All trading relationships have their ups and downs. The fear of many companies is that recession could be increasingly damaging to relationships as price negotiations grow ever more antagonistic.

Every year IGD undertakes a detailed survey to assess the evolution of trading relationships. Through this we can test the impact of recession and from our latest assessment, drawing from 150 retailers and manufacturers, we were pleased to reach the opposite conclusion. Despite – or perhaps because of – the tough negotiations, more than two thirds (68%) of manufacturers told us that developing strategic relationships had become more important to them this year. Only 3% say that it’s less important.
 

Retailer versus manufacturer priorities

Source: IGD Customer Engagement Survey 2009

However, it takes two to tango and if manufacturers want to realise their aspirations they must recognise and respond to retailer views on what would enhance relationships. Our survey delivers a crystal clear message. There’s broad agreement over the need for strategic alignment and on the importance of everyday operational issues like service levels and promotion management. Two anomalies leap off the page, though: retailers would very much like their suppliers to give more attention to both shopper trends and retail economics.

From their perspective, they seek greater empathy. Manufacturers would no doubt welcome more empathy from retailers too, but in a world where ‘the customer is king’ suppliers have a particularly big incentive to build relationships. So what’s holding them back?

One explanation is that in the recent past, retail economics and shopper behaviour were relatively stable. There was little demand from retailers for help in these areas. However, with so much changing and at such a pace, new analysis and dialogue is essential.

For example, weaving together a variety of promotions to profitable effect is a complex task – especially as shopper motivations present such a moving target. It is easy to get the calculations badly wrong and suppliers that can help their retail customers hit profit targets in these difficult times will be greatly appreciated.

What makes a ‘best in class’ supplier? Views from two leading international retailers. "Best in class suppliers have the basics covered week in and week out and a meaningful NPD pipeline. Beyond this they are sharing future plans well in advance and provide actionable category-wide customer insight. They are very aware of what drives our thought processes and actions, so that they can either support our plans or provide a compelling case to change them." "A best in class supplier must have a shopper focused growth agenda, understand the operational and commercial model of the retailer, have the ability to adapt quickly to changing market conditions and help us to differentiate. Its approach is fact-driven as opposed to brand-driven."

A second theory is that retail economics, and to a lesser extent shoppers, are seen as the domain of retailers. Traditionally suppliers have brought different and complementary insights to the table and used frameworks like category management to pool knowledge. However, the more relevant information they can digest in advance and use to stimulate ideas and options, the more influence they will hold – especially when the customer is inviting it.

A final possible explanation is the divide between sales and marketing. Traditionally, marketing departments have held the big research budget and focused on point of consumption rather than purchase. Only more recently has the emphasis started to shift, and so companies are on a learning curve.

The expense of shopper research is an inhibitor but it’s the big strategic insights that matter most in building rapport, and these needn’t be overly expensive to find. The problem is well recognised. A third of manufacturers considered their limited ability to understand retail economics and KPIs as a key challenge and four in ten said the same for shopper trends.

We’re aware that some companies have embarked on a concerted campaign to address the gaps to enhance their retail relationships. During such a period of uncertainty, with so much at stake, it would be risky to get left behind. Of course, IGD’s retailer and shopper analysts are always happy to help.

Whether it is identifying weaknesses in customer engagement plans, improving category action planning, understanding shopper trends or developing unique shopper insight - we bring best practice solutions to your business to enable you to grow your sales and profits.
 

More information:

	Building Customer Engagement Capability in Recessionary Times
	To request a free research extract or to find out how IGD can help you assess and develop your customer engagement capability, please click here.

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Anne Bordier is Head of Commissioned Research at IGD, responsible for leading key research projects within IGD and on behalf of IGD’s customers.

Anne is a specialist on the Carrefour account which she has been covering for the last six years. She is also leading IGD’s research programmes into customer engagement and global account management, as well as international retailer responses to the sustainability challenge.