Building a CPG retail product is a store-by-store process. All the advertising in the world will not help you if your branded product isn’t there! In fact, it’s a waste of money. You need to be known to the neighborhood and market area of the store in which you are for sale to create local demand.
Here is a set of programs that address the top 7 challenges:
- Staying in Stock: Is it quickly replaced before it sells out?
Out-of-stock is the most deadly branded product killer. Your new customer finally tried it and comes back to buy it, but no! It’s not there, and worse, the clerk wants to make a sale, any sale, so they tell your customer that you are out of business, undependable, or hard to get, even if they themselves forgot to order it, even if your distributer’s salesperson forgot to ask for a reorder. It’s all your fault! At least, that is how your new customer feels…
That means that any sales program has to reward not just for placement (first time sales) but for repeat sales over a longer period of time. That requires that you keep track of monthly sales (depletions, AKA number of your products delivered by your distributor to each account) and notice when sales drop or fall off altogether in each account. You (yes, YOU! Not your distributor and not the retailer!) must get this fixed within 30 days or it will look to the account as if sales died, prompting a discontinuance. This is common practice for retailers with especially new products.
One way we solved this problem is to offer a bonus on sales (so much per unit), but not pay it for 3 months! We would “bank” it for the distributor’s salesperson. If sales were zero in one month, they could lose what they had in the bank. We used several variations on this program successfully.
- Removing the Sales Stoppers:Is it visible? Is it priced and coded right?
When you hear or discover that sales are slowing or stopped in any store, go there immediately and discover the sales stoppers. This responsibility generally falls on you or your regional sales manager (AKA territorial manager, or representative).You must remove the sale stopper before you get discontinued. Remember the buyers just watch the numbers on their screens, and they may never go to the stores! All they know is that scans are sales. And they better happen fast and often. Retailers have a limited amount of shelf space and are always looking to replace you with a “hotter seller.”
That means that your territorial sales managers must have a checklist of sales stoppers that they constantly look for and remove immediately. This list must include but not be limited to: correct shelf price, UPC correct checkout scan, correct recieving scan, correct reordering tags in place and readable; shelf is fully stocked, dusted, and positioned; storage room has enough back up supplies to last until the next delivery; correct shelf location; clean and undamaged labels; and much more! We identified 23 reasons why our product had low or no sales, and none had to do with our quality or price!
Part of your territorial sales manager’s compensation has to be tied to sales, growth (increases over same month last year), and profitability. Don’t allow anyone just “buy” sales by reducing the price to achieve sales-based commissions! They have to be financially motivated to look for sales stoppers and remove them. Do not rely on your distributers or your retailers to remove sales stopper even though they benefit financially from sales of your products!
- In-store Advertising: Is there compelling merchandising material up?
The only place where your product, your customer, their money, and their decision all come together is the point of sale (AKA point of purchase). This is why any program must contain colorful and compelling in-store, point-of-purchase materials. These can range from shelf signs to big banners. Customers need to distinguish your product from all the other products in your category. Make your in-store advertising materials clear, easy to read and visible from at least 4 feet away.
The materials should state the reason for purchase, whether it’s a temporary price reduction that you have previously negotiated or a quantity discount. The materials should also provide some third-party endorsements, awards, or accolades. And most importantly, the materials should fit on the shelf. If they are too wide, they will cover your own reorder tags. If they are too long they will cover the products below you and retailers will remove them.
Remember, at retail, it’s a race and a battle for space and position on the shelf. Your marketing materials can help reserve that space even when the shelf is out of your products. At least you, the retail clerks, and the distributor’s salespeople will be more likely to notice, since it is less likely that a competitor, seeing the vacancy will replace your out-of-stock product with their own products. This move will take up all the “vacant” space on the shelf and then there will be no room for you when you or your representative finally get back to the store.
- Displays: Are they eye-catching, in your face, and regular?
Gaining permission to build a display usually requires a temporary price reduction on the producer’s end. Try to get the retailer and distributer to contribute by taking a smaller percent on sale to achieve these reductions. The best programs (a.k.a., programming) we have seen usually are pre-negotiated months or even a year ahead of the time when it actually shows up at store level. They are also tied to display programs that stack multiple cartons of your products in strategic locations throughout the store.
Displays are variable sizes. They can be side stacks (2-3 cartons with the top carton cut down to allow visibility, vending, and access to product units) with a bigger back card (a.k.a., “case backer” or “carton rider”); or “waterfalls” (5-10 cartons stacked and a sign); or “island” displays (freestanding so customers can walk or push their carts around them); or, the most desirable, “end aisles” (a.k.a., “bay ends”).
The big advantage of display programming is getting the attention of the shopper, even when they are not looking for your products. Keep in mind the best places in the store to have those displays is where the shopper has to slow down, make a turn, or wait in the check-out line. Lastly, try to make your displays seasonally themed. This will help the retailer decorate for each unique holiday. This will gain their favor to select your display program over others. Displays are especially effective when introducing a new product, if you can get one.
