The Ad Agency Dilemma – Retail Leverage Friend or Foe?

By Vince Young

The Dilemma

Most challenger brands have very lean marketing departments. There is simply not enough manpower for marketing departments to adequately develop the roadmaps to a better tomorrow (strategic business plans, future product marketing efforts, and market/consumer insights) while simultaneously delivering the product management, marketing communications, customer initiatives, and profit demands of the here-and-now.  So what do we do? We rely heavily on our creative agency partners as extensions of our own marketing departments.

Our problems become their problems. Here in-lies a potential conflict – an ad agency is a business and its goal is to encourage its clients to spend as many marketing dollars with the agency as possible. While this is a very understandable desire, it may limit the challenger brand’s ability to use its marketing dollars to gain retail leverage as sometimes critical investments need to be made to support the retailer which may cut out the agency’s interests.

Friend or Foe?

Retailers tend to support vendors who support the retailer’s need to drive store preference and sales. Retailer-specific or co-operative marketing initiatives where the retailer may ultimately develop the key shopper marketing insights, the campaign creative and lead the media buy are often meaningful parts of the challenger brand’s marketing mix to gain retail leverage, but may limit how much the 3^rd party ad agency generates from the challenger brand client. Such activities include co-operative mass media (TV, print, on-line), in-store TV, retailer dot com and loyalty program support, new-store opening programs, and private retailer shopping events.

What Is A Challenger Brand To Do?

So how can challenger brands motivate ad agencies to support its need for retail leverage?

1. Check your agency’s “Retail Leverage” I.Q. – As part of the traditional agency capabilities pitch, have potential agencies articulate their view of how you and your retailer make money and how the agency’s capabilities can help drive mutually-beneficial thinking to grow both. Typically, the best ad agencies for challenger brands at retail are challenger agencies themselves. Don’t engage an agency based on the case studies that they present on how they have a client portfolio of mega power brands. Rather, demand real-world examples of how the agency has demonstrated an understanding of the successful approaches of challenger brands at retail. Ask how they have helped challenger brands fortify a position at retail and how they contributed to brand deployment & demand-generation. Demand an account management and creative team who is expert at retail product launches, promotional design & programming (ideally, in the same classes of trade as your own), and co-operative marketing initiatives. Lastly, ask potential agency partners to illustrate the measures that they take to keep themselves current on retailer needs and challenger brand leverage strategies (such as reading this blog).
2. Teach your ad agency about your business – not just your brand. Too often, agencies only get the download on brand strategy or the inputs of a project brief. Take the time each month to share with your agency (account management & creative) all of your key customer presentations as well as the most important internal reports that detail the state of your business.
3. Implement an Incentive-Based Agency Fee System – Any agency that claims to be expert in brand strategy, creative design and retail programming for brands in need of retail leverage should be rewarded for the successful in-market performance of the brands they support. The converse is true as well. Include stretch goals in agency retainer agreements that tie incremental agency payouts based on the brand’s performance in key retail performance measures such as market share, share of retail shelf, and share of voice (weekly retailer circular ad share). This will surely motivate the agency to think and act in a manner that maximizes their value as a partner to gain retail leverage.

What best practices have you seen or experienced where challenger brands and ad agencies have partnered successfully to generate retail leverage? I welcome comments from brand marketers, retail merchants and agency executives!

How To Build A Culture Geared Toward Retail Leverage

By Vincent Young

Your company’s go-to-market leadership team is frustrated.

Marketing leadership is not satisfied with how your brand is positioned within the retail environment. They simply cannot believe that the market research, new feature-sets, sexy packaging, and communications campaign aren’t enough to get the retailer hot and bothered enough to displace the category leader and support you in a more significant way.

Behind closed doors, marketing managers question whether the sales team has actually presented the product line and brand strategy “correctly” to the retailer. Marketing believes that the sales team is behaving more like “account mangers” as opposed to aggressive sales agents for your company.

The sales team feels like they are being sent to a gun-fight armed with a pea-shooter. The often say, “Marketing seems to forget that we are, in fact, challengers.” The positioning of the new product line is simply not aligned with where the reseller is going with the category. The reseller is not willing to pay for or charge for the difficult-to-communicate feature or product performance improvements. The communications campaign is cute, but not impactful enough relative to the campaign that has just been presented by the category leader and it doesn’t align with the retailer’s communications strategy.

What are some real actionable practices/processes that your company can adopt to create a company culture that better aligns the organization and that leads to the development of better go-to-market plans that maximize your challenger brand’s better traction at retail?

Here are 5 practices that are sure to result in the creation of marketing strategies that offer greater leverage in the transaction with retailers:

Five Ways To Build A Retail Leverage Culture:

1. Tie each corporate executive’s bonus to growth at a “pet” retailer.

Create a bonus structure where each of your company’s senior leaders (including HR, Finance, Operations, etc.) is compensated based on the extent to which your company grows its business with a designated retailer. Believe me, executive engagement, input and direction in internal meetings will be very different as more company resources will suddenly become available to support the types of investments needed to win with assigned retailers, thus providing a greater form of leverage

2. Have the sales team do some heavy lifting during National Sales Meetings.

As a marketer, I hate it when I hear that there is a National Sales Meeting being planned because it usually means a ton of work for marketing and a ton of fun for sales! A healthy exercise for a National Sales Meeting is to have each sales team prepare and deliver a presentation in the presence of their peers and marketing based on the following hypothetical assignment – “Assume you were given $2 million of marketing funds (not including discount dollars) to launch a product at your account, how would you spend it and why?” This forces the sales team to think more like marketers and the marketing team to integrate traditional brand development programs with those that can best provide leverage at key retailers.

3.     Require product managers to model profit pool for their category at key retailers.

This model should itemize the total profit that each competitor (including private label) contributes to the retailer’s bottom line (including back-end programs). Most marketers of challenger brands have very little understanding of how a retailer actually makes its money and the order of magnitude that challenger brand proposals need to effect.

4.     Shop together and learn.

Create mixed teams of sales and marketing employees (in pairs) and assign each pair a series of stores to visit as if they were shoppers (even if the store is not in one of your key classes of trade). Each pair has to collaborate on and present the best example of challenger brand development (excluding private label) in the store and explain what your company could learn from their chosen example.

5.     Don’t enable the “Desktop Marketer.”

Too often today, marketing managers spend all of their time creating PowerPoint decks, sitting in conference rooms, writing e-mails, or making spreadsheets. To foster a “leverage-savvy” culture, all marketing managers should be required to lead a certain number of retailer pitches each year as part of their personal objectives.

Effecting changes in company culture takes time, but cultural transformations happen a lot faster when certain behaviors are modeled from the top. Try to implement a few of these practices in your organization and I’m sure you will like the improvement in team collaboration and retailer program development. Good luck!