By Vincent Young

The battle for power at retail often provides very black and white perspective to those on the brand side, or the retailer side.  Let’s face it – we both think the other needs us more than we need them – unless of course you are a challenger brand, in which case you better be good at showing why they need you.  We’ve tried to illustrate both perspectives, with articles highlighting successful strategies by both brands and retailers.  Now we’re bringing a new perspective – from an angle that is uniquely positioned to see it from both sides – the agency.

The team at Retail Leverage recently caught up with Jon Genese, Senior Vice President of Account Services at AMP Agency (Boston, MA) to get an agency’s perspective on some of the greatest challenges facing their national brand clients at retail.

We asked these questions, which helped cover a wide range of retail / shopper marketing issues:

1. Where does the agency fit in the retail marketing equation?
2. How has your agency had to evolve its capabilities given changes in the retail environment, in particular the changes in relationship between brands and retailers?
3. How do you help brands gain advantage vs. private label?
4. What skills do retail brand managers need to be successful in the future?

In case the video doesn’t play in your browser, here is a link directly to it:

http://www.youtube.com/watch?v=eXCBs3q_5oo

By Ben Smith

Growth makes the world go round.  The market demands it, the CEO and CFO expect it, and the managers chase it.  To provide retail perspective on the old quote  - “if you aren’t growing, you’re dying” – we do believe you are growing in a less desirable sense – that is growing more reliant on your existing customers.

Being realistic, unless you are a start-up or regional player, your brands products are probably already in the expected channels for your category(s).  Of course you could and should be trying to grow in your existing channels – but you’re probably in trench warfare now, fighting over the same turf as your key competitors, not to mention your partner retailer’s private label products.

I don’t know if I’m suggesting something as radical as the authors of the book “Blue Ocean Strategy” would suggest – I’m merely advocating you change the channel by looking beyond your existing business.  That being said, pursuing new channels does have some similarities to the core philosophies shared in “Blue Ocean Strategy”.  Think about your existing retail channels in context of the Red Ocean Strategy below, and then look at the Blue Ocean Strategy.  It makes a Blue Ocean Strategy in retail seem worth a shot.

WHAT ARE ALTERNATIVE CHANNELS:

So a “Blue Ocean Strategy” in retail is what we are affectionately calling here “Alternative Channels”.  What exactly are “Alternative Channels?  I don’t mean alternative channels in the 1990’s or satellite radio sense.  The simplest definition I can offer is that “Alternative Channels” are means of distribution outside of those you’d traditionally expect for a given product / service to reach customers.  This means they probably require modifying how you go to market.  This impacts everything from the margins and programs you offer, to how you reach customers and present yourself at the point of purchase.

Agencies and vendors take note – pursuing sales via alternative channels often creates new growth opportunities for you too. Additional marketing budgets for somebody’s special initiative.  Targeted messaging.  Custom displays.  Special packaging.  New types of promotions.

RECENT EXAMPLES OF ALTERNATIVE CHANNEL PLAYS TO GET YOUR IMAGINATION GOING:

P&G expansion at BabiesRUS

During 2009, P&G moved from Pampers & Dreft at Babies R US to a broader assortment of consumables.  Given that Babies R US tends to be a destination for parents on a mission for diapers or formula, they are providing convenience that perhaps reduces a separate trip to pick up these other essentials.

Nintendo Wii at Sports Authority

Nintendo’s Wii Fit has shown up in other places such as Babies R US, but the biggest example is their showcase in Sports Authority stores.  They have the opportunity to solution sell the wide range of fitness accessories that can go hand in hand with Wii Fit sales.

Dell’s Kiosks at over 140 Malls (RIP 2008)

Note – Dell’s mall kiosks served as a transitional tool for the direct marketer to dip its toes in the retail waters.  In 2008 Dell shuttered its mall kiosks and opened up retail distribution in leading computer retailers such as Best Buy, Walmart and Staples.

Taking OfficeMax Branded Products Outside Their Own Stores

Officemax has been selling branded products at Safeway since 1998 and announced recently they were expanding to Food Lion, as well as other unnamed mass and grocery retailers.

