A look at how to survive and flourish in a fiercely competitive market.
Adding value by competing on other elements than price only
Over the past few decades, retailers in Europe have invested heavily in rebuilding their stores into strong brands. Subsequently, these brands have been used to endorse retailers’ private label architecture. The main aim of launching a private brand is to boost customer loyalty by offering unique products as private brand, as well as to improve the profit margin. The market for private label products has grown significantly throughout Europe. In eight European countries, private label now has a volume market share of 40% and in some even more.
Simultaneously, the actual number of players in the retail food market has decreased through mergers and acquisitions. This has resulted in a market where a few powerful buyers interface with many suppliers. In many product categories over capacity in manufacturing has meant prices of private label products have been under considerable pressure and with it their profit margins.
The process of retailer consolidation has had, and continues to have, a major impact on the manufacturing industry.
Surviving in the new retailer environment
The marketing and sales efforts of a branded goods manufacturer are focused on building and maintaining consumer preference for his brands. Usually, the sales person in a branded environment only has limited knowledge of the branded product he or she sells.
This is not true for the retailer who sells a private brand. Such a retailer will try to boost private label sales through product knowledge and providing customers with information that will move them to purchase his products. Indirectly, the account manager of the private label’s manufacturer is also involved in knowledge sharing. Besides which, he must also have outstanding marketing skills. In this way he can offer the retailer the necessary support in optimising the product’s marketing mix, such as product ingredients, packaging, logistics and pricing.
In a highly competitive market, private label manu-facturers will have to move beyond and above ‘simple’ tendering and spreadsheet buying. Their challenge is to create an open trading relationship focused on building categories in collaboration with retailers. Only by finding creative ways in which to stand out and prove the added value of a product will manufacturers be of interest to retailers.
Driving category sales with added value insights
To be truly successful requires more from the manufacturer. His account manager should be able to act as a consultant to the category manager at retail-end, based on consumer insight and a deep category understanding. He should possess unique insights that provide the category manager with added value know-how.
This requires account managers to know more than only market data that can be readily bought. They should also have an understanding of products, prices, packaging, in-store presentation and how these affect each other. Based on such deep understanding of the market and impacting trends, account managers can truly support retailers in fine-tuning their private label offer to drive category growth and profitability.
Gathering such unique information means intensive work. It requires account managers to regularly visit stores in their region and methodologically monitor changes in any category, with a keen eye for detail. In this way, they will be able to gather and share unique information that can be used to persuade the potential customer of the product’s value.
After all, let us not forget that category managers are under extreme pressure and often lack time to visit their own stores on a regular basis, let alone competing ones. They are required to deliver category results under great stress. For them, making decisions based on spreadsheets is more efficient than being overloaded with ideas, proposals and requests. It is only worth their while to listen to an account manager if such a person can provide proven or real advantages. The manufacturer who can unburden the category manager from time-consuming efforts and deliver value-driving category insights, will have an important competitive advantage. Make the category manager shine and your products will shine!
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