Webinar: The Art of Negotiating Price

The team at Askuity, a provider of a sales enablement platform geared toward consumer packaged goods and retail companies, invited me to host a webinar on Thursday, March 2, 2017.  I’ll be talking about The Art of Negotiating Price, with a focus on how you can arm yourself with good information and research to support pricing goals.

You’ll learn about:

  • The importance of a consumer-first approach to pricing and how to challenge conventional wisdom.
  • Inexpensive tactics that any brand can use to identify their optimal prices. Whether pricing a new product or adjusting the price of an existing product, we’ll show you how to make sure that the price is right.
  • How to use pricing research to effectively negotiate price with your retail buyer. We’ll teach you how to maximize margins and defend your pricing strategy at your next buyer meeting.

Thursday March 2, 2017
1:30PM Eastern

Register here

Trends from the 2017 Winter Fancy Food Show

Before the recent Winter Fancy Food Show, I served up some trend predictions that we might see at the show.  Let’s revisit those predictions.

Giant cheese wheels at the 2017 Winter Fancy Food Show
This display of cheese wheels was impressive and very tall. Inside the wheels was a space for booth staffers to meet with food buyers.

Using food processing byproducts creatively: ReGrained upcycles spent grain from beer brewing and turns it into “Eat Beer” bars. They tasted like a cross between a cookie and a nutrition bar.

Coconut: In some form, I saw coconut as an inclusion in many products, from protein shake powder and nutrition bars to seaweed snacks and chocolates. Dang had its coconut chips (and some new non-coconut rice snacks that were delicious).

Cooking made easier: I was surprised that meal-kit companies like Blue Apron haven’t started to show up with retail-ready offerings.  But I did see some fun make-it-yourself kits.  Back to the Roots sells kits to grow your own mushrooms. And Brooklyn Brew Shop sells beer, wine, and cider brewing kits.  (And both companies have expanded beyond those core offerings to a variety of herb, cheese, and baking kits.)

Healthier frozen treats: Arctic Zero, with a low-calorie focus, and Snow Monkey, loaded with superfoods, showed their frozen desserts.

Dairy alternatives: Milkadamia makes macadamia nut milk and Dahlicious makes yogurt from almond milk. Califia Farms has introduced a wide variety of new items based on almond milk and had a good presence at the show.

Low-carb offerings: This trend was present across the show, especially with snack foods.  I saw it most notably with a continued large number of meat snacks from brands like Vermont Smoke & Cure and Duke’s. I especially noticed a lot of meat sticks, as if Slim Jim has grown up.

Some other fun things I saw:

The Summer Fancy Food Show will be June 25-27, 2017 in New York City.  See you there?


Project NOSH’s staff picks from the show:

And some of my photos:

Predictions for this week’s Winter Fancy Food Show

I’m in the air on my way to the Specialty Food Association’s Fancy Food Show in San Francisco, where I’ll be for the next 3 days.

I’m planning to post some photos and highlights from the show (as I’ve done in the past). But in the meantime, what food trends are people talking about for 2017?

Source: https://www.flickr.com/photos/embajada_ecuador/5961922786

Here are some trend predictions from Instacart, Whole Foods, and Consumer Reports that I will be looking for:

  • Using food processing byproducts creatively. For example: Sir Kensington’s Fabanase no-egg mayo made with chickpea cooking water, or drinks made with cascara, the outer husk of coffee cherries that are often discarded after harvesting beans.
  • Coconut as an inclusion or core ingredient in more products.
  • Cooking made easier: Items that make meal prep easier but don’t require purchasing a full meal prep kit delivered to your house.
  • Lower calorie frozen treats, like Arctic Zero and Halo Top. They can’t can’t technically be called ice cream but are hard to distinguish from the real thing.
  • A growing proliferation of dairy alternatives. This will move beyond the established soy and almond milks to coconut, hemp, and flax milk.
  • New low carb offerings: Paleo and Whole 30-friendly items are the descendants of the Atkins craze of the mid 00s, and I’m expecting to see more of them.