Ultimately, the purpose of growing outside of your existing book of business is to drive growth for your business.  You gain leverage with your existing customers, even if they don’t know it / acknowledge it, by having alternatives.

Key Benefits To Pursuing An “Alternative Channel” Strategy:

1. If you successfully develop new customers, you lessen your dependance on existing customers
2. Experience serves as a “Learning Lab” where you can test new ideas & apply learnings in your existing channels
3. Opportunity to create new demand for your product by positioning it for specific applications / uses
4. Growing sales in new channels may help lessen impact of seasonality in your existing channels
5. Buyers / merchants tend to stay within the retail industry – your new friends may pop up in your existing channels down the road.

CAVEAT:

You always have to be aware of the potential impact to your existing business.  It is much easier to find alternative channel success stories than it is to find people willing to tell you how they got their hands slapped by existing customers, or even worse, lost business as a result.  While your management probably won’t accept a printed copy of this article as a get out of jail free card, you are welcome to try.Take heart though – as the retail market has consolidated, ironically we believe there is less threat to pursuing sales via alternative channels than ever before.  In the past retailers used to obsess that someone else was getting a better deal than they were.  If you were living on the edge, every Sunday you held your breath knowing your buyer was ready to play a game of gotcha / you’re busted with the circulars as evidence.

Perhaps the abundance of price comparison websites/services means that nobody is really going to be able to offer a significantly better deal, so that threat has passed.  Perhaps retailers feel guilty about increasing competing against the brands they built their businesses on with their own private label goods.  The net is we believe the coast is clear as long as you are fair in your offerings.  If there isn’t anything you’d be ashamed of your existing customers to see, no worries.

ADDITIONAL RESOURCES / RELATED READING:

Note –  resources on alternative channels are few and far between.

• Amazon.com book page for “Blue Ocean Strategy”
• Blue Ocean Strategy community at 12Manage.com
• 2005 Article in DSN Retailing Today “Alternative channels gateway to better sales”
• 2003 article about alternate channel sales for furniture

By Ben Smith

It’s hard to have a conversation about consumer electronics without making the discussion relative to Best Buy.  While I assume most people know that Best Buy is the market leader, I don’t know if they understand their magnitude in the marketplace.  With their longtime rival Circuit City closing in 2009 this provided a slight “reset” for the market and it is worth taking a look at how things shook out.  I know that all the customers we met with had their own take / plans on how they were going after Circuit City’s market share.   The general market consensus was that Best Buy would gain the most, but that Walmart and Amazon.com would also benefit.

Well the dust has settled and results from the Q4 holiday season are in.  I realize that some of our readers are in the CE community and have ready access to retailer share.  Note that I’m not quoting anything from NPD that I have access to for my job.  I’m linking to a couple of public sources to point out that you can get a good idea of what is going on with a little digging (or you can get it from us)!  The data I’m sharing is from consumer surveys conducted by 2 different firms,  so take it with a grain of salt – it isn’t cash register data, but provides valuable perspective on where consumers look to purchase their electronics.

1) AD AGE ARTICLE SHOWS BEST BUY GAINING GROUND (WITH 33% SHARE)

Ad Age featured an article appropriately titled “Former Foes Gain Share From Shuttered Circuit City”.

Summary: Best Buy gained share last year and is up to approx. 33% consumer preference share.  Walmart gained also, and is up to approx. 20% consumer preference share.  They have further breakdowns in the article by customer’s income.  Those under $50K/year, Best Buy and Walmart are neck and neck.  But for those $50K & over, Best Buy is the overwhelming leader, over 40% share.

Store       Dec. 2008   Dec. 2009   +/-

• Best Buy    29.8%       33.1%       3.3
• Walmart     17.0%       20.6%       3.7
• Amazon      2.3%        3.6%        1.4
• Target      2.1%        2.8%        0.6
• Sears       1.6%        2.0%        0.4

Their data source: (data from BIG RESEARCH)

Notes: Of course they didn’t include Circuit City’s share in 2008, but I estimate it was between 8-10%.  I estimate that brick & mortar Best Buy and Walmart probably split Circuit City’s share pretty evenly, with Walmart gaining a little more due to a larger number of store locations.  Amazon.com gain’s were likely from Circuitcity.com’s absence, as Circuitcity was a strong dot com player (stronger than their retail presence in comparison).

