Consider all of the challenging dynamics that have come to define the manufacturer-retailer relationship, such as the increase in store brands, the lack of accountability of trade promotional spend and the sharing of consumer loyalty data. Recently, Clarkston hosted a Consumer Products Executive Exchange Dinner in NYC which, for the first time, included a small number of retail executives. This led to a great discussion about how to more effectively collaborate and leverage this relationship.
Through the discussion, and also evident through many conversations I have had with leading CP industry executives, there are 3 different ways to characterize the relationship between manufacturers and retailers:
- Transactional Relationship: Driven by cost efficiency, short-term contracts and limited sharing of information
- Collaborative Relationship: Joint promotions and co-marketing drive important consumer insights
- Transformational Relationship: Co-development of new consumers, brand equity, customer intimacy and competitive advantage
Most companies should be able to easily recognize how many and which clients fit within each of these buckets. However, I would suggest that there should be a formal process in place to evaluate where your customers fit with a plan to continually move these relationships to the next level. This process, for instance, would allow you to identify all of your Transactional Relationships and select targeted retailers to become more collaborative with. A few years back, prior to being acquired by Procter & Gamble, Gillette identified 45 strategic customers that it wanted to develop a transformational relationship with. Through this process, these strategic customers came to represent 50% of Gillette’s sales volume and grew at a rate 50% faster than the rest of their customer base.
I challenge you all to think about how you could be more effectively partnering with your retail customers to drive profitable growth.