Suppliers only get one chance to make a great first impression during a buyer meeting, so preparation is key to ensuring that the meeting is a success. To help suppliers prep, I’ve assembled a list of six key questions which every supplier should be prepared to answer when meeting with buyers.
These six questions were originally identified in CatMan 2.0, a 330-page document that I co-wrote a few years ago. CatMan 2.0 was created by a blue-ribbon consortium of companies and solution providers. It was a comprehensive update of the original category management industry approach that I co-developed in the early 1990’s.
In the CatMan 2.0 chapter on space and assortment, the consortium identified the six questions retailers are likely to expect a manufacturer to answer when a brand introduces a new item and asks for shelf space. Following are are the six questions, which I’ll expand on in detail below:
- Where does the new item fit in the Category Decision Tree (CDT)?
- How is the new item different from the competition?
- To which target shopper does the new item appeal?
- How much incremental volume will your item generate?
- What’s the effect of your item on category profit?
- What’s your introductory effort?
Question No 1.: Where does the new item fit in the Category Decision tree?
Your buyer has a mental picture of the category in their mind when meeting with a brand, and that picture is the Category Decision Tree (CDT) which simulates how shoppers make their choice in the category. Your goal is to orient the buyer with the CDT: Where does your item fit in? Is it in one of the largest segments within the category? Is it within a growing segment? Is it a new item that does not fit within any of the current segments? Your buyer needs to understand these basic questions about your new offering.
Question No. 2: How is your new item different from competition?
The typical U.S. supermarket contains over 40,000 SKUs, and many individual categories have over 100 SKUs. The last thing your buyer needs is a new SKU that duplicates the attributes of others fighting for valuable space.
What attributes does your item have that make it different? Does it contain some new ingredient? Or does it omit some ingredient with negative perceptions in the consumer’s mind? Is it based on some new insight about shopper behavior? Does it utilize a new packaging or manufacturing technique of some kind? Being different and being unique is the most important characteristic any new item can offer to a category buyer. What’s your point of differentiation? Be sure to touch on this in your meetings.
Question No. 3: To which target shopper does your new item appeal?
Perhaps your new item is distinguished by appealing to a specific target consumer group that is not attracted to existing items in the category. A classic example is the fluid milk category which years ago was differentiated only by the relative fat content of the various products (such as whole milk, 2% fat, etc.). Today’s fluid milk category has dozens of products, such as those for lactose-intolerant shoppers. These new milk products appeal to a relatively large group of shoppers for which conventional cow’s milk is an unpleasant choice.
Your new item may also appeal to a valuable and growing group of shoppers – such as health-conscious shoppers or those trying to avoid carbohydrates. Perhaps your product appeals to families with children, historically the most valuable shoppers in the store. You must be able to identify your item’s target shopper and show how it’s relevant to the category buyer.
Question No. 4: How much incremental volume will your item generate?
Buyers generally are not interested in items that merely trade volume from one existing item in the assortment to another new item in the assortment. All that does is stress the supply chain and reduce the gross profit yield per foot of shelf space. Not a good deal for the buyer, especially since it takes a lot of work to cut in a new item. So you must be able to demonstrate how your item generates incremental volume in the category.
Are you appealing to a new shopper? Are you satisfying the needs of a heavy shopper in the category? Are you addressing a consumer segment that is growing rapidly?
There are some solution providers that can help you to measure how much incremental volume your item may offer, but if you find their solutions too expensive, you may want to share your internal research that led to the new item. You may even want to conduct some simple low cost research showing preference for your item within the universe of category buyers.
Question No. 5: What’s the effect of your item on category profit?
Your item may be a huge success in the marketplace for you, but it could be a disaster for the buyer if your product reduces the overall gross margin in the category by taking volume from more profitable items. You need to address whether or not you are generating incremental profit or are you trading volume from an item with a higher gross margin
Obviously, this requires a source of volume calculation. You either need to have that data or to create a theoretical model addressing the issue. A simple place to start is with the gross margin dollars for your item versus the average item in the category. Then compare your item’s gross margin dollars to the items for which your item is the most likely substitute. Please keep in mind that your buyer is often compensated on his gross margin percent for the category or gross margin dollars generated in the category. Therefore, the buyer wants to understand whether you are putting money into his or her pocket or taking it out.
Question No. 6: What’s your introductory effort?
The buyer will want to know what you’re doing to stimulate shopper awareness and trial. Most new items fail because the manufacturers do not spend the money it takes to generate a trial. What kind of support will you provide to alert your target audience of the benefits of your new item?
Today’s buyer has little interest in giving you valuable shelf space if you are unwilling to invest in creating shopper awareness and demand for your product. Don’t forget, your buyer is competing with other buyers in the chain for shelf space. If your buyer includes new items in the assortment that do not generate incremental profit, that may cause upper management to reduce the space in their category. Therefore, you must demonstrate what you are willing to do to generate incremental gross margin for the valuable space entrusted to the buyer.
Now, go make that perfect pitch!
Look at the presentation you prepare for your next buyer meeting and work the answers to these questions into your pitch. Remember, your display must focus on addressing the buyer’s needs, not yours. They want to know what’s in it for them and how you will help their category grow. Coming to them prepared with solutions will go a long way!
Editor’s note: Suppliers seeking additional help in answering these six questions can reach Gordon directly at the contact info below.