2) RETREVO PULSE ARTICLE SAYS BEST BUY LOSING GROUND (BUT WITH 40% SHARE)

Retrevo Pulse featured an article titled “Best Buy Competitors Gained Ground This Year”.

Summary: Take it with a grain of salt that Best Buy lost ground in this survey, as they actually have an even larger share of preference in this one, at 40%.  I’m not disputing the source, but as you’ll see in my notes, I think you can explain away some of the differences.

About Retrevo & their data source: The Retrevo Pulse is a data source from a CE shopping website that conducts its own surveys and publishes them. What I like about Retrevo is the simplicity of their reports.

Notes: This article shows Best Buy with a even larger share of preference than the Ad Age article, at 40% – but that it slipped over the last year.  The article also makes it look like Amazon gained at Best Buy’s expense.  Perhaps it boiled the results down too much, and again, we don’t see what Circuit City’s 2008 numbers were to gauge how much there was for competitors to take.  They also show Walmart much smaller than the Ad Age survey.  And conversely, Amazon looks huge here.  Given that the survey was conducted online by Retrevo, a online shopping/comparison site, you can imagine that their population is probably more comfortable with relying on Amazon.com for their CE purchases.

TAKEAWAY: CONSUMER ELECTRONICS STILL REVOLVES AROUND BEST BUY

Best Buy is the dominant player in Consumer Electronics, a king maker that has influence with consumers beyond whatever its share actually is (33% – 40%).  Even as Walmart and Amazon grow share in the CE space, it is ultimately because people get more comfortable NOT making their purchase at Best Buy.  If you are a CE manufacturer, not having your products at Best Buy robs you of credibility with consumers and key influencers.  If you are an agency with clients who sell products at Best Buy, you need to know as much about Best Buy as your clients because it is your best route to success.  If the products you sell can’t succeed at Best Buy, you will have little leverage wherever else you go to peddle your wares.  Conversely, succeeding at Best Buy paves the way for success in other channels.   Best Buy does the heavy lifting for other retailers that sell consumer electronics.  They just have to look at what Best Buy assorts as a baseline and start from there.  So get it right in the first place and base your plans on success at Best Buy.  Retail leverage will flow from there.

BONUS: NAME TO KEEP AN EYE ON IN CONSUMER ELECTRONICS:

If you don’t live in the midwest or south, you probably haven’t heard of HH Gregg.  In the coming decade you will.  They are a regional consumer electronics chain that has national ambition.   Imagine the things that people liked about Circuit City (more experienced sales associates, ability to deal), but without the legacy burden’s that held Circuit City back.   This article in the WSJ lays out HH Gregg’s ambitious expansion plans. While HH Gregg has a small footprint and is only roughly 10% of the size of Best Buy (127 stores), in many ways this is an advantage to them.  They are ramping up expansion in a market where retail real estate has been decimated, including many former Circuit City locations that can easily be re-purposed.

By Vincent Young:

Whether you are the dominant brand player in your category or a challenger brand just trying to hold shelf position during a troubled economy, there are certain common realities that will bind us all in 2010. Some are current trends that will continue to increase in importance as the landscape of retail continues to evolve, while others reflect my humble opinion as an army of one.  So, without further adieu, I give you five Retail Leverage Predictions for 2010…

Five Retail Leverage Predictions for 2010:

1) The CMO Will Become the CCMO (Chief Customer Marketing Officer): It started years ago with opening price-point private labels, then we saw the premium positioning traditionally occupied by the leading national brands come under attack by the upscale “house-brand”- and then before any of us realized it, retailers themselves evolved from being simple margin-hungry supply houses to becoming incredibly influential consumer brand marketers themselves. With that change, marketing leaders (CMOs) of supplier brands to retail are forced to understand as much (if not more) about the retailers’ brand strategies as they know about their own stand-alone consumer brands. The implication here is huge – this means that, starting with the consumer and working backwards, brands who sell into retail will need to validate their consumer marketing strategies by proving that the supplier’s brand compliments and adds value to the overall brand goals of the retailer.

