It’s November! With less than two months of the year to go, Tesco’s suppliers around the world will be preparing the ground for agreeing next year’s Joint Business Plan. This year the Thailand business unit, Tesco Lotus has launched a new twist to the process, encouraging and leading manufacturers to pool their ideas. Clearly Tesco’s Thai managers hope that by gathering a category’s leading lights, they will be able to access a level of insights they have failed to tap to date. Whilst this is great for Tesco’s commercial team, many Thai trade marketers are burning the midnight oil to meet expectations!
How the Category Action Planning process works
The whole journey starts with the health-check; data is gathered to determine Tesco’s relative performance as compared to other retailers in the space and to the category as a whole. Based on this data Tesco works with suppliers to develop a Category Action Plan. Each supplier then develops a business plan designed to support the category action plan as an input to the joint business planning process. Once the planning process is complete and both sides have signed-off the joint scorecard, terms are agreed for the coming year.
Viewed in this way, there is little new about the overarching process. Indeed some of the tools applied here have been around since the earliest days of Category Management and Efficient Consumer Response. However, this year, Tesco’s Thai team have added a couple of twists just to keep category managers on their toes!
Category Action Planning Twist One: Working With Competitors
I have to say that when I first heard about this, even I was a little surprised: The presentation of each company’s view on the Category Health Check and the development of Category Action Plans is to be done with all key vendors concurrently. Yup, that’s right, P&G, Unilever and L’Oreal each get to present their insights and ideas, whilst the others are in the same room!
Now whilst I’d love to be a fly on the wall in these meetings this twist presents a few challenges:
- How do you persuade Tesco you are the guys to support whilst not sharing your key insights with competitors?
- How do you avoid being shown up as not knowing enough by your competitors? And;
- How do avoid sharing your key strategies with competitors and hence loose competitive advantage across, potentially, the whole modern trade?
Category Action Planning Twist Two: Using Dunnhumby data is a must
This is much less of a surprise: Clubcard data provides some rich veins of data to analyze and at least has the benefit of being equally available to its subscribers. But of course insisting this be the key source immediately excludes vendors who don’t subscribe. Even for subscribers there are challenges too:
- How do you avoid offering anything other than the most generic analysis of Dunnhumby’s data without, again, exposing your own insights to competitors?
- How do you approach the process if your team does not yet have a high-level of competence in managing this sort of data (our recent research with Nielsen suggests nearly 80% of consumer goods businesses in Asia have inadequate processes to support the analysis of shopper data)?
- How do you tie in other data sources to ensure that the analysis not only reflects what’s happening within Tesco, but also in the competitive world outside?
Managing the Challenges
Whilst the particular twists that Tesco have introduced this year are new, many suppliers have worked with Tesco successfully for years. We found that there are steps that these companies take, that with a small amount of modification will deliver in these circumstances:
- Define where Tesco sits in the company’s strategy. It’s easy to assume that just because Tesco is a large customer that it’s an important customer. For many Tesco attracts a large volume of shoppers which drives high category volumes. But, as I wrote last week, many Tesco shoppers, particularly in large format stores operate on auto-pilot. This means that relatively little investment is needed in this part of the portfolio if this behavior works well for your brands. If, however, Tesco’s diverse store base helps you to un-tap shopping behavior that could drive your brands growth, the retailer may be more import.
- Define clear objectives for Tesco. Be specific on the business changes you are seeking and define precisely in which groups of stores you expect these changes to be delivered. This will help you focus more clearly on the insights you need to develop to prove a future business case for supporting your agenda.
- Offer insights, not just information. In this process everyone is party to the same information, be it Kantar, Nielsen or Dunnhumby. Offering another formulaic sets of charts that just describe the situation will neither distinguish you, nor defend against a more aggressive competitor. Convert your objectives into hypotheses and then use commonly available data to prove or disprove these. Avoid sharing research you have conducted, however, until you are one-on-one with Tesco.
- Use retailer’s language. Tesco (as is clear from their high-handed approach) do not care about vendors – they care about their performance in the category. They don’t care if your sales are up, and they don’t measure your performance in invoice sales. BUT, they do care about their growth in both real and like-for-like retail sales; they care about their market share and their share of the category as they define it; they care about their stock-holding and your contribution to this and they care about the margins they make from the category. These are the measures you should focus on – not your own!
- Offer practical solutions. Too many vendors propose exciting and creative retail solutions only to find that the ones that get implemented are the simpler more generic approaches of their competitors. This is because the best solutions for Tesco are ones they can rapidly and easily deploy across all there stores in a group of outlets.
I’m fortunate to have worked with Tesco, to have supported key account managers for many years and to be surrounded by veterans in the field, so it’s relatively it’s easy for me to identify how to manage the category action planning process. However it may not be so easy for you and your team.
Do please feel free to get in touch to learn more about how our team at engage can help you develop and negotiate joint business plans with Tesco or any other accounts around the world, or contact me if you feel you’d benefit from some one-on-one coaching.