Managing modern trade
- 1. ABC FOOD CO. Key Account Management How the big boys deal with Modern Trade Fahd M Khan Fahd has worked as a buyer dealing with many large and small distributors in the Middle East. The document was drafted as a guide to modernization for smaller distributors keeping in mind the best practices in the region leading to consistent processes increasing competitiveness
- 2. Key Account Management INDEX • Profile, Objective, Responsibilities • KPI’s for a Key Account Manager • Management of Key Account Relationship • Internal Coordination • Talent Management
- 3. Profile, Objective and Responsibilities Profile The Key Account Manager is the first contact point between ABC and the Retailer to ensure that objectives of both parties are met through a win-win relationship Overall Objective Manage and strengthen relationships with Key Accounts so as to achieve long term sustainable & profitable growth consistent with ABC’s overall strategy Responsibilities A Key Account Manager should have the following deliverables • Channel Management Plan (Yearly) • Customer Management Plan (Yearly) • Yearly customer contract with business terms favorable for ABC • Product Management (Forecast, Availability, Listing, Merchandising, Shelf Share, Pricing) • Sales Management (Targets, Margins, Category, Promotions, Rentals) • Monitoring Customer Service levels in close collaboration with category manager and logistics • Consistent Business Review Process to ensure achievement of targets and commitments • Streamlining of promotions so as to maximize the coordination between sales, marketing, logistics and the customer
- 4. • Execution of BTL activities so that products of ABC are consistently and profitably highlighted by the customer • Identify and act on cost reduction opportunities especially those that arise out of increased collaboration with the customer • Monitoring and reacting to competitor activity in Customer Outlets • Design and Agree on process for internal and external coordination • Manage overall profitability of the account • Coordinating with accounts to ensure collection and dispute resolution • Manage the sales team by outlining clear objectives & ensuring a transparent, standardized incentive structure • Plan the allocation of the Trade Marketing Budget between accounts and activities • Set up Standard Operating Procedures to service Key Account Customers.
- 5. Key Performance Indicator’s ABC’s Vision (Hypothetical) ‘To be the leading food solutions partner in the Middle East by 2012’ ABC’s Strategy (Hypothetical) The company wants to be a market leader in the food category by providing complete solution to retailers. - This solution means offering a Premium, Mid Range and Price Fighter product in the categories that ABC plays in. - The company will not enter categories which are too heavily contested except with an established market leader. - The company is pushing its own brand by to further increase its bargaining power with Retailers. - The company plans to take advantage of the trend towards organic food by offering the full range of organic products in the region KPI • Sales Growth (Adjusted for Category, Company Objectives & Share of Category) • Key Account Profitability • Customer Feedback • Internal Feedback (Sales Team, Marketing, Logistics, Accounts) • Product Management (Availability, Listing, Merchandising, Shelf Share, Execution of Promotional Activities) • Improvement in Trading Terms
- 6. Measuring Tools • Sales Report complete with Margin Analysis by customer (an example is provided in the Sales report that is the part of the project) • Normally a 360 degree analysis is the tool used for customer and internal feedback. Alternatively feedback forms might be used • Product Management can be monitored through market visits and internal audits by the management • Trading terms can be monitored by comparing yearly contracts and the internal targets of the Key Account Manager • Market Share report within the stores to monitor the share of category within Key Accounts • Key Account Profitability is the understanding of the money earned from servicing an account. This could be calculated in the following manner Gross Margin (-) Rebates (-) Other expenses (Rentals, Activities) (-) Allocation of Merchandising Costs (-) Allocation of Logistics Cost (-) Returns & Damages The result will allow us to manage our costs and customers better. The process could be revisited on an ongoing basis and made more sophisticated.
