How Can We Grow?
Grow faster. These two words are at the core of nearly every business planning cycle. The simple answer is often to throw more money at the business through promotions (either in-store or through trade dollars) or a new campaign to drive purchases and watch the top line grow. Yet too often, pursuing short-term wins results in long-term losses.
With convenience store retailers and CPG manufacturers often caught in this short-term focus cycle, both groups are always on the hunt for new and strategic ways to grow their business while working together. Limited distribution products, special in-store promotions and one-off campaigns are costly, time consuming and, more often than not, shift consumer demand instead of growing it. To win together for the long term, these companies should stop focusing on “How can I grow?” and instead reframe the question to “How can we grow?”
This collaborative approach can yield results that benefit both companies through joint strategic decision making and new broader perspectives.
A focus on “me now” tends to generate increasingly unsustainable results, even when the initial plan looks appealing. As a leader in your organization, how many times in the past month have you heard about a new promotion that will rapidly grow your top-line business by several percentage points with just a little investment? Smart people likely came up with this idea and it may provide the expected returns, but at what long-term cost?
For example, let’s take an in-store promotion where manufacturer X has decided it needs to grow its business with you by 10 percent in the fourth quarter. The plan makes sense: add a ready-to-sell display near the checkout with a graphic header that has a tie-in to their planned marketing campaign. The promotion will probably drive the necessary volume for you and allow you to hit your target.
Before you agree however, consider these three challenges:
- How much in ancillary sales will you lose from customers that stop at the counter instead of going into the aisle to make the purchase?
- How are you going to lap the sales “bump” next year when everyone expects a repeat performance?
- Will the campaign have a lasting impact on sales after the event is over?
From a retailer perspective, the first two challenges are troublesome. Consumption is instant and mainly unplanned, so when customer time in-store is reduced, the total value of their transaction is as well. As for lapping the program next year, the goal will be to back it out of the annual plan, but attributing sales to one specific promotion is an imperfect science, leaving additional volume at risk. The CPG manufacturer faces similar challenges as it sees purchases shift channels and shift timing.
But strategically, the third challenge is the most problematic. Promotions and one-off campaigns work to drive short-term impact, but generally fail to deliver sustainable long-term results, which are needed to build a stronger business capable of delivering more with less investment.
Shifting the Mindset
Industry executives around the globe have realized that the same programs won’t cut it anymore, requiring their teams to be more innovative and efficient. To do so, organizations must shift their strategic approach and move the frame of reference for sustainable growth from "I" to "we." Through this shift, the conversation between convenience store retailers and CPG manufacturers refocuses on creating long-term growth, achieving joint goals and elevating both organizations.
Going back to the in-store promotion example, let’s look at a few key components that would shift the long-term impact of this program:
- The promotion should involve a new product focused on instant consumption.
- The promotion should communicate a connection with another in-store product that the retailer is trying to grow.
- The promotion should be ideally timed for both the manufacturer and the retailer (for example, just before the travel season starts in the spring).
Incorporating these three components shifts the dialogue from what is important for one party — growth in a manufacturer’s slow period or increasing convenience store counter sales — toward joint goals — growing the average dollar ring at the register, growing entire store sales and expanding the manufacturer’s product portfolio and reach.
Through these joint goals, a strong relationship and perhaps even a true partnership can develop between those involved, as conversations shift to how both parties can grow together. Planning sessions begin to shift from "What promotions should be implemented next year?" to "Where do we see the category/channel going in the next five years?"
The transition from "I" to "we" can start through several different actions, such as:
- Developing internal capabilities and knowledge that enable long-term relationship development. Start by identifying strategic partners that have common goals as you. As a convenience store retailer, look for deep insights on the challenges CPG manufacturers are currently facing and consider how they can be jointly addressed.
- Delivering on actions that demonstrate commitment, such as establishing joint planning sessions focused on a one- to three-year horizon, instead of a short-term focus on next year only.
- Creating joint collaboration sessions between CPG manufacturers and convenience store retailers focused on identifying learning opportunities out of challenges, and brainstorming how both groups can adjust to prevent it from happening again.
Once the conversations start to shift, the fruitful dialogue and strategic discussions will follow, and through these discussions, powerful and innovative ideas/plans will develop that can benefit both groups. By reframing growth objectives into “How can we grow?” retailers and manufacturers can create long-term solutions that develop strategic relationships, stronger baseline trends and deliver mutual growth.
Colin Speakman is senior manager of Kalypso. He brings more than 11 years of experience in innovation, new product development strategy and brand management to his clients. Speakman works with clients in the consumer goods industry to leverage consumer research, business needs and organizational capabilities to develop and launch new products in retail channels, support portfolio optimization, manage profit and loss responsibilities, and direct strategic planning.
Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.