2) Creative Services Agencies Will Learn the Language of Retail: In 2010, a set of additional language will be added to the traditional “agency brief.” A description of the umbrella brand positioning & strategies of the key retailers that will sell your brand has to be relayed to the agency creative department as a way to insure that your messages, look, feel, and recommended programs not only support your individual brand architecture, but are also complimentary to the retailer’s overall brand approach. Creative agencies that fail to understand retail branding as the highest order of supplier brand hierarchy will lose billings to those who speak the language of retail.

3) It Will Take a Village to Make Social Networking a Relevant Marketing Tool for Retail Leverage: Let me give an example: I love sports, I love potato chips, I love beer, too! In the world of social networking, why do I then need to follow/track/keep-up with both Frito-Lay and Anhueser Bush in the world of Twitter and Facebook?  I shouldn’t have to – they should combine their efforts, partner with a national grocery chain and create ONE community for people looking for great tailgating ideas/new products/offers! Brands who partner with retailers to create and manage consumer “solution” based social networking strategies stand a much better chance of keeping consumers within the sprawling world of digital communities engaged. This will create totally new processes and paradigms for social networking administration, promotion, and advertising. But remember, the brand that gets it right and co-creates relevant sized social networking communities within partnership with retail gains a significant amount of leverage with the given retailer.

4) “Co-operative Planning” Content Will dominate Best Selling Marketing Publications: Currently, most marketing textbooks serve as roadmaps for how to build brand strategies and supporting marketing plans for the largely inexperienced.  The classic “Kotler” marketing instructions still apply and are sound for learning marketing in a pure environment. However, if your brand is a good or service sold via today’s world of retail where your brand is more like a building block that supports a retailer’s umbrella brand, then the classic approach will need a little tweaking. In 2010, the new “best seller” will be dedicated to providing strategic marketers with the tools, best practices, and measurement systems that allow for retail leverage strategies to become institutionalized within the standard marketing planning process.

5) The New “All-in-One” Brand Will Dominate the Retail Landscape: Historically, consumer brand managers had the ability to choose how to best position their brands within a given category – price, value, or premium were the traditional options available to brand marketers. In many cases today, retailers are looking to consolidate vendors while expanding their own brands across all of the traditional positioning lanes (not just opening price-point), thus driving national brands to become a niche player if its focus is only on one positioning segment. As a result, the new power brand will have to be able to generate volume across all three positioning segments in order to remain viable on-shelf. “Price-leading” national brands will be forced to become viable in higher-end segments, while historically premium national brands will be forced to make offerings within the lower-priced segments of most categories.

WRAP-UP:

We will revisit these predictions as the year progresses and hope to provide examples of brands who are successfully adapting their go-to-market strategies and programs to reflect the ever-changing realities of retail in 2010. Feel free to share your examples of how you plan to increase your leverage with retail in 2010 and what predictions you have that have guided your thinking!

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By Ben Smith

It’s the most wonderful time of the year – CES.  Before I get to the point and offer our invitation, I thought I’d share my non Powerpoint based preparations for CES.

Here is my CES Checklist:

Chapstick?  check (I recommend Burt’s Bee’s)

Why CES Is Important To Me:

This is my 9th CES, with a one year hiatus during my brief foray into the Clean Tech industry with Gridpoint.  Let’s just say the consumer energy saving products I was working on while there were, and still probably are, about 5 years too early. We killed them before they even got a chance to launch at a venue like CES.  So I missed the show in 2007.

Fast forward to this year – after moving from Biz Dev to Trade Marketing / Marcom, I almost missed CES 2010 due to budget issues.  Thankfully things worked out – a good thing since the day jobs for the braintrust here at Retail Leverage includes minor details like writing the CES presentations!  However let’s just say that I care enough about the total experience of CES that I had made plans to pay to go on my own.

