Selling new product launches to retailer
Sunday, July 22, 2007
Whenever a new product is launched, its felt that the burden of success is on marketing. If the campaign is well structured, well executed, and the time, effort, competition and logistics are taken care of, then the consumer need becomes the only significant driver, no? Well you may say that if you have not been to the ground. Coz all said and done, the last leg of new launch is in hands of the salesman who is working with the retailers. He is the man who will make your new product reach the hands of consumer, but then he has a 'catalyst' - retailer.
But here comes the problem, normally when there is a launch the retailer is quite skeptical of buying it, leave alone placing it. The older brands are doing well, he is having his share of margin, so why buy something from these salesmen which doesn't have a reputation yet? At same time the dilemma for salesman is that unless the product reaches shelves, how will it move?
Solution? Higher retailer margin, promotional schemes for retailers, larger credit period etc. Smaller brands may even have to place it for free wherein the retailer pays them after the sale of any SKU. But even with established brands, sometimes they won't buy the newer product. Its not that consumer wont buy the product, it hasn't reached its hands yet. But if you try selling the retailer, you will meet the exact excuse. Underlying problem is that its the retailer's mindset that the product wont move / consumer wont buy and hence he will not place it.
Some other times you will see that you manage to sell the product to retailer assuring that he buys for this month and see the sales, vouching for the high sales of your other brands. Many times its another of a cheaper on pocket version or smaller SKU or maybe a smart but big packing. Say the product is a hit too, but after few months the retailer will get skeptical as he finds that his returns are lessening. I will take case of Pepsico coming out with Uncle Chips' promotions. Say the margins on both Ruffles and Uncle Chips is 10% (assumption on my part). The retailer's returns will lessen here. Reason is that the volume a retailer can buy from you is fixed, so his earlier returns on selling 10 packets of Ruffles will be much higher than that he gets by selling 10 packets of Uncle Chips of same volume (mind it, not grammage). Until the margin compensates for the loss, be doubly assured he will cry in next coming month ends (sales guys will understand this pain!)
But the story doesn't end here, if the margin is lower for the retailer then its most probably lower for the manufacturer too. But the company district sales head will settle the equation by pushing the sales targets, which again puts the salesmen in tougher position. The more the newer product eats into the sales of its predecessor instead of competition, lower will be the market share in terms of value while the volume share may show a different picture. Instead of this I have seen quite few companies being more comfortable with just volume share.
Labels: Launch
posted by Jas @ 7:25 PM,
