Aligning with Retailer Goals

Tailoring Strategies to Retailer Priorities

Retailer objectives can vary based on market dynamics, geography, and their positioning within the industry. For instance, premium retailers may focus more on profitability and value per transaction, while discounters often prioritize volume share and basket size. For Middle Eastern retailers, objectives may be influenced by rapid market development. Recognizing these differences would allow you to tailor your strategies effectively.

Common Retailer Objectives

Retailers typically focus on two overarching goals:

1.       Driving Value Share: Retailers aim to grow their market share by outperforming competitors in terms of value. In a high growth market, retailers might be content with posting stellar absolute growth, without fretting too much about losing share. But ultimately in consumer goods businesses, it comes down to share. Sometimes a retailer may have the goal of chasing spend per shopper as a metric but in essence that’s just a way of achieving value share again. I can’t see a buyer getting a good bonus for having hit the spend per customer objective but having lost value share in the market.

2. Improving Profitability: Increasing percentage profitability ensures the retailer’s financial sustainability and growth. You may ask that if we want to decrease our investment % and the retailer, whose margin is dependent on your investment, also wants to improve his % margin at the same time then how can this ever be a happy marriage. The answer is that this is as compatible as you two can become. A profit tug of war is an inherent characteristic of the relationship.

There is a sweet spot sometimes which allows you to improve your investment % without necessarily taking any investment away from the retailer. This is when promotion retros are made more efficient. Some strategies of making this happen are as follows:

·       Testing and Refining Mechanisms: Experiment with different sites, timings, and mechanics for promotions to identify the most impactful approach.

·       Analyzing Data for Marginal Gains: Use data insights to fine-tune promotional activities, ensuring maximum ROI.

·       Sharing Gains with Retailers: When promotions generate better results, share the benefits with your retail partners to strengthen the relationship without increasing investments.

The relationship becomes the trickiest when instead of value share growth objective the retailer wants to grow its volume share either overall or in your categories of play. I have thankfully never been in this position but some of my peers in UK have. It results in constant pressure for investment whilst eroding value from the category and your P&L. In such cases, you can just manage the relationship the best you can.

Other faces of a volume share growth metric are growth in total number of customers (retailer penetration) and making more of the existing customers buy into certain categories (conversion) in which they are “under-indexing” vs the market or where there is potential for the future owing to some macro trends.

OKR Framework

I find the Objectives and Key Results (OKRs) framework useful. Retailers typically prioritize one primary objective — volume, value, or profitability — with other metrics serving as key results to track progress.

For instance, a retailer aiming to grow value share might focus on:

• Increasing spend per shopper.

• Improving category performance relative to competitors.

As a brand, aligning with these goals could mean offering solutions that drive premiumization, such as promoting higher-value products or introducing innovative SKUs.

If retailers were to also use the OKR model, it would look something like below with the retailer prioritizing either volume or value objective. But simply put for the retailer too its either volume, value or profit with any other metric being more of a Key Result

Conclusion

Most retailers would ultimately be chasing one of the above objectives and then it boils down to your category management, net revenue management and negotiation skills to find common grounds.