Retail Outlet Tracking

In today’s challenging economic situation both in developed and developing countries, the performance of business entities is getting more demanding. To best of its ability and understanding of market realities, each company in such competitive environment tries to optimize revenues and gain share of category in which it operates. In this mad race to gain market share points, we tend to ignore one basic principle: even if overall market size increases, the share gain by one player means share loss by other(s). The board of directors of big companies should have clarity about corporate strategy: are we in market share game or do we want profitable sales even at the cost of market share loss? 

Those companies which are in market share game need to have clarity about the type of share. The dynamics of volume and value share are, at times, opposite in nature and, therefore, the companies should have clear strategy about the market share. In case there are hardly any pricing differences of products by competitors, the focus on volume share does not seem to be out of place. However, a company with major spent on marketing and brand building needs to keep an eye on value share. In this article, I will try to briefly mention the critical factors which commercial managers need to consider if they have strategic focus on market share. The issues relating to profitability versus market share may be discussed in some other article in future.

Market Share Gain thru Outlet Share Gain

Even companies desirous to gain market share tend to take only ‘macro view’ of the situation by focusing on overall strategies, top line results and so-called ‘big picture’. However, an analysis of numerous success stories emanating from various industries including FMCG sector shows that real market triumph comes from winning the battles at outlet level. One should not forget that market is the accumulation of outlets, so share gain at outlets ultimately results into market share gain. The proponents of market share game generally overlook the obvious connection between market share and share at outlet level. We may gain market share if we continue to win outlets, hence it is important that we track our performance at outlet level. If we win battle at outlet level, we will be able to win the war at market level. Sales and marketing managers, therefore, need to consider workable ideas for outlet execution, outlet tracking mechanism, ‘go-to-market strategy as well as target right customers/shoppers/consumers. 

Trade Channels

In order to win market share war, it is important that preferred trade channels are identified where outlets are to be won. For an FMCG company, for instance, the preferred trade channels may include mom-and-pop stores (neighborhood general stores or kiryana stores), super markets, pan/cigarette vendors (a common trade channel in India and Pakistan), petro marts and corner stores. Since market share is generally ascertained by third parties (Nielsen, Canadean) in order to have more credibility, the companies focus on channels which are covered by such research companies. The overall sales and marketing initiatives should be focused on preferred trade channels so that such activities bring positive gain in the overall market share. The allocation of corporate resources should also be done in accordance with contribution of selected trade channels in the overall industry volume/value as captured by third party research companies. The task of approaching outlets becomes comparatively easy once preferred trade channels are clearly identified and the execution standards for these channel specific outlets are implemented. A channel focused strategy helps in gaining market share. 

Outlet Specific Execution Standards

The battle at outlet level cannot be won unless we know exactly what does victory mean. Different companies may have different execution standards depending on outlet type. An FMCG company would have outlet execution standards covering areas like SKU wise availability, share of visible inventory, in-store shoppers’ messaging and the like. However, many FMCG companies do not have execution standards but they expect that things at market place will improve automatically. Channel specific outlet execution standards have to be worked out and sales & marketing teams need to endeavor to implement those standards. Such execution standards should be neither so ideal that they cannot be implemented in entirety nor they should be so relaxed that their implementation does not improve market share. Though it may sound simple, the execution standards need to be finalized based on market research, input from all stake-holders and corporate objectives. Once developed, these execution standards should be explained, through formal training sessions, to those who are supposed to implement them at the market place. Such ownership is also required to make changes, whenever required, to keep the execution standards as robust as practically possible.

Outlet Tracking & Role of IT

The mere development of outlet execution standards will not bring the desired results particularly market share gain. It is important that these standards are not only implemented but its implementation is duly tracked as well. The tracking at outlet level vary from company to company; there are companies that only rely on ‘Distribution Management System’ (DMS) for secondary sales tracking while assuming that whatever is sold to the outlets in last two or three days ago will remain available there. Keeping a watch on secondary sales to individual outlets is a good tracking tool but more needs to be done in order to ensure that execution standards (or ‘picture of success’ or ‘perfect outlet’ as few companies may call) are implemented in letter and spirit. For that purpose, some companies do hire third parties to conduct market audit to ascertain the degree of standards’ implementation at the market place. Some other companies, on the other hand, do rely on their own market auditors who conduct surprise outlet visit and share their findings with the relevant managers so that corrective actions are taken. The role of IT is critical in the outlet tracking mechanism; market auditors, whether internal or third party, need to share the findings including pictorial evidences either real time or with minimal time lag. I have noticed most effective tracking systems in those companies where Heads of IT or CIOs do participate in system development. The data captured through market audit is sent, real time, to sales and distribution data base of the company thus enabling sales managers to take corrective actions without any loss of time.

Providing ‘Actionable’ Feedback

The development and implementation of outlet execution standards is not some ‘nice’ thing to have; it is, on the contrary, a ‘must’ thing to have if the company wants to embark on journey to gain market share on sustainable basis. Any deviation observed in outlet execution from laid down standards has to be communicated to relevant stake-holders so that corrective actions are taken. There are two important elements: firstly, the feedback provided to stake-holders (particularly sales and trade marketing associates) has to be actionable. If the feedback does not compel the recipient to ‘do’ something, it will have no practical utility or value addition for the business. Secondly, the actionable feedback has to be provided real time; as some people say that feedback ‘delayed’ is feedback ‘denied’ (read: not provided). The generic feedback won’t add value to business; specific and actionable will do. Generic observations may be acceptable to board of directors but it will not serve the purpose for an Area Sales Manager. If market audit report simply mentions that 25% of outlets do not carry 3 SKUs, the sales manager will not find it actionable. However, if the audit report list downs the names of outlets and missing SKUs, then sales manager will be able to take action to correct the situation. We need to appreciate that the action-ability of feedback is essential for implementation of outlet execution standards and, hence, sustainable market share gain. 

Linking Sales Incentive with Tracking Results

The principle of ‘carrot-and-stick’ may sound centuries old but practicing managers find it quite useful in day-to-day business matters. We should not forget that standards are developed to implement; therefore, we should reward those who actually apply those standards at the market place. It further means that those who fail to implement the standards should pay ‘some’ price for omission. However, I believe in positive incentives for performers. A sales manager who executes the laid down standards should be given ‘extra’ incentive so that those who fail to execute standards are motivated to earn extra bucks by doing extra work. 

Final Word

There are a number of FMCG companies who do have outlet execution standards covering areas like product availability, shoppers’ messaging, point-of-purchase material and share of visible inventor. Such companies have their finger on the pulse of market and formulate plans in accordance with real (and not ‘perceived’) situation. These execution standards, if implemented successfully, will yield the desired results particularly market share gain. The tracking of standards’ implementation also provides great market insights to policy makers that help the companies to accelerate their growth in this competitive world.