Strategic Relationships, Part II

In Revenue Generation Part 1, we discussed the merits of taking a more strategic approach to sales, forming collaborative long-term partnerships rather than simply generating revenues on a more ad hoc basis. With the focus on the wholesale or distributor segment, we suggested that in the eyes of the end-user whether that was a business entity or a consumer, the distributor acted as an extension of your own business and promise. Combined, your strengths would provide the ideal go-to-market strategy based on the goals and objectives you established in your business blueprint, and leave you in the driver's seat of the revenue and profit engine.In Part 2, we will turn our attention to strategic partnerships with the retail community. The same advice offered in Part 1, in terms of first assessing your own business, your goals and objectives and the stage at which you are operating in holds true here as well. If you are in the introductory or start-up stage, you will likely best be served generating revenue through as many avenues as possible, as cash flow is necessary to be able to put some of your longer term goals in place. Short of dramatically altering the market through guerrilla tactics or loss leader activity, if you have taken the time to establish a business blueprint, you can operate on a short-term basis in absence of a strategic relationship with a retail partner. Just keep your long-term potential in mind.Once you have established credibility or a clearly differentiated position, and are in the growth stage, you can take a longer term view of your business and identify those retail partners with whom you wish to partner on a strategic level. Again, understand your business strengths, your goals, objectives, your target customers' demographics and psychographics, your positioning and identify those retailers that align best with you. This next point will be the topic of discussion in next month's newsletter: unless you have a brand that commands and defines a category, such as Q-Tip and Google, consumers simply aren't as brand loyal as in years past. Even then there are private label alternatives for most product categories, particularly those that have become commoditized. I will also suggest that the retailers own market positioning pulls consumers into their stores, at which point the consumers then shop the brands on those shelves.So, your long-term success, viability and sustainability will greatly depend on which retailers you establish a strategic relationship with: which ones make most sense to allow you to reach your revenue, profit and other business objectives. The following factors should be considered when you are assessing the market and each retailer:The retailers' market position and target consumer, both from a demographic and psychographic standpoint. Does your brand or product's target consumer match theirs? Would you ever think to purchase a Seiko watch at Wal-Mart? Or MAC cosmetics at Zellers in Canada?The retailers' goals and objectives, as they apply to your category and the overall positioning they execute.Do they execute an every-day-low-price (EDLP) strategy or a high-low price strategy. How does that impact your own price positioning?What are you prepared to deliver in terms of value added that distinguishes you from your competition? Review our discussion on become a relevant partner to your buying community in Blueprint Buzz's second edition for more insight.Their supply chain and logistical requirements. Can you meet their expectations?Implement profitability measures by account to gage true returns of your investment dollars, because make no mistake, all have expectations in terms of product or service support that you need to capture up front. In-store or account specific trade spending is an unstated expectation, up to 4% of your gross sales. Add warehouse, returns, discounting, freight and other such costs to your net margin measurement .Once you have completed this exercise, there is nothing wrong with eliminating some of the retailers as possible strategic partners. Remember that your bottom line is what counts, and the right partnerships will go a long way in establishing your long-term viability. As a suggestion, for the lesser known branded manufacturers, consider the possibility of becoming a private label supplier to key retailers as a means to establish credibility and gain trust. You can save on the marketing and advertising dollars that typically support branded products, and invest in "innovation", technology or other differentiating variable. You can then leverage those core competencies you offer into shelf space for your own branded products.Ultimately, what is at stake for the business owner or leader is a long-term sustainable business, with a firmer grip on the revenue and profit engine. Greater acceleration and control allows reinvestment back into the business, continued strengthening of your core competencies, and a recognized and respected market presence.Did You Know?Strategic retail partnerships with the most relevant (to your specific business) retailers, once secured and negotiated, can offer the following:All benefits associated with Preferred Vendor status.A platform for new products, extensions, innovation, test marketing or exclusive assortments (high desirability factor for the retailer as well).Greater brand and product equity through on-shelf presence and promotion.Not having to be part of the annual cattle call of product reviews. You will also have the opportunity to defend your shelf position should a competitor challenge it.Co-management of inventory through collaborative forecasting, excess inventory initiatives and in-store promotional suggestions.First call when they need information, product, initiatives or strategies to meet their internal metrics or planning.Collaborative cost take out initiatives.Fewer surprises.