In this post I will describe how to use Market Intelligence for reducing perception of risk in the mind of a retail buyer. This knowledge will help you to make your negotiation processes shorter and your promotional subsidies lower.
So what are the challenges of getting your product on the shelf?
It should not be that difficult and expensive. After all, you are offering them an opportunity to make money, right? Right, but when you ask someone to sell your product, you also ask them to make an investment in:
- Shelf space in their stores. That space produces revenue only if the product is selling well. They do not know now how well your product will sell. Your sales forecasts are based on your assumptions and your biases, but you ask them to accept a risk of losing revenue and bear the cost of their shelf space.
- Promotional cost. Channels need to bring traffic, potentially interested in your product, into their “space.” And that is not cheap, particularly if your product is relatively new. Your sales forecast is not based just on early adopters success.
- Cost of transaction. Even if your products fly of their shelves, there is no guarantee of profit. The cost of returns and exchanges can ruin the margins very quickly if customer satisfaction is not met. Overpromising by your marcomm may create expectations in the minds of your customers that cannot be met by the product experience. Substandard QA can result in Reliability crisis that will tax the channel’s margin and negatively impact their Brand value.
- Product training cost. The employees of the channels have to understand the benefits of your product to recommend it to their customers. Training takes time and money. If there are too many products on the shelves and proper training investment is not done, your product will not likely be selling well. A good example is that Microsoft complains about mobile retailers’ sales force ignoring Windows phones as the reason for their low market share. Another example is described in the Customer Intelligence Analysis of Best Buy Downfall.
Remember – the channels have options to carry other products that compete in the same space and present lesser risk in their estimation. So here is the challenge: What can you do to help them reduce their risk assessment of your product?
You can start by watching this video:
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Bring the third party, higher authority to this negotiation
That is right! The buyers do not believe your sales forecast and the market research you have paid for. They also know how easy it is to solicit desirable response by posing cleverly loaded questions in your surveys and focus groups. The buyers want to know why consumers will choose your product over those already available in the stores. And they want to hear this directly from consumers, without solicitations and influence over their opinions. From the consumers whose opinions matter because they have spent their own money to experience products like yours.
1. Identify the products you want to displace.
2. Leverage their customers’ experiences to find your product competitive purchase drivers.
3. Quantify the impact of this information on your sales projections, and share the evidence with your channel partner.
4. Celebrate and watch the product rolling off their shelves, but don’t forget to monitor customers’ feedback to make sure they still think your product is worth buying over other competitors.
Let me know if you want to ask any specific question privately about how this strategy could be implemented in your situation, or share your thoughts about this Marketing Intelligence advice by leaving a comment below.