Driving category benefits and value
Since the 1980s, category management has played a key role in selling into retail, largely due to shelf space increasingly coming at a premium. Retailers realised they needed to use their space as productively and effectively as possible and, as a result, category leader roles were developed to manage different product ranges. From household and beauty to food and beverage products, category leaders have been instrumental in promoting their knowledge of their category’s benefits and their leading role in it to a buyer. They work closely with their own account managers to meet retail buyers’ expectations from that category in terms of ensuring a shopper finds the right product, at the right time, at the right price. But despite the support and input from product category experts, account managers often still fall short when it comes to turning these added value services into negotiating value with retail buyers.
Value needs to be introduced into the sales conversation from the outset, rather than simply conveying the product benefits. Account managers should be more focused on understanding that price should be a consequence of value, and that buyers are willing to pay more if they sell the value, vision and aspiration of that product.
The power of the network
An additional factor when negotiating with retailers is understanding the network of decision-makers involved in any one transaction. Retail buyers often give the impression that they are the sole authority in decisions, focusing mainly on price, margins and terms. However, we know that in a modern retail environment strategic purchasing decisions impacting their retail business are rarely the sole responsibility of one individual buyer. In fact, there will be several people in the buying circle that will influence the decision, all with differing perspectives and input. For example, while price will always be a principal factor, others may be focused on the product strategy, product range or packaging, others on sustainability factors such as levels of CO2. All of these provide useful considerations when negotiating on value.
How to strategise negotiations
Account managers need to prioritise both the buying circle network (by developing key stakeholder influence strategies) and category development as key factors when negotiating value.
Firstly, they need to understand the needs of more than just one buyer, appreciating that they are selling against the comparative needs of a buyer decision-making group or group of stakeholders. Secondly, they should then incorporate those needs and demands into their negotiations and develop a range of relevant added value concessions to trade during the negotiation.
Time to get the left brain working
Developing a conscious competency approach to selling focuses on highlighting value over price, helping buyers visualise what they might miss out on by not purchasing. Currently it’s too much in the subconscious, and it needs to change. This involves managing perceptions, so buyers see you’re negotiating based on tangible value, not just cost. Value can include aspects such as expert advice, product category improvements, sustainable packaging or support from a dedicated merchandising team. This approach gives the account manager more negotiation power. But it requires both the right skillset and mindset that puts the account manager in a strong position against skilled retail buyers, who would usually prefer to start by negotiating on price alone and like to ignore the value a sales person has to offer.
However, negotiation is not instinctive and needs to be learned. It is a structured, left-brain activity involving analysis, valuation, proposal development and understanding the value of both the concessions you make and those you request. Key principles, such as the quid pro quo approach (never giving something without receiving something in return) highlight the strategic nature of negotiation, especially when it comes to negotiating annual contracts or new product propositions, and are an essential success factor for selling into retail organisations.
A final word
The best way to apply all the above in context, particularly as an Account Manager preparing for an important negotiation, is to ask yourself, “If all the value I believe I’m offering the customer were realised using my own money, would I be better prepared? And would I allow the buyer to overlook this value? The answer to these questions seems fairly obvious!