If you’ll be at the show, I’d love to meet up.  Please leave a comment here or contact me.

Stocking up for the holidays is important for manufacturers, too

As I was shopping for my family’s holiday meals this year, I was reflecting on full aisles in the supermarket and check-out lines snaking through the store.  It seems when the holidays come, everyone heads to the supermarket.

This is important for food and CPG manufacturers to keep in mind as you plan out your year.  Even non-food items have sales upticks as supermarket traffic generally increases.

Source: https://www.flickr.com/photos/brizzlebornandbred/13619444923

Sales spike in most categories during the weeks around Thanksgiving, Christmas, and Easter.  (Some categories have additional weeks with extra-high demand, like cocktail mixers for summer holidays like Memorial Day, July Fourth, and so on.)

It’s great news for manufacturers. But it requires planning to work well.

Some emerging manufacturers get caught by surprise when a flood of orders arrive to meet seasonal demand.  Supermarkets are accustomed to these cycles and will place orders accordingly (and ideally with guidance from your sales team or broker). This sometimes leads to urgent production to fill orders — and sometimes even leads to unfilled orders for those who are caught off guard.  (This has happened with big companies that I’ve worked with, not just the small ones.) It’s important to build up enough inventory to meet demand.

Once you leave a supermarket with an empty shelf they can’t fill, you’ll end up on the “naughty” list, which will come back to haunt you.

For an idea of how dramatic the seasonal spikes can be, see this example below .  This is a category in the bakery department, showing weekly unit sales at a supermarket retailer. Sales during Christmas week are more than 3 times higher than in low-demand weeks.

Though I was reflecting on seasonal replenishment cycles as I was shopping, I had some other thoughts, too.  This year was so eventful, personally, professionally, and for our world. I hope 2017 is extraordinary for everyone reading this.  Sending good wishes for a happy, healthy, prosperous new year.

Half the money spent on advertising is wasted

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

Many attribute this quote to John Wanamaker, the founder of the department store that bore his name. The quote is attributed to others, too, but the source isn’t important. What’s important is that it’s incredibly hard to know if advertising is working or not. Marketers perpetually struggle with this.

Source: https://static.pexels.com/photos/128242/pexels-photo-128242.jpeg

In 2009, I saw results of work Google did with Lipton Tea. Google ran ads for a new white tea alongside search results, on YouTube, and on its display network. If these ads had been on TV or radio, it would be difficult, if not impossible, to measure the impact on retail sales. Even with online advertising, it would typically be difficult to make that connection.

But Google and Lipton took their analysis a step further in two ways.

First, They used comScore’s online panel to measure the difference in web engagement with Lipton assets between those exposed to the advertising and those who didn’t see it. They also conducted survey research to understand how the advertising affected attitudes and opinions toward Lipton and this new tea.

Second, and most interesting, they tied online ad viewers (and non-viewers) to Kroger loyalty cards. From there, they measured whether actual purchasing behavior changed. In a real sense, Lipton measured the change in sales attributable to its advertising effort.

Let that sink in for a minute. The researchers could tell if someone had seen an ad. And if a person saw the ad, they could measure whether or not their purchasing behavior changed.

Lipton dollar sales per household increased by 26 percent, which is far from trivial. (See the full results.)

Though this research is now 7 years old, I’m surprised to have not seen it used more broadly in the industry. In the past few weeks, I’ve seen links to not-so-new revelations of Google’s ability to track when users visit specific stores in real life. If you run an ad for a retail location, you can track whether those who saw your ad visited your store or not. See Search Engine Land’s 2015 article on how this works, and another article that mentions how PetSmart and Office Depot use these metrics.

Measuring sales for individual consumers is just getting started and I think there will be much more to come. As ordinary consumers, we’re all going to start receiving much more targeted advertising. (And I think this will make ads more interesting for most people.) And marketers are going to have unprecedented ways to have their messages spread effectively.

