Trade and retail marketing

History of trade marketing

When talking about the retail marketing, it is important to have in mind the complexity of the relationship distributor and producer (of products). Historically, there was a dependency in-between channels and distributors (producers) where the strongest/biggest had the most power to decide what to buy or what to sell. Today, the relationship is totally different where the relationships have switched.

The complexity of the channel mix for the retail market resides in that their have their own channels that they need to keep profitable. Therefore, there are products that they can not sell to their channels due to the impact on the high profitable channels.

In any case the relationship between distributors and producers is of great difference.

Historically (in the 60s) you could easily sell what you produced just by putting promotion in the Television. Buying spots you generated distribution, if the distribution worked you sold more products, selling more products leads to generate more business and that to invest in promotion in TV etc…

But this has changed. What has happened are several trends:

  • Saturation of information (promotion). Spain is the 4th country that use TV for promotion
  • Concentration of the distribution (all markets tends to this but in consumption it has taken off)
  • The brand of the distribution is more important than ever. This alters the relationship of the power
  • The supermarkets and hypermarket have empowered their own brand to the extend that it is now affecting profitability (as they compete with their own brand along with the brands they include in their space)
  • Innovation is harder and harder due to the copy-replication of the products
  • The globalization has impacted the retail market due to the new emergent markets and the transfer of the technology. Globalization has led to hypersegmentation of the offering which has affected the life cycle of the products
  • Changes in consumer behavior: from mass market to individualism and ending up in multi-individuals (grouping them based on their common behaviors)

The way to calculate sales in retails is: price *how many units * frequency * penetration (people that have bought my product more than once). It is hard to affect penetration unless you have an innovative product. I.e. it is hard for an existing product to increase penetration, i.e. to make the homes buy more of a product.

An interesting aspect is the 2X1 habit in the retail market. It is not done to “get rid of stock”, it is done to increase the frequency of buying behavior (have the hypermarket consumer return more than the 11 times a year as usual). A way to increase frequency is AXE campaign (“spray more like in the spot” with the result that you use more and need to buy more).

the channels

The channels producer, distributor and consumer are today interfacing with each other. There is a relationship in-between consumer and distributor and between relationship in-between the product and the distributor.

Trade marketing is about “identify and satisfy the needs of the channel (distributor) adding value, profitability and dependency”, but the trade marketing is also working on identifying and satisfying the needs of the consumer. The marketing mix in retail mix is called:

  • offering
  • promotional activities
  • price (towards consumer)
  • space

Challenges fo the trade and retail marketing

For the producer: The challenge is to be “visible” with your product. It takes 5 seconds for a consumer to choose a product. For a supermarket with 11 000 products and 1h of medium time it means that only 6% of the products are selected. 94% are “missed”. Therefore, the objective of the retail marketing is that the consumer choose your product. Branding, promotions become your most useful tool.

For de distributer: The challenge for the distributor is the great amount of categories they have to work with. This cause an issue as they find it hard to differentiate. This will cause a trend towards socio-demographic segmentation. They work with

  • providing all the different needs of a consumer and/or
  • a set of many brands that answers the same need

What trade marketing can do generate more successful business

Spain by facts

  • invest less in marketing/communication in new products (innovation)
  • the spanish population is less prone to change
  • products in the spanish market take longer time to reach the shop

There are 5 types of product launches. It is important to focus your effort based on the type of culture you are talking to.

  1. great boost (typical English approach) 
  2. retarded effect
  3. collapse
  4. plain
  5. continue increase (typical Spanish approach)

Working with different markets and channels. From most margin to less margin depending on what type of distribution you use. E.g. the retailer is buying the product to a higher price than the supermarket. The margin is important but the focus is on “how much does our customers get their return” in order to understand where the week points are for that business. The reason for why it is important to understand the business of the client (distributor), is to know how much the producer profit from the product in each channel and how much the client (distributor) earns in terms of margin. Information useful in the negotiation and decision of how much and where to place the product.

The challenge for the producer is to adapt to the segmentation of the distributor. If the focus is single homes, your product has to adapt to those segments as well as support the needs of other distributors. This could be handled by creating different formats of the same products.

co-marketing

In order to provide a better product and service to the consumer, the producer and the distributor try to cooperate. The main aim is to make the product category to grow (instead of chasing the market share). When you work to increase a category you must be aware of that you also help the competitor to increase. E.g. if you make the category perfumes to increase you also “help” the competition to increase their sales.

The reason why the distributor and the producer co-operates in increasing a product category is to gain benefits from both angels: know-how of the consumer (the producer) and know-how of the consumer behavior (the distributor). There are many elements that are important in the buying behavior but that may be (very often) different from the elements important for the consumer. Normally we focus on the consumer but not so much on the shopping behavior. Very often we segment based on parameters that may not be relevant for the shopper (the user that does the shopping). E.g. wine. Segmented by “color” and then by “origin” but what about “when it is used”? Example, a segment of wine called “to give away”.

All buying activity is about offering more solutions for less effort. Therefore you need to work with minimizing the effort and or increasing the solutions for that effort required. The less effort you ask the consumer to make the easier you make purchase (less time, simplify, same product developed to meet several demands).

The focus has to be in the needs of the consumer/shopper independent if we are distributor or producer. The focus has to be on solutions, experiences in the buying process. Create experiences by simulating how the dress fits, how the furniture fits into your home, cosmetic simulations without having to try on the cloths.

