We have received some great feedback about our guest newsletters. It is always important to bring fresh perspectives and Alan Archibald does that this week.
Alan Archibald has worked on the sales and marketing of food and beverage products for over 4 decades now. As a vendor, he sat and negotiated across the desk from me in my Loblaw days on more than a few occasions. In recent years, his consulting agency, Archibald Analytics Inc. has worked with companies on developing and implementing “go to market “ strategies for a wide variety of food and beverage products. Alan and I have also worked together in delivering workshops on sales and marketing to professionals across the country. Alan’s focus is often on the effective use of channel partners – all those third-party firms and individuals in the distribution, brokering and merchandising arena you often need to hire to grow your business. After sitting across the desk from each other we enjoy the opportunity to help producers and processors take the right steps to grow their business.
Selecting and managing your sales broker for success …..
One of the areas of sales management that seems to be causing much grief among many food processors in today’s world is the performance of sales brokers. Typically, food companies looking to grow sales outside their region or in new channels will opt for a broker instead of adding to their sales staff. Broker cost is a variable expense tied to sales volume. It typically ranges between 3 – 10% of wholesale prices depending on the range of services offered, and the expected sales volume. It is most often less expensive than the fixed cost of a salaried person at least in the early stages of sales growth.
But companies often struggle finding a broker that meets initial expectations. Time and time again we hear of companies that lack satisfaction with brokers. Often those bad initial experiences lead companies to abandon the use of brokers when the right fit might be exactly what they need to achieve that next level of growth. Why do these relationships flounder? Let’s look at three common reasons.
Poor capability matching with needs
Companies can have varying motives for hiring broker assistance, and brokers offer a differing array of services. Aligning these two is critical to success. Do you want your broker to make Head Office calls for you to obtain listings and manage your sales promotion spend? Do you want your broker to call on individual stores in a region to facilitate order taking and manage your presence on the shelf? Or do you want your broker to offer BOTH head office and field work? Perhaps you have a more specialized need – such as pursuing private label business or developing sales in an entirely new channel like food service sales to casual theme restaurant chains.
Whatever your objectives are, you need to ensure that they match the capabilities of your broker candidates. A small 2-person brokerage in Ontario is not going to be able to deliver field support to an Atlantic Canadian processor looking for coverage of a major retailer’s stores in the region. A Western Canadian based broker should have a hard time convincing you that they can represent your brand to retailer national category managers based in Toronto and Montreal. A broker whose key “principals” (companies or brand they represent) are all in the fruit and vegetable category is less likely to be effective in representing you to grocery or protein category managers.
Your broker needs to supply sufficient evidence from testimonials and references from customers as well as current and former principals that they have the experience and capabilities to meet your needs.
Sales expectations not understood and agreed upon
Brokers are compensated on sales volume. That is why they fundamentally want to understand your sales potential before taking you on. It is also why they often ask for a fixed monthly draw - or a higher percentage fee - in the beginning stages of a relationship to cover their investment of time and expense in securing and building sales of a new and emerging brand.
It’s critical that you know your average sales per store potential before engaging a broker – so you both know the size of the opportunity and can jointly develop some expectations for sales performance. That is why we always encourage companies to first focus on maximizing sales in their local market -and understand the tactics that best achieve them – before chasing a shiny new growth opportunity in a more distant region. That way when they look to a bring on broker to assist with sales growth, they can have a honest discussion of the potential opportunity based on actual sales performance.
Without these facts, you and and your broker may have differing expectations on the size of the sales opportunity and the effort it requires.
Failing to establish clear performance targets and reporting requirements
Brokers naturally focus on those brands with larger expected sales volumes for a given amount of sales effort. Processors are often faced with choosing between a larger established broker or a smaller, specialized one.
Larger national brokers representing multiple brands can usually offer a full suite of services – e.g., effective head office representation, field work in the region. But a small emerging brand they take on may very well get lost in the shuffle and get insufficient sales attention unless clear expectations are established up front.
Conversely, that small boutique broker may have fewer principals. Your emerging brand may represent a bigger share of their overall sales opportunity – but they may lack the relationships with category managers or the field staff to deliver in store support if that’s what you need.
Proper screening of brokers In the evaluation stage will help you make the right choice. Get the names of other principals your size and interview them about their satisfaction levels. (Even better if you can talk to “former“ principals who may have left.) Referrals of course from retailer category managers is golden if you can get to them. You can often meet them at trade shows. (US retail has a much more accepted system of broker usage than Canada. US retailers often not only insist you use one – but will recommend candidates. The reason is that they do not want to spend the time and energy in educating vendors on how to do business with them – they pass that task on to brokers who are up to speed.)
The best way to combat the attention issues is to establish clear performance targets and reporting requirements at the outset. If its field work that you are looking for, then your broker needs to sign off on a visit schedule – what frequency of visits to A, B and C priority stores can you expect in a given month. What monthly reporting stats will you be getting – with a focus on results not merely activities - number store visits, pictures of displays, number of stock outs corrected, product or display issues, new store acquisitions, overall sales by store stats for the period. (If they do not manage sales by store, then your broker should commit to obtain from retailer or distributor)
If its new listings you are seeking, what chains in your product category has your broker had success with? What brands and product listings? How long did it take? Is that retailer on your priority target list? Can they provide some references for this work? Finally, what sales activity plan do they propose in pursuing head office listings – targets, in what period, expected success rate, reporting schedule. Before engaging, you should have a clear idea of the work they propose on your behalf and how and when results will be reported.
So your ultimate success with your broker is often dictated by how well you jointly establish performance expectations at the outset, and gain agreement on clear result reporting. Those considerations should guide your selection in the front end.
All these understandings should be set out in a standard agreement with a reasonable term, renewal process, as well as notice period if either party wants out.
Failure to set these expectations out in writing is often a principal reason that companies end up being dissatisfied with their broker performance.
Alan Archibald has held executive leadership positions in various facets of the food industry. Currently he leads Archibald Analytics Inc., a consulting practice that helps companies that have technically sound products or services but lack the capacity in designing and executing viable “go to market” strategies.
Some people might not be surprised to see Loblaw and Walmart hesitant to move forward with the Industry Code of Conduct. It must be frustrating for the people who have been working on this initiative to have two major players balk so close to the finish line. Perhaps this is a negotiating tactic to get some changes implemented or perhaps it is a response to the politicians in Ottawa blaming retailers for food inflation. We will probably never know. It would be a step forward for our industry to have a process to resolve disputes that is more equitable and that, to me, is the biggest win if the code of conduct is implemented.
Where is Peter Speaking?
We have been working hard to put together a new video to promote the work we do speaking at conferences and events. Hope you enjoy the video!