Making travel just a little more pleasant

This year, I’ve been on the road more than ever, which is one of the perils of working as a consultant.  Over time, I’ve accumulated a variety of junk that I haul around  in my bag to make life a little bit easier while away from my home base.  One colleague likened my bag to Mary Poppins’ magic bag (which I am hoping was meant as a compliment!).

This is a departure from my usual food/CPG industry writing, but I know there’s many readers who travel as much as I have, and I hope you can find a little something useful to take away, or find something to share with a frequent traveler in your life.

travel-gear

1. Pencil case: Carries many of the pens and other tiny things in this photo. I have the Nomadic PE-08, which appears to have been discontinued and replaced by the PE-18, but any small case will do.

2. Umbrella: It doesn’t happen often, but when it does, it is terrible to be caught in the rain.  I carry a Lewis N. Clark umbrella.

3. Power strip: This might be the most useful things in my bag.  It converts a single power outlet into four.  I’ve made many friends in airports and meeting rooms when we all need to charge up at the same time.  My model is discontinued (and it has a piece of electrical tape on a part that lights up, which was very annoying in dark hotel rooms), but some like this Accel model, which includes some USB ports.

4. Back up power: I can get about 4 iPhone charges out of my old Anker, and newer ones can charge 7 times.  I can get about 75% charged in 30 minutes.  It’s a life saver when a call goes way longer than expected and your battery is almost dead – and you’re not anywhere near a power outlet.  I’ve loaned this charger to coworkers and even strangers and it has made their day.

5. Tide pen: This can often remove a stain without much residue. And I drop food on myself all the time.

6. All sorts of charging and connectivity implements:

7a. Writing implements: My favorite pen (Uniball Jetstream), a highlighter, and a Sharpie (not shown).  Sometimes some whiteboard markers if I expect it to be useful.

7b. Mouse: If you have the luxury to work at a table top or desk while on the road, Logitech’s Marathon Mouse makes it so much more comfortable to mouse around, especially if you’re doing a lot of Powerpoint.

8. Headphones: I buy at least two of these at a time because I seem to lose them.  My Panasonic earbuds are great, and I wrap them around a wrap thing from Sumajin, which keeps them from being a big jumble in my bag or pocket.  I have a bag of extras of the soft earbud tips at home because they seem to fall off and get lost.

If you want to splurge, the Bose QuietComfort noise-cancelling earbuds are ridiculously amazing. It’s amazing how much of the world they can filter out on an airplane or in a noisy airport or train. The earbuds work nearly as well as the giant headphones and take up a fraction of the space in your bag.

9. Medicine: I hate needing to track down a place to buy common medicine when an ailment strikes.  I keep ibuprofen, Immodium, and cold/allergy medication in my bag.  There’s no reason to carry the full container, and I’ve found these small baggies to be a great way to carry a few doses of each with me.  You never know when something is going to strike, and it’s helpful to have some common stuff on hand without taking up too much space. The baggies go inside my pencil case. I also like to keep a cheap nail clipper with me in case of an annoying hangnail or neglected long nails.

10. Notebook: I’ve liked the Moleskine large notebooks for a long time, and the Evernote edition is great, in that you can snap photos of pages and they import to your Evernote account.  There’s even some handwriting recognition that allows you to search handwritten notes.  It’s not perfect, but when it works, it’s so cool.

Some other stuff not shown:

  • Snacks: I have Kind bars (madagascar vanilla) and GoodnessKnows bars just in case I need to eat.  Sometimes it’s tough to fit in a meal before a meeting, and having a boost of calories at the right time can be very helpful.
  • Shaving: At 0.5 oz, this shaving oil takes up so much less space than a shaving cream container.
  • Airport security: Sign up for PreCheck or Global Entry.  It makes the security process so much more pleasant.  No worries about removing liquids, placing your laptop in a bin, or taking off your shoes and belt.  It’s like a throwback to how security was in the 1990s.  PreCheck is $85 and valid for 5 years but only works in the U.S.  Global Entry works in the U.S. and some places outside the country, too, and it costs $100.  (I signed up for PreCheck before learning about Global Entry, so I’m less familiar with it, but it seems worth the extra $15 if you ever plan to travel outside the U.S.)