Positioning

When we talk about positioning, we have to be aware of the fact that you position related to something (a competitor, a product etc).

In order to understand “positioning” you have to understand the areas of Marketing.

There are 3 types of areas in marketing

  1. The era of the product: the demand is more important than the product (no competition)
  2. The era of the image (some competition)
  3. The era of the positioning (a lot of competition). The struggle her is to “mean something” for your customers.

The consumer has more possibilities than ever in their selection but less time to select.

What is positioning?

Position a product, a brand, a company, yourself an idea in the minds of the consumer. It’s all about to utilize what already is in the mind of the consumer and “reorder” the connections already existing.

Example: If you can’t stat that you are number, one make clear that you are number 2. AVIS: “As we are no 2 we make more effort”. It’s about looking for the strengths of the others and find the weaknesses of their leadership (a war strategy).

In Marketing, the important thing is the perception (may not always be the reality of the product). You have to focus on the way you are “perceived”. It’s a war about perception of the concept, not about the product. Example iphone 5 versus other smart phones that are better in quality, but the perception is what counts.

How to position

It is done in 2 phases:

  1. Identify what is your brands (the synthesis of the brand)
  2. Identify strategies in communication

How to identify the brand values

1)    Brand identity

  1. Core brand value (essential value/benefits)
  2. Extended value (product + organization +personality+ symbols)

2)    what offers the brand

  1. functional benefits
  2. emotional
  3. projective

3)    The positioning: is the mix between brand identity and what the brand offers

Identify which word is “your word”. That is your core (and in relation to others).

The positioning of the brand is the key benefit expressed in one word and you must make sure that the differentiator is included.

Identify strategies in communication

  1. Work through the “identity map” (placing all the words that you relate to your brand) you need to look at what the strengths and weaknesses are of your competition
  2. Develop the “word/line” to position

It is important to be the first (nobody remembers whom was the second on the moon, the second pilot to cross the Atlantic, the second longest river etc…). The main brand removes in the minds of the consumers all information about the second brand. There is little space for 2nd and 3rd.

The first brand, idea, company that has gained the position in the minds of the consumers, it is hard to change. To get the first position you must be sure to:

  1. Have a perfect concept AND
  2. Have an excellent execution (it is common that the second one executes better takes the no 1 position in the minds of the consumer). I.e. LCI of Nestlé versus Actimel of Danone.

You must position something in a mind you need a mind that does not have an already positioning idea; the hard thing is to enter a mind where there is always a predefined idea.

The slogan

You must be able to take away the brand and just by the rest you should understand what brand you are talking about. E.g. “XX, takes care of your cloths like your mother”. It has to be right on target to your main target word. A word that is differentiating you from your competition. It could be emotional, it could be related to a benefit you get or just a “concept”.

It is very important to set a word that people relates to the brand. Positioning is to create a new category. A category that affect the mental stairs.

About mental stairs

  1. You create your own reference maps.
  2. The mind has learned to order the ideas in mental stairs.

The goal is to get the highest position in that stairs.

There 4 characteristics of a “category”

  1. There is a  need to be satisfied
  2. There must be users
  3. There must be user-situations
  4. The product or service must satisfy these needs

How to create a new category (example of category Safe Cars)

You should have as an objective to take the first position within that category. The interest is to be the leader of “things”. If you are second in a category it’s very often better to create a new category, but of course, to create a new category you must work hard to create it.

What is a category: e.g. “safe cars”. 

You target must be VERY specific. If you just target that kind of people you should target that type of people. If you start to try to focus on other targets, you will not be able to strengthen your brand (with the values you have given it or the positioning you are holding).

First you ask yourself:

  1. what is the use you try to reach
  2. what is the audience that have this need
  3. what is the need you try to cover

Based on this, you develop a product/service that meets that need

How to know if a “category” is working?

The two magic R, is “repetition” and “recommendation”. This is a way to know if your category is working.

Due to this you need to start with a specific target, you can not try to target them all at the same time. When you are strong within one user, you can target others (e.g. Nintendo. First for children, l when it was strong, the Brain training was invented).

The category is “if you want for example refreshing drinking you order Coca-Cola”, if you want an energetic drink you order Red-Bull”. If the benefit you are satisfying is what you are, it is perfect.

Types of positioning

There are different types of positioning. These are some of them

    • The second. If you can’t be number 1, make it clear that you are number 2

 

  • The “without”. Make sure that you do something “without” something
  • By “size”. If everybody goes for big, you go for small. E.g.
  • By “price”.
  • High price (If you say that you are “the most expensive” you give the image of having the best quality)
  • Low price (You position your brand for being the cheapest e.g. DIA)
  • By gender. E.g. Malboro
  • By age. E.g. Cola-Cao = young, Nesquick = the youngster (pepsi for the young)
  • By the authentic, the genuine (“the real thing”)

 

You have to think “to be something to somebody”. You have to take a position. You must focus on one use, one user and one need.

How to reposition a brand

8000 words are what a student has in its mind. 12 000 brands is what a supermarket has in terms of brand. There is no space for these brands. What you need to do, is to “kick out” an existing brand to take that position. You have to find “the true”, “the differentiation” “the why not the others but this one”.

Putting a name to the brand

It should help you to position your brand. Therefore, you must think about the name in relation to what it is that you want to say with your brand. 

One way to create a positioning and brand could be to associate to an already existing known brand or knowledge.

What is your experience of positioning?