For better or worse, going to CES is akin to the swallows returning to San Juan Capistrano.  It serves as a virtual reset for myself and many other CE marketers and merchants.  Sure we just met with you a couple of weeks ago, and yes, we’ll be scheduling follow-up meetings for mid to late January, but it serves a purpose.

Why Is CES Important For Retail Leverage?

Those CES meetings with your retail customers are important – one of the few (if you are lucky) opportunities during the year to look at the bigger picture, vs short-term listing / margins / execution issues.  If you’ve been with us for a while, you know we advocate 5 ways to gain Retail Leverage.  CES is a great time to present those kind of strategies to your customers.  If your CES meetings don’t set the tone for where you are going in the next year, and how you are going to advantage your customer, I don’t see much of a purpose for meeting.  I also believe picking up the general vibe on the show floor is important, as it provides a window to the same trends the retailers are already on, or will be soon.

The Point Is – You Are Invited To Gain Retail Leverage At CES

I also believe CES provides a one of a kind opportunity to maintain industry connections, and more importantly, forge new ones.

So this is our invitation if you want to connect with us, talk shop, and discuss Retail Leverage strategies (or play craps – or both at the same time).  When we have some downtime at the show, or after hours, the door is open. This invitation is to marketing and sales pros from CE brands, their agencies (PR, marketing, advertising, etc), and pretty much anybody looking to gain Retail Leverage.

The best way to contact us is via our twitter account (@retailleverage) or retailleverage@gmail.com .  We hope to see you there!

By Ben Smith

The basis of Retail Leverage “the blog” is Challenger Brand Strategy.  While we continue to find ways to illustrate the concept of Retail Leverage, we love when somebody provides a teaching example that is directly relevant, such as the recent BusinessWeek article about “Why Tech Bows To Best Buy”. The article provides an inside perspective of what Best Buy looks like in the post-apocalyptic environment after the demise of Circuit City.  I have a great deal of respect for Best Buy’s CEO, Brian Dunn, featured in the article, who seems reasonable and straight forward – which you’d expect somebody that worked their way up from Blue Shirt to CEO.  The essence of the article is that while Walmart and Amazon are worthy foes, Best Buy is the only large national consumer electronics player left standing and they plan on capitalizing on what makes them different.  However important Best Buy was before as part of the buying process – regardless of the final point of purchase – Best Buy is now ready to take advantage of its position.

If you are a challenger brand marketer (or an agency working with one) there are lots of takeaways.  I hope you read the article but the highlights from a Retail Leverage perspective are below:

1. If you aren’t collaborating with Best Buy on product development  you are behind.  The earlier you involve Best Buy in the process the better.  They already are with your competitors.

Rather than waiting for electronics makers to ship Best Buy the same products that its rivals get, Dunn’s lieutenants are walking factory floors with executives from companies such as Hewlett-Packard and Toshiba, influencing product development and design.

2. Demonstrating (or demonstratability) of your product is increasing in importance.  This means you need to re-evaluate your in-aisle strategy to ensure your story is being told.

“We want to become a digital playground where people come in, experience it, try it, and find out how all these things can work together around their life,” says Dunn.

3. If Best Buy isn’t already competing with you, make the assumption they will be soon.  If not, your category probably isn’t a priority for them anyway.

“The company is already selling certain products in competition with suppliers, and will likely push other products off store shelves to make room for gear it’s developing. Best Buy’s new role makes it a kingmaker for companies that play along and a serious threat for those that refuse.  Executives at several major consumer electronics companies worry privately about Best Buy’s growing influence.  They’re concerned that Dunn and his team could block them from getting innovative products in front of customers or favor Best Buy-backed goods over their own.”

4. Pulling out of Best Buy is always an option.   Yeah right.  Maybe Apple could get away with it.  Maybe.  Anybody else – good luck.  I wish HP would try – ha!  Realizing this, know that even the strongest competitors in your category realize the power that Best Buy has and go great lengths to accomodate them.  You need to be willing to go farther.

“Apple, Sony, and other manufacturers could retaliate if they feel Best Buy is getting too heavy-handed, although they would think long and hard before doing so. They could pull products out of the retailer’s stores or forge closer relationships with rivals such as Wal-Mart.”