(Note that I’ve chosen these products through my own trial & error, and most of these links are Amazon affiliate links.)

Are there any travel hacks you’ve found? I’d love to have you share them in the comments.

The story of self-checkout

I probably consume more media via podcast these days than any other format.  (I have such a large queue of shows I listen to that I speed them up by 25% so I can fit them all in.)  One of the earlier podcasts to get a big following is NPR’s Planet Money, born out of the 2008 financial crisis.  From its beginning with explaining the root causes of the housing crisis, they have broadened their reporting to so many little known nooks and crannies of the global economy.  It’s a great show and worth listening to regularly.

supermarket_self_checkout

Source: https://commons.wikimedia.org/wiki/File:Coles_supermarket_Self_checkout.jpg

One recent topic was supermarket self-checkout machines.  Did you know that an ER doctor invented the first self-checkouts in his spare time?  The first pilot ran in a Price Chopper in the mid 1990s.  Not what I expected at all.  Listen below.


Listen above or go to: http://www.npr.org/sections/money/2016/10/19/498571623/episode-730-self-checkout

You get what you pay for

If you’ve been into a Walmart in the past few years, there’s a good chance you were disappointed in your experience. You weren’t the only one — Walmart’s management agreed with that sentiment.

The New York Times recently reported, “Shoppers were fed up. They complained of dirty bathrooms, empty shelves, endless checkout lines and impossible-to-find employees. Only 16 percent of stores were meeting the company’s customer service goals.” To boot, Walmart’s same-store sales numbers had dropped for five quarters, and total revenue actually dipped for the first time in the chain’s history.

walmart-check-outSource: https://www.flickr.com/photos/walmartcorporate/5684720360

During that time, I was making the rounds of Walmart stores to check on new items my company had in distribution. I’d often pick up household necessities while making those visits, and I continually had a hard time finding common items. I remember looking for diapers for my daughter and found vast swaths of items to be out-of-stock. For the variety of diapers we used in my daughter’s size, I had to borrow a mop from a nearby aisle and climb up onto a shelf to sweep the very last box available off that shelf. And there was no one around to help me.

What was less visible to shoppers was the intense cost-cutting measures behind the scenes. Walmart’s wages had dropped to a point where they could not attract quality employees, nor did they staff enough of them. They even eliminated the famous greeters that had graced the entrances to its stores for more than three decades. Founder Sam Walton would not have been pleased — he championed the idea of greeters and thought they had many benefits: to make Walmart shoppers feel special and well treated so they would return, and to prevent shoplifting in a benign rather than tough-cop way. (Walton’s autobiography touches on this topic and much more of his thinking.)

Once they saw the balance sheets, however, Walmart’s management realized they had cut too deep. In a video-feed address to its 1.2 million U.S. employees on Feb. 19, 2015, Walmart CEO Doug McMillion said, “Sometimes we don’t get it all right. Sometimes we make policy changes or other decisions and they don’t result in what we thought they were going to. And when we don’t get it right, we adjust.”

And adjust they did. Over the past 18 months, Walmart’s average non-managerial wage has increased 16 percent compared to 2014. For a price-driven retailer, that’s not trivial.

Though not discussed in the NYT piece, Walmart took an unprecedented step to move some financial burden to its vendors at the same time it announced that it would be increasing wages.  Payment terms were extended from typically 10 days to as much as 90 to 120 days, with an “early payment” discount of 2% still applying.  Additionally, new fees of 1% to hold inventory in Walmart warehouses were instituted, along with a one-time charge of 10% of the value of inventory shipped to new Walmart stores and DCs.

