Published by WDI Magazine (2015)
Written by David F. Giannetto
At the heart of every wholesaler or distributor’s success lies the need to put more product in more places – maximizing distribution so that customers have access to as much of the organization’s portfolio as possible. It is of such singular importance that many companies adopt it as their one and only strategic objective. But as easy as this rule might be to communicate, and used to focus the efforts of a sales group, it puts blinders on the organization, preventing management from seeing what is possible.
And just the act of seeing what is possible will itself help provide the momentum necessary to drive the organization forward after all of the easy-to-sell products have been put in all of the obvious places. Consider an increasingly sophisticated way the best organizations in your industry are measuring their market presence, and using better measurement to increase their overall performance:
- The Internal Perspective: The first analysis a company performs can be thoughts of as a “like-kind” analysis. It reveals how one channel, chain and account is performing relative to other, similar locations, and shows which specific locations represent a real opportunity to grow. This is important not only because it is highly actionable (your sales staff can be given a list of accounts to target) but also because it reveals what product mixes are having the greatest impact. However, it is important to realize that this approach sets goals based upon historical results – it is an entirely internal perspective. It will be challenging for the organization to see beyond past success to envision what might actually be possible.
- The Market Perspective: The next step in progressively better measurement uses the performance of those in your industry as a gauge. It typically requires mixing syndicated data with internal sales data to calculate market share. When syndicated data contains store level detail, it also reveals new, more effective product mixes (often set via planograms) and changes to a product portfolio based upon new market trends. It is a truly strategic perspective and the first step in helping management look outside of their organization to see a bigger picture. But, this too is only an internal perspective – albeit internal to your industry. It still does not answer the most important question: What is the maximum distribution possible.
- The Consumer’s Wallet Perspective: To determine what maximum distribution or full saturation of the market would be if a company could achieve it requires an understanding of what consumers would buy if they had unlimited access to a company’s product portfolio. It is equivalent to understanding how much money consumers would choose to spend on your products if access were not a limitation (in its simplest expression a market penetration strategy is designed to remove all barriers to access for the consumer). The only limitations would be consumer interest and consumer capital. Thus, it requires the inclusion of per capita information integrated with internal sales information – and preferably also market share. Per Capita measurements (a standard measure available based upon U.S. Census data) show the total potential spending power of consumers and when viewed geographically allows your company to determine where it has been most effective at convincing consumers to spend proportionately more on your product offerings. This reveals what is what is truly possible and in which market segments (given the demographics of those segments) it is possible. Your organization can then modify its strategy, distribution goals and product mix accordingly. While it is fair to say that this perspective is still in some ways limited based on your industry’s previous success, success itself is a relative measure. You only have to be better than all of your competitors.
The need to be profitable is the one, true constant measure of success. Any discussion of market presence would be incomplete without emphasizing that distribution goals are typically volumetric in nature. While there are times when increasing distribution taking a profit loss is a valid business strategy, such as to gain market share, it must be supported by accurate, fact-based information that shows the market will create the future profits today’s loses are expected to generate. Therefore, a better way to define market presence is: putting more products, in more places, and doing so profitably. Although this requires better information and a better understanding of how your company is making money, the need to be profitable over the long-term outweighs any other perspective management might adopt, and serves as the one true, constant, overarching measure of success in business.