November 28, 2006
Two very different perspectives
In their current issue, Consumer Goods Technology has a report entitled “The State of Collaboration”. Excellent information, and all of it is well worth reading.
There was one thing in the article, though, that struck me as particularly interesting. This graph (I’ve modified theirs slightly), shows the number of manufacturers and retailers who listed each item as one of the three collaborative activities that give the best ROI:
What struck me about this is the huge disconnect between the rating manufacturers give TPM, and the retailers’ rating. Manufacturers say TPM is the second most important area, not far behind demand planning – retailers say it’s the least important (tied for the bottom with transportation management).
To illustrate the depth of the disconnect further, let’s look at the survey results in terms of the ratio between the manufacturer and retailer rating:
Well, class, can you tell me which of these things is not like the others?
There’s a pretty strong similarity of opinion between suppliers and their customers on the importance of various collaborative activities – with the striking exception of trade promotion management (and the smaller exception of product development).
Why?
I’m not sure, but I have some guesses. One is contained in another of the survey items: “Lack of trust between trading partners challenges my company’s ability to collaborate with its trading partners.”
Percent agreeing:
· Manufacturers 35%
· Retailers 28%
I suspect the real numbers are a good bit higher – this isn’t the sort of question people answer completely honestly. And of all the areas in which there’s a lack of trust, TPM has got be #1.
Going back to the earliest days of co-op, there has always been a good deal of rancor connected with this process, and as the numbers involved have grown, so has the rancor. Retailers often view “collaboration”, when applied to trade promotion, as a code word for “spending cuts” and/or “let’s tell the retailers how to market.” And many manufacturers view retailers’ planning and spending as on a par with the way their teenagers spend at the mall – extravagant and unthinking, at least as long as they're spending the parents' money. In both cases, there’s just enough truth to keep the suspicions alive.
So how do we fix the situation? Trade promotion is far too important to both parties to allow this sort of variance to continue. If retailers don’t see a big return on the effort they put into TPM collaboration, they will soon cease the effort – which would be disastrous for all concerned.
Again, I have no answers, other than the vital necessity of open communications, with the onus on the manufacturers to act. Manufacturers must find out why retailers don't perceive a return, and address the retailers’ concerns. And they must explain to the retailers what they are trying to accomplish in the TPM planning/collaboration process and why. They need to share whatever degree of analytics they’ve done and explain what they are doing in the future to improve their analytics and thereby improve the fruits of collaboration.
If retailers see TPM collaboration as no more important than transportation management, then there’s something seriously wrong.
Meanwhile, back at the blog …
Get links and commentary on news effecting trade promotion and channel marketing at our blog, TPMtoday.
Some of our recent posts include:
Wal-mart entering India
SEC pledges to lower Sarbox costs
Target v. Disney: The war is heating up (with updates)
Time for an anti-dumping suit against Sony?
Private-label demand increases
The last stand of the toy chains