Employees are undoubtedly happy to have higher pay. Walmart also made moves to allow greater scheduling flexibility and better access to training for more opportunities for advancement, hence even higher wages. The goal is to help employees feel part of an organization that respects their work. I suspect this will lead to higher employee satisfaction scores. And, yes, same-stores sales have started growing again.

This mirrors findings from some of my past professors’ research, which found that employee satisfaction leads to customer satisfaction, which in turn leads to improved sales. To connect the dots: as employees become happier, sales become better (notwithstanding the increased employee shopping at Walmart, now that they’re making more money).

There’s a point when cost-cutting goes too far, and Walmart clearly found that point. Nearly unique among huge companies, though, is the speed at which it took action to make a change and reap the benefits.

As a result, I haven’t had to climb any shelves lately to grab a lonely box of diapers. Happier, better-paid employees are more available around the store. Greeters are back. Walmart is getting what they are paying for.

Manufacturers: If you supply (or aspire to supply) retailers like Walmart, it’s important to know that when you sit across the desk from a retail buyer on a sales call, they might have a lot more going on than is apparent on the outside. During the time I called on Walmart when they were cutting costs, it wasn’t perfectly clear to me as an outsider that they were feeling pressured and, in retrospect, it was an enormous burden on the people I was meeting with.

When you have your meetings, can you probe to find out what your buyers are challenged with? Can you help them meet their goals and not just yours?

Why doesn’t everyone use online grocery?

I answered this question on Quora, where I enjoy answering questions from time to time.  One came up recently wondering why people still go to the supermarket when one could just order via one of the online grocers that has popped up in recent times.

The question:

Why do many people still go regularly to the supermarket when they could save time ordering grocery online & getting it delivered to their home?

Thinking about it… they could save money for the gas too if they regularly use their car to do the shopping. Is it a matter of customer experience? How buying grocery offline is better than doing it online? Is it a matter of habit, & people need to get used to it as we got used to buy books online?

I’ve heard this line of reasoning from friends who are close to the tech industry and think it’s obvious that everyone will glom on to the latest innovation.  (I once heard some aspiring tech innovators suggest that children’s’ toys and games could be made irrelevant if they could just make iPad apps that were good enough.)

My answer, as I wrote on Quora:

A glance at Instacart’s Service Areas would make one think that they have already locked up coverage across much of the U.S., but it’s far from the case. I crunched some numbers quickly against metro area population counts, and Instacart serve maybe 25–30% of the population. It might even be less if I wasn’t as generous in some of my counting.

If you add some other providers like Google Express, Peapod, Amazon Fresh, FreshDirect, etc into the mix, they may bump up overall coverage to something higher, but it’s far from a majority of the U.S. population.

But if we focus just on those who can order groceries online, there’s other good reasons to avoid online grocery shopping.

  1. It’s too expensive. Instacart marks up prices from some supermarkets by an amount they don’t disclose, plus sometimes a delivery charge of $4–6 — or more with “busy” pricing — plus tip. And you can’t take advantage of coupons or in-store sale prices. Amazon Fresh costs $300/year for a subscription, on top of the price you pay for food. I think the online services will always be at least a little more expensive, as they need to cover the cost of their operations.
  2. It’s not fast enough. When we ran out of diapers for my daughter the other night, no one could get them to me fast enough. I needed to simply get in the car and go to the store.
  3. It’s inflexible. When the services are busy, you might have to specify the delivery window many hours (or even a day) in advance. That means you have to be home to accept the delivery or take the risk that your groceries might spoil. If something comes up at work and I can’t get home on time, I’m in trouble.
  4. You can’t choose the bunch of bananas you want. Someone else is doing the shopping for you. So the bananas might be too green. Does the chicken look spoiled? Is that melon just ripe enough? And some services, like Google Express, don’t even deliver perishable items yet.
  5. It can be hard to find stuff. I was trying to find a certain flavor of ice cream that Iknow is carried by a store, and it just wasn’t coming up on a search. If I had been in the store, I would have known exactly how to find that item. In fact, I possibly could have driven to the store near my house and actually bought the darn ice cream and been back home in the time it took me to figure this out.
  6. Services make mistakes. Once I ordered a pint of strawberries from an online grocery service. For some reason, they delivered 16 ounces worth of strawberry yogurt. Not quite the same. So I then had to make a trip to the store to buy strawberries. And do something with the yogurt I didn’t want. Some people don’t want to deal with these annoyances and would rather just do things themselves.
  7. Some people like to shop. Even though it’s not rational or efficient, some people enjoy going to the store and browsing.

