2nd December 2012
Christmas Wish: Better Trade Terms Next Year
I have one Christmas wish: that my trade terms with leading retailers would work better for me. I’d like to feel that I’m investing in my retail partners and not subsidizing them. I wish that the money we spent could be focused on activities that really drive sales rather than buying more of the same activities that seem to deliver little or nothing. And Santa, above all, I wish that when I invest in in retail, I would actually get what I pay for 100% of the time rather than just 80% of the time.
Sales Director (Acme Inc.)
Mr. S. Claus 1 Northridge North Pole
3rd December 3, 2012
RE: Christmas Wish: Better Trade Terms Next Year – The Gift Of Conditionality
Thank you for your Christmas wish, which was rushed to me by one of my elves. Here at the North Pole we work all year long to grant the wishes of little boys and little girls at this special time of the year. I know that many of their mummies and daddies are also busy at this time of the year trying to meet the demands of their major customers.
We know that many people like you, Billy, have spent the last few months working hard on business plans and presentations, laying out all the wonderful things you have in-store for retailers in the coming year. We also know that about now, many of you will be busy negotiating your trade terms. So this year we’ve decided to give you all an early Christmas gift. We call it the gift of “Conditionality”.
“Conditionality” helps you to get what you want from your trade terms, it makes trade terms performance-based and it changes ‘Trade Spend’ into ‘Trade Investment’.
Here’s how it works: you decide, based on your target shoppers’ behavior, what you wish for in the store, then you make that wish a condition of the money you pay to retailers.
Let’s say for instance that your shoppers buy to a plan and will shop elsewhere when products are out-of-shelf, then wish for availability. Ask for commitments to minimum order quantities, shelf inventory and shelf space in exchange for financial support. Or pay an incentive in return for compliance to plan-o-grams in-store.
If your target shoppers might switch from a competitor they understood more of the benefits you offer then wish for communication. Tie retail terms to the execution of signage, in-store activations, compelling shelf layouts or the use of mobile technologies.
And if, like many brands at this time of the year, having your product in the pantry will lead to greater consumption, wish for more effective offers. Make payments to retailers conditional of execution, off-take, redemptions by target shoppers and focus investment on key consumption occasions.
The gift of conditionality works for everyone: shoppers get what they want in store; retailers get focused investment and you get real returns. All you have to do to give this gift is to make your wish list before you negotiate with your retail partners and exchange what you want for what they want.
Don’t wait ‘til Christmas to enjoy this gift though Billy, you can benefit right now, just remember to say “If you invest in me, then I’ll invest in you!”
A very Merry Christmas to all…
P.S. Do remember to wait until you’ve got what has been agreed before you pay your trade partners!