- 7. Management of a Key Account Relationship Scope Function Owner Objective Process The yearly contract should cover all expected investment including Rebates, Space Rentals, Activities, POS Information, Listing etc. Annual Key Account Maximise Return on Investment with the This would allow ABC to understand its complete Contract Manager Account investment and plan accordingly to maximize return. Progressive Margin can help incentivize over achievement Design a sales report format and get the same implemented by IT. Monitor Sales Daily together Agree on aggressive targets with the with the Sales Team and react to fall in sales with Key Account Sales sales team and create the best the help of Marketing. Ensure monthly checking of Manager conditions for them to achieve the same Price List. Implement a standard incentive structure to cover volume, value, collection and product presentation Work on a yearly Marketing Plan for each customer keeping in mind the activities planned Key Account To ensure strengthening of ABC's by Budget Allocation, ABC's Marketing, Marketing Manager product by increasing proportion of sales Customer's Calendar and Last Year's Activity. Also Brand Manager within the category ensure coordination when reacting to changes in sales. Support Marketing by reporting competitor activity. Ensure execution On being informed by the accounting department, the KAM should get the discrepancy resolved by Maintaining Customer Price File, Account opening a channel of communication between Finance Team Finance Statement, Collection of Cheques & relevant parties. Cheque should be collected by Member follow up discrepancy of accounts the sales team. In case of nonpayment KAM should resolve the issue with stopping of delivery as measure of last resort A request should be made by the KAM for the To create promo codes and ensure that creation of the code and the stock to be IT IT Team Member stock is transferred to the same transferred. An IT team member linked to Key Accounts should be incharge of executing it The KAM should visit stores constantly and follow To ensure that ABC's products are up discrepancies with the Merchandising Merchandising presented in the best possible manner, Supervisor. Ensure that the sales team follows up Supervisor Merchandising follow up with the store teams for and keeps track of the shelfs, prices and product Key Account orders. Ensure adherence to planograms availability. Constant collaboration required with Manager and shelf share as per the contract the retailer's store team by the sales team and KAM To ensure execution of promotions as The KAM should follow up promotions to Key Account per the marketing calendar & react to understand their impact on sales and margins. Promotions Manager changes in sales by planning & executing Finalize the promotion plan in collaboration with promotions with the brand manager the Marketing team and the customer and get the
- 8. requisite paperwork done. Maintain a file on results of the various promotions and react to changes in sales by being proactive in initiating promotional activity The KAM should work on ways to collaborate with Distribution & the customer & help the D&L supervisor reduce Distribution & To ensure smooth delivery of products Logistics these costs. KAM also has to resolve disputes Logistics and avoid discrepancy in price Supervisor arising from discrepancies between ABC's invoice and the receiver's copy The salesman is responsible for deliveries on the daily basis. However the KAM should follow up Distribution To ensure ABC's service levels are 90% Delivery service levels by requesting information from the Supervisor and above buyer (retailer) and ensure that any problems are solved by sharing the results with D&L Supervisor The products should have an expiry of atleast 6 To ensure correct barcodes, follow up on months. The KAM should be informed if stock of Distribution Warehouse expiry dates & wrapping of promotional any product is minimal. Promotional Stock should Supervisor products be followed up by the sales team to ensure that the quantity is ready at the time of delivery This has to be followed up by the sales team and To minimize returns, damages & expiry the merchandisers. On being informed the KAM Returns Key Account by proper product handling, rotation and has to coordinate with the store team to dispose Management Manager Instore activity for short expiry of the products and minimize damages and returns Business Review Procedure • The business review should be done quarterly • The main elements of a business review are - Sales Target Achievement by Category - Year on Year Sales Growth/Decline - Promotional Activity - Competitor Performance/Category Shares - Plans for the next quarter - Customer Feedback - ABC’s Concerns • The objective of this exercise is to ensure that the goals of ABC are being met within the store and the retailer is informed about ABC’s business concerns. At the same time ABC can understand opportunities to increase its participation within the outlet
- 9. • This is standard procedure with almost all major distributors and retailers and should be implemented immediately Customer Profile A file should be maintained for each customer with all stakeholders comprising the following details (A) Customer Name (B) Key Personnel Position Name Contact Email Central Buyer Asst. Buyer Store GM Store Manager Store Supervisor Receiving Manager Accounts Manager (C) Contact Point in ABC Position Name Contact Email KAM Sales Supervisors (D) Sales Budget Q1 Q2 Q3 Q4 Budget Actual Budget Actual Budget Actual Budget Actual Volume Value (E) Scanned Copy of the Contracts (Previous Years) (F) Quarterly Business Review Reports (G) Report outlining the Objectives of the Year
- 10. Internal Coordination Clear lines of authority have to be established by the KAM as far as Internal Coordination is concerned. A proposed structure is proposed below Support Marketing GM Coop GM ASD Dist. & Logistics KAM IT Accounts Sales Supervisor Sales Supervisor Coop ASD Merchandising /Promoters The support departments should have one point of contact for the Key Accounts. This would help smooth the work and follow up even when somebody else is deputizing for the KAM. The current structure of the company is divided under Coop and ASD. However the Key Account Manager should ideally be responsible for the whole business with the Key Account and therefore should have a sales supervisor reporting to him for ASD too. Currently with limited Key Account Stores two sales supervisors are enough – each for Coop and ASD. However as the no. of Key Accounts increase the no. of supervisors will have to go up. The Key Account Sales Supervisors should be one ideally for Modern Trade Channel. This is keeping in mind the ethnic profile of buyers.
- 11. Talent Management • The biggest problem facing CEO’s today is talent management • In structured organizations HR has a career plan for different positions and the managers are supposed to execute it • In this instance the Key Account Manager just manages four – six people at the Sales Supervisors Position • It is thus the responsibility of the Key Account Manager to groom them into future KAM’s and ensure that there is somebody to follow up in his absence • The company and well as the customer’s are growing and therefore people will be needed to service them in the future • A sales supervisor groomed into a KAM will have the advantage of working with the customer and therefore knowing the business and the people at the retailer running it • This will ensure continuity in the business and also encourage employees to work harder and learn new skills • There will be a ready replacement for a KAM and the current situation where there is lack of focus will not arise • Talent Management should be a part of the job description of the manager and the sales supervisor should understand that he is being groomed to manage the customer in a period of two years • This should be a companywide exercise however Key Accounts provide an opportunity because of the potential of the current people serving them