You hear this a lot in SKU rationalization projects, where you’re trying to clean up the pieces of a non-performing assortment of products. “We need this to offer a full line”
However, we’ve carried the item for years and it clearly isn’t delivering the turns or margins we need to sustain it.
So how should we approach this?
Understand Field Sales Perspective
First, think carefully at how your sellers and distributors introduce your product to the end user. How would they pull stuff out of the bag and in what order?
Your distributor rep is probably thinking like this:
- Proprietary systems that the manufacturer rep spent time training them to sell; often high margin and with various trips / incentives for hitting key sales targets
- Anything where their boss is paying extra commission (house private brand)
- “Story of the month” – with a hot cost or new feature they use to get in the door
- Price Fighters – usually a universal item in a core category, pulled out of the bag when it becomes apparent that the customer won’t buy any higher paying items.
- Specialty items – as a last resort, your rep will do battle with their boss and their merchandising team to add a new item to the assortment for a single account.
Complicating things – they may only pull one or two of the above out of the bag during a given sales call. So choose your spot wisely!
If you had to give them a brochure, what should it say about your assortment?
Would it be narrow and focus on a key item (“we have the best cost on jumble roll tissue!”) or would it try to sell them the full line, knowing they may need all of it?
Start With Buyer & Distributor Behavior
The first strategic question: is your target audience full line buyers?
Within janitorial supplies, large brands like Kimberly Clark would probably laugh at this question. But this should be a real concern for converters and emerging brand teams.
We live in a winner-take-most market. The first brand out of a distributor’s bag tends to get most of the sales. There might be a second place brand. There usually isn’t a third. Remember many distributors are going to want to push their own private label as well.
Are your products – THAT GOOD – that they can unseat one of those slots?
Or do you need to play a narrower game, focusing on where you can cherry pick deals.
In Praise of Cherry Picking
There’s nothing wrong with cherry-picking. In fact, if you’re seriously constrained on cash or capacity, it often is more profitable to get “good” at one product line than scatter resources across a far broader space in search of “adequacy”.
And there are ever so many ways to build competitive advantage as a single item specialist:
- Best Distributor Support & Marketing Assistance
- Adapt to Unique Customers and Sales Channels
- Manufacturing / Sourcing Specialist (Best Cost)
- Integrate Services / Support / Dispensing
- Innovative Design
Even better, most of these ideas don’t require price cuts. You might even charge more!
Focus is a blessing for small players. It’s relatively easy to become the best iwhen you throw all of your effort into beating a narrow set of “serious” competitors. Especially if you can find niche markets and “local drama” bigger players won’t stoop to address.
Building competitive advantage often triggers a virtuous cycle. The “best product” in a particular market gets a strong tailwind, in terms of everything from more referrals to trade media coverage and easier access to talent. They have an excellent chance of maturing into “earners” – steady profit generators with a growing competitive moat.
Compare that with a portfolio of “merely adequate” product concepts, a well curated stable of “gentleman’s C-Players” without any real spark to attract attention. Over time, this can quickly devolve into a diminishing returns business…. and from there, failure…
If you cannot win as the first or second brand out of the bag, be wary of scattering your budget across a handful of marginally competitive products.
Which role are you competing for?