But, like Joshua Herzig-Marx says, there is no doubt there has been success in online grocery and some real shifting in the industry. I’ve found online grocery to be incredibly helpful when I’ve been crunched for time — and especially when my daughter was an infant and it was tough to leave the house. While I think there will be more migration in the years ahead, there’s always going to be a place for traditional bricks & mortar grocery shopping.

3 Ways to Kickstart Pricing Discussions with Visualizations

Price cut tags on supermarket shelves

Of the four Ps of marketing, price has the most power to transform a company’s revenue and profit. The best way to kickstart a pricing discussion is to visually display price analytics.

Ultimately, these visual tools support portfolio and channel strategy development.  Importantly, they help take emotion out of pricing decisions and focus strategic discussions on the heart of the matter.

Among others, these are three powerful tools to visualize prices:

  • Price Waterfall
  • Candlesticks
  • Discount Curve

Each tool demonstrates a range of insights that can drive strategic thinking.

1. Price Waterfall

The price waterfall shows us where we might have problems with profit leakage.  Though the chart is simple, it can be shockingly difficult to calculate some of the costs, especially trade costs, and translate them to costs for an average unit.
Price Waterfall Example

Example of an interpretation: Above, much of the manufacturer’s profit is eaten up by discounts, shown as trade spending, which is used here largely to allow the retailer to discount from MSRP (manufacturer’s suggested retail price) to its ASP (average selling price).

The full amount of trade spending isn’t reflected in that discount amount, and we might suggest reducing the amount of trade spending or re-negotiating with the retailer to reflect more of the discount in the price it charges on-shelf.

2. Candlesticks

Candlesticks help us visualize the spread between the different types of prices seen in retail outlets — spanning from MSRP to the promoted price.

Price Candlestick Example

Example of an interpretation: You might imagine that the manufacturer wants to move its average price at its Mass channel customer closer to $3.50 but they refuse to do so.

Looking at the candlesticks, we might see some great reasons why: Their Grocery channel competitors are regularly undercutting this Mass retailer, selling as low as $2.39 on promotion and $2.75 on average.  Why would the Mass channel customer want to be undercut even more?  You could understand their point of view.

We can also see that there is poor price discipline.  This company has a suggested price that it rarely, if ever, earns from its consumers. This will lead to high rates of trade spending that might not be necessary.

3. Discount curve

How much do consumers pay on an equivalized basis?  Typically, we would look at price per pound, ounce, gallon, dozen, or some other volume measure, for all the items across a portfolio.

We ideally see that consumers receive a consistent value across sizes in the portfolio, with a discount as the volume in each package increases. We would want to see a smooth (or, at least, smooth-ish) line sloping from the high index to the low index.

Discount Curve Example

Example of an interpretation: We can view this two ways.  One, the Large package is too expensive on a per-ounce basis, and it should cost less.  Or, two, Small, Medium, and Club size packages should be priced to reflect the value that consumers see in the Family Size package.

There is no one right answer, but the goal is to remove kinks in the discount curve.  An optimal curve would be relatively smooth, without upward or downward kinks.

4. What else?

Visualizing prices is an important step as part of strategy work. But in most companies, prices sit on a list for price quotes and internal reference. It’s hard to get visibility into what’s happening in the real world.

Freeing pricing information from that piece of paper transforms it into living analysis that drives strategic decisions.