5. Reiterating the importance of product demonstratability / comparisons at Best Buy:

Dunn strolled into a store in Union Square to check out the company’s new “discovery zones.” In the Best Buy Mobile zone, for instance, dozens of customers were checking out how Motorola’s new Droid smartphone stacks up against Apple’s iPhone. Although it’s too early to tell whether the strategy that lets users try out multiple brands in one place will goose sales and create a more loyal following, Dunn nods approvingly. “What we’re able to do is show how all these things can work together,” he says. “Convergence is actually here now, and all those roads will lead through the center of our store.”

6. Start embracing Best Buy as a technology company – as a partner and competitor.  This isn’t just a fad like customer centricity.  Buzz Jill and Ray were useful but “partnering” is a strategy with much larger ramifications.  It means they’ll either get what they need from you, your competitor, or just make it Private Label.  They have more leverage than ever before.

“The job of knowing just how far Best Buy can push before manufacturing partners push back falls in large part to Kal Patel, executive vice-president for emerging business. Former CEO Anderson hired Patel away from the consulting firm Strategos in 2003 to direct the retailer’s strategy, and Dunn has given him broad leeway to transform Best Buy into a technology company. Patel suggests, unapologetically, that Best Buy and its partners will have to get used to a new relationship. “If you’re in the technology business, we’re going to have to learn to deal with constant conflict,” he says.”

7. If you have an annuity stream strongly consider using it as leverage to let Best Buy make you a king like Kaspersky.  Just be careful that you don’t make a deal that doesn’t allow you to live once they decide to make someone else king.

“PC makers are concerned the retailer is trying to grab more of their scant profit pool.  They may be right. One unusual deal Best Buy has struck is with the antivirus company Kaspersky Lab. The Moscow-based company agreed to let Best Buy manage its software and subscription program in exchange for more prominent placement in stores, says Randy Drawas, Kaspersky’s chief marketing officer. “We get a broader footprint within Best Buy and are seen as a premium brand,” he says. Best Buy salesmen promote Kaspersky’s software, and the retailer gets a slice of the revenues when customers use it. PC makers, though, may lose out on revenues as software from rivals such as McAfee are stripped off machines.”

8. You may be able to get leverage in your category by making Best Buy’s new in-store media network a priority for a chunk of your marketing dollars.  I don’t think it has ever hurt with the buyer to support a retailer’s key initiatives – especially those around getting you to shift some of your marketing dollars to their programs.

Best Buy plans to launch its own advertising business early next year. The company will let movie studios, PC makers, and other companies run trailers, songs, or commercials on the thousands of televisions, PCs, and cell phones within its stores. Sony, Toshiba, and Samsung have already signed on to advertise.

SUMMARY:

All in all, Best Buy is more important than ever before – regardless of where the consumer actually purchases the product.  Best Buy will still make money on the traditional one-time sale of your product.  Now they will ensure they get a piece of any annuity, and they also are covering their bets by monetizing the advertising and showroom experience – so that even if the consumer buys elsewhere, they still get their cut.  They are doubling down on the digital playground experience as this is one of the few vectors that would be hard for Walmart to beat them on, because they will never win on price vs. Walmart.

If you are in consumer electronics you need to be able to win at Best Buy before you can think of winning at Walmart.  Otherwise you simply aren’t relevant.  If you want to learn about how to gain Retail Leverage in an environment like Best Buy, we suggest you check out some of our ideas here, and then start following us so you can get our latest and greatest.

By Ben Smith

First 100 Days!

We have received tremendous response / reaction to our blog since we launched almost 100 days ago!  You’ve found us thru a variety of ways such as word of mouth, Linkedin, Google, Facebook, Twitter.  In this time, we’ve provided 18 articles covering a broad swath of topics we relate to our concept, Retail Leverage.  Virtually every article touches on strategies that can be used by challenger brands, and we’ve maintained a good balance between providing actionable ideas and examples of ideas that other brands have already employed.

What Makes Retail Leverage Tick?