- Special Pricing: Does it get the customers to try it?
It’s important to understand the difference between markup and percent on sale (a.k.a., what the distributer and retailer “have to see on sale”). When it comes to pricing, almost all of it is based on percent on sale or profit on sale. Markup is the percent of the cost the distributer or the retailer adds to the cost the next party in the chain, including the customer, will pay. Percent on sale is the amount the buyer or customer makes as profit when they sell it. An easy way to understand this process is this: If a retailer wants to see 25% on sale (as profit), they have to mark the item up 33.3% of the price they purchased the item for. In order to see a quarter on a $1 sale, they mark the item up buy 1/3 of his purchase price of $.75.
Now that you understand the profit pricing process, you can better determine the discounts that draw attention to your products at store level. Keep in mind that whatever you do will be amplified down the chain. Also be careful not to leave any money on the table. This means understand that the retailer wants to not only see a particular percentage profit on sale but also wants to price your item at the nearest 99 cents price point. This is called the “Rule of 99.”
In other words, the retailer will pocket any extra money you provide in the discount that is above the nearest 99 cents when they put their percent on the price they bought it for. This gets even more complicated when trying to achieve a retail price and still account for what the wholesaler, distributor, broker, or middleman want to see. It’s best to start from the shelf price you want when your product is on special, and work backward to account for everybody’s profit needs, and then set your program price. This is an art! And it requires basic math.
Pricing is the most effective way to promote sales, but be careful how and when you do it. Just a few pennies can make a dollar difference on the shelf! Ideally, you want to create pricing programs that move volume by giving quantity discounts, and hit a price that says, “Hey, I know you’ve seen my product here, week after week, and I know you have yet to try it, but look! Now I’m a dollar off!”
- Demos: Does the local market know the benefits of your product and where to buy it?
It’s hard to get a prospect to buy your product if they’ve never tried it! This is one of the big advantages of bricks-and-mortar retail. Unlike online, customers can actually try it before they buy it.
Your representative, your distributor’s representative or a demo agency puts on a “demonstration” of your product in the store where you are for sale. This must be well thought out and the event must be heavily scrutinized or you will be wasting money.
Here’s some essentials to look for when you do or have a demo performed:
- Choose a place in the store where shoppers already congregate (like the checkout)
- Schedule the demo at least two weeks in advance (to allow for advertising)
- Choose a day and time when the shoppers have money and are there (like Fridays, Saturdays, the 15thand the 30thof the month)
- Make sure you have enough inventory (so you don’t sell out and turn shopper away)
- Have inventory right at the demo table (so they can put it in their cart immediately after the demo)
- Negotiate special pricing on the demo day (to encourage volume buys)
- Provide signage with compelling reasons (like, ”Free Samples Today” to attract shoppers)
- Ensure that the representative has a friendly outgoing personality (to make shoppers feel comfortable)
- Ensure that the representative is neatly dressed and on time with everything they need (to impress the retailer and get a return demo)
- Educate the rep doing the demo fully on your product
- Immediately after the demo, ensure that your distributer asks for a larger order than usual (to accommodate the new customers and prevent out-of-stock)
- Most important, don’t let your distributor’s salesperson sell in a large quantity with the promise of a demo to “get rid of it for them” or you will just be moving out product and not creating regular increased sales (a.k.a., “lift”)
- Vigilance: When was the last time your own representative was in the store?
We actually saw our competitors tearing down our point of purchase materials, hiding our products, taking down our reorder tags and marring our labels. Why? Because, again, there is a very limited amount of retail space! You are very fortunate to even get your product into a retail store; most branded product producers have to sell online exclusively because they can’t get into the bricks and mortar stores. You competitors know this and want to protect their own space. When they see a new product show up on that precious shelf, they want to destroy it as soon as possible, hopefully before it gets traction and becomes a permanent fixture,
This is why it’s imperative, especially when you are new in a store, to double up on your store visits. Don’t rely on your distributor or your retailer to tell you what’s going on. Only someone from your company will do this job properly. It’s called oversight, vigilance, and hands-on merchandising. Make sure your people regularly inspect and defend all your placements.
How often should they visit? As often as the competition. You see, the competition took our materials down just to see how often we visited the store. So ideally, if our rep went right back the very next day, we would be sending them the message, “Hands off! We are watching you!” Sounds like a war zone? It is! And those CPG producers who don’t visit their stores on a regular basis pay the price in poor, no, or discontinued sales!
Conclusion: If you are not in their face, you’re not in the place!
Programming is a multi-faceted challenge with tons of moving parts. Understand all the parts, understand your goals, and work backwards to achieve the results you want. The whole purpose of programming is lift. You must sell more after the programming than before, or you’ve wasted your time and money. Programs should be carefully orchestrated between pricing, displays, merchandising, and hands-on vigilance to get the most out of your investment.
Who We Are
Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.
Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.
They offer their Guiding Principles for Success (GPS) & Shelf Smarts courses to help consumer product brand builders achieve success. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.
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