Key account managers and sales managers make countless presentations to retailers. Huge amounts of investment and sales are resting on the outcomes of these presentations: failing to get a listing or agreement to an activity can spell disaster. Most sales people and marketers know that creating a clear value proposition to the retailer is key. They know that it is key to demonstrate that the retailer will benefit commercially if they support this activity. And yet, even with lots of data and numbers there is still often one problem. Retailers sometimes don’t believe what is presented! There is however one sure-fire way to improve the credibility of your forecast: allowing for product cannibalization and steal when you forecast the impact of your activity.
Why don’t retailers believe your data?
No, it’s not because retailers are naturally distrustful (though some might be!) It’s not that they think that you are a liar either. It’s merely the simple truth that much of what is presented to retailers doesn’t work out as forecast. What percentage of new products survive, let alone deliver against the original aspirations? Estimations range from less than 1% to 10%: so let’s cut the retailer’s some slack on this. It is the job of trade marketers and customer managers to convince them that they have thought this out, and that it is an honest forecast, based on the best view they have at this time. Forecasting is notoriously tricky, especially for new products, but the inclusion of product cannibalization and steal data is a clear way to suggest that the forecast is transparent and self-serving.
What is product cannibalization and steal?
Before we go on, let’s align on definitions. Whatever activity we are presenting; we’re hoping that there will be incremental sales. Our value proposition for the retailer should (in most cases) focus on the incremental sales the customer will enjoy. But not all of the sales of our product will be incremental. Some of those sales will cannibalize our own products. If I launch a strawberry variant, then perhaps the raspberry variant might suffer, as some shoppers will switch. Likewise, some sales might steal from competitors. Perhaps the competitor has a raspberry variant: so some shoppers of this brand might switch too.
The same goes for a promotion: if I promote the large pack size, the small one might decline, and the competitors large pack might also suffer.
Presenting product cannibalization and steal transforms how a buyer sees your proposition
Actively including a calculation of product cannibalization and steal in our presentation to the retailer demonstrates a number of things that add to the credibility of our proposition.
- We’ve bothered to do the math. Even if what we present is full of estimates and assumptions, it shows that we’ve given it some thought at least.
- We’ve thought about shoppers. At its heart, product cannibalization and steal requires us to think about which shoppers are likely to buy our products. Shoppers are a retailer’s lifeblood, their customers, so it immediately shows we’ve thought about them, by considering the impact on their shoppers.
- We’ve thought about the retailer. To consider product cannibalization and steal we HAVE to think category, and that matters to the retailer. We’ve looked beyond our sales number to honestly review the situation and impact from the retailer’s point of view
- We’re not trying to make things look better than they are. Again, even if we’re guessing, the fact that we’re prepared to acknowledge that not all the sales will be incremental shows us in a good light. We’re not trying to dress this up. We’re ‘honest brokers’, and that means that the retailer is much more likely to believe what we present.
Including product cannibalization and steal won’t automatically get the buyer to say yes. You may have a debate about the level of steal and cannibalization, for instance. But that is a buying signal – it suggests they are engaged. But more importantly, you have sent the message that your proposition is considered, pragmatic, and above all customer-centric.
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