securing a listing?

4. How are you structured? What are your priorities?

5. Internally, how is your performance assessed?


What makes a good supplier?

• Empowered to make decisions

• Understands retailer’s overall business priorities & strategy

• Is close to the account

• Visits stores

• Understands store formats and suggests solutions to problems

• Understand the differences vs. competitors

• Strong administration and systems processes

• Helps the buyer to do their job

• Understands their KPI’s and funding requirements

Source: IGD Buyer Survey, 2008


“My best suppliers take the time to visit the stores and talk to the staff, meet some of our field team, research and understand our consumer base. It then follows that any proposals they make I take very seriously”

Quotes from Buyers


“Good communication skills,

excellent planning skills and

organised. Good time

management and proactive to

driving both businesses forward”

“Proactive, flexible, quick to respond & willing to try something new”


What advice would buyers give suppliers?

• Find out the name / role of the buyer before you call

• Never call on a Monday morning

• Make sure meetings are well run and to a clear agenda

• Offer something different vs. those available in competitors

• Be willing to listen & open to exchanging ideas

• Have a detailed understanding of the retailer’s business and stores

• Be proactive and positive: several solutions to a problem

• Reassure your buyer they are your most important customer

• Deliver on the basics (especially supply chain)

• Understand the retailer’s systems & regulations

• Make sure you have adequate & well briefed holiday cover

• Accurate invoicing


“Make sure you understand restrictions - so don't waste time with initiatives that clearly can’t work. Also understand systems and timescales of internal processes”

“Ensure they are adding

value all the time ....buyers

are busy people and don't

want to chat!”

“It’s a competitive market - suppliers that are keen to look at ways to differentiate offer through unique / exclusive product and/or promos in your retailer vs. the others will put them in a stronger position than the rest ”

Quotes from Buyers…



• Is the product in synergy with my category strategy?

• Is this new product meeting the needs of my shopper?

• Will it help me boost my margin and grow category sales?

• Is it price competitive?

• Is this product easy to place on the shelf?

• Is it retail ready packaged?

• Can you recycle the packaging?

• Is the product manufactured sustainably?

• What is it carbon footprint?

• What levels of service? Risks of poor availability?

• What media and marketing support will this product / range get?

• How big is the promotional budget?

What the buyer looks for..


What are they measured on?

Do you know?


How are buyers assessed internally?

• Profit development - % margin and/or cash

• Sales growth and market share development

• Price competitiveness

• Identifying & launching NPD opportunities and innovation

• Wastage & availability

• Return on investment

• Long-term supplier development / rationalisation

Marketing / promotion income

• Meeting category strategy in terms of sustainability / packagingreduction objectives


Working with Retailers: Deciding the approach

• Retailers / suppliers use variety of decision support tools to segment retailer or supplier base

SalesProfit

Strategic Alignment

HIGH

StrategicTactical

InnovativeTransactional

LOW

• Willingness to share data

• Organisational capability of above

• Management approach & support

Y-axis:

• Size of partner’s business

• Growth

• Profitability

X-axis:

• Level of strategic alignment

• Range Merchandising approach & support

• Supply Chain Management

• Willingness to collaborate

Source: IGD Research


Of course, any approach must be reciprocated by the partner!!!


Retailers segment suppliers by capability


��XDemonstrates fundamentals of joint business plan

X

X

X

X

X

X

��

��

��

Transactional Relationships

��XAbility to manage complex supply chain projects or technical/innovative solutions

��XWorks as leading category adviser in local markets

��XAbility to anticipate shopper trends and use data for foresight rather than just insight

��XAbility to develop and implement major product launches and promotions at a local level

��Strong NPD pipeline

��Ability to analyse and interpret shopper data into clear actionable steps

��Consistently high levels of service (on-time, accurate, complete orders)

��Strong account planning skills at a local level

��Strong brand visibility & equity

Strategic Relationships

Operational Relationships

Retailers’ Expectations


Brand, marketing & innovation

Financial management

Customer management

Category leadership

Structure & people

Data & shopper insight

Supply chain management

Capability Shield

IGD’s Capability Shield



Brand, marketing & innovation

Financial management

Customer management

Category leadership

Structure & people

Shopper Data & Insight

Supply chain management

Suppliers’ average “Capability Shield”


Retailers’ priorities

Suppliers’ capability

Key:

Source: IGD Supplier Survey, 2008


Transactional Relationship

Strategic Partnership

Low Capability

Operational Relationship

High Capability

Relationship In

terface

Level 1

Level 2

Level 1 Level 1

Level 2

Level 3

Building your “Capability Path”

Level 2 capability

Key:

Level 3 capability

Level 1 capability



Ability to manage complex collaborative

projects

Transactional Relationship

Strategic Partnership

Low Capability

Operational Relationship

High Capability

Strong relationship with customers’

supply chain teams

Ability to efficiently introduce new SKUs

and promotions

Strong relationship with customers’

supply chain teams

Ability to efficiently introduce new SKUs

and promotions

High service levels

Low levels of wastage

High service levels


High service levels


Relationship Interfa

ce

“Capability Path”: Supply Chain example


Level 2 capability

Key:

Level 3 capability

Level 1 capability


So can Partnerships bring real benefits?

• Developing collaborative supply chain practices are key to balancing costs and service

• Partnerships must be worth the time and resource invested, and valued by both parties

• There is no 'one size fits all' solution.

• Retailers only engage with a small number of branded suppliers at a truly strategic level

• Building capability is key to win with your key customers…

• ….and will also improve your ability to negotiate win-win agreements with the trade

• NPD, supply chain excellence and shopper insight capability are likely to bring you the

greatest competitive advantage


Thank you for listening

To find out more, visit:

igd.com and igd.com/analysis

Or contact:

Cecile Riverain, Senior Business Analyst

[email protected]

Customer Engagement 2008October 2008 IGD Overview Nick Downing, Sales Manager Customer Engagement...

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