Challenger brand marketers have to be more creative and do more with less.  Inspiration can be found anytime, anywhere.  We look for ideas in business and trade publications, store walk-thrus, weekly circulars, pop culture.   The 3 contributors behind Retail Leverage have lived this daily for a combined 40 years (and with challenger brands, there definitely is a “dog years” multiplier in terms of experience).   We hope that by sharing our ideas, inspiration and commentary we can help others – and we think we are.

What Does Retail Leverage Hope For?

We hope to become better about fostering conversations.  Perhaps it is the platform we are hosted on.  Perhaps it is the way we write our articles.  Perhaps we are just so right, there is nothing left to be said (we kid, we kid).  Whatever the reason, we are going to start optimizing everything about the articles and the site in order to better host conversations.

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Besides commenting and taking part in the conversation ….  please spread the word about us.  Lots of ways, including:

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By Vince Young

The Dilemma

Most challenger brands have very lean marketing departments. There is simply not enough manpower for marketing departments to adequately develop the roadmaps to a better tomorrow (strategic business plans, future product marketing efforts, and market/consumer insights) while simultaneously delivering the product management, marketing communications, customer initiatives, and profit demands of the here-and-now.  So what do we do? We rely heavily on our creative agency partners as extensions of our own marketing departments.

Our problems become their problems. Here in-lies a potential conflict – an ad agency is a business and its goal is to encourage its clients to spend as many marketing dollars with the agency as possible. While this is a very understandable desire, it may limit the challenger brand’s ability to use its marketing dollars to gain retail leverage as sometimes critical investments need to be made to support the retailer which may cut out the agency’s interests.

Friend or Foe?

Retailers tend to support vendors who support the retailer’s need to drive store preference and sales. Retailer-specific or co-operative marketing initiatives where the retailer may ultimately develop the key shopper marketing insights, the campaign creative and lead the media buy are often meaningful parts of the challenger brand’s marketing mix to gain retail leverage, but may limit how much the 3^rd party ad agency generates from the challenger brand client. Such activities include co-operative mass media (TV, print, on-line), in-store TV, retailer dot com and loyalty program support, new-store opening programs, and private retailer shopping events.

What Is A Challenger Brand To Do?

So how can challenger brands motivate ad agencies to support its need for retail leverage?

1. Check your agency’s “Retail Leverage” I.Q. – As part of the traditional agency capabilities pitch, have potential agencies articulate their view of how you and your retailer make money and how the agency’s capabilities can help drive mutually-beneficial thinking to grow both. Typically, the best ad agencies for challenger brands at retail are challenger agencies themselves. Don’t engage an agency based on the case studies that they present on how they have a client portfolio of mega power brands. Rather, demand real-world examples of how the agency has demonstrated an understanding of the successful approaches of challenger brands at retail. Ask how they have helped challenger brands fortify a position at retail and how they contributed to brand deployment & demand-generation. Demand an account management and creative team who is expert at retail product launches, promotional design & programming (ideally, in the same classes of trade as your own), and co-operative marketing initiatives. Lastly, ask potential agency partners to illustrate the measures that they take to keep themselves current on retailer needs and challenger brand leverage strategies (such as reading this blog).
2. Teach your ad agency about your business – not just your brand. Too often, agencies only get the download on brand strategy or the inputs of a project brief. Take the time each month to share with your agency (account management & creative) all of your key customer presentations as well as the most important internal reports that detail the state of your business.
3. Implement an Incentive-Based Agency Fee System – Any agency that claims to be expert in brand strategy, creative design and retail programming for brands in need of retail leverage should be rewarded for the successful in-market performance of the brands they support. The converse is true as well. Include stretch goals in agency retainer agreements that tie incremental agency payouts based on the brand’s performance in key retail performance measures such as market share, share of retail shelf, and share of voice (weekly retailer circular ad share). This will surely motivate the agency to think and act in a manner that maximizes their value as a partner to gain retail leverage.

What best practices have you seen or experienced where challenger brands and ad agencies have partnered successfully to generate retail leverage? I welcome comments from brand marketers, retail merchants and agency executives!