ShopAbility discuss Joint Business Development Planning with retailers, and whether it really applies in today’s trading environment. For Retail Pharmacy Magazine.
JBDP: Joint Business Development Planning or Joint Business Planning. ‘Where do you start?’ some cynics ask. With two dominant (some say dominating) grocery retailers calling the shots, is there really room for joint planning?
Joint Business Planning was fairly common a few years ago. But with changes in senior executives across all of the major retailers, new entrants to the market, and new owners/ shareholders, all with different priorities and growth strategies, how prevalent is it or should it be today?
A few underlying questions that regularly get debated in the FMCG industry include:
- Will the goodwill and creative initiatives be abandoned at the first sign of stalled growth, by either party?
- Will Operations (stores and field teams) fully execute when, and the way that, has been agreed?
- Will we truly share the pain and the gain?
- Will other mid-senior level executives be as committed as the Planning team to abide by what has been agreed, and ostensibly paid for?
- What will other Retailers or Suppliers do if they find out what has been committed to with a competitor – especially if increased trade spend is involved?
- How do I react when our agreed Plans are nothing more than a perceived Terms grab and little has been achieved despite all of the great rhetoric?
WHY DO A JBDP?
The commercial decisions that surround a JBDP are certainly complex and can create confusion, frustration and indecision with many suppliers. The questions we pose are commonly asked across most FMCG suppliers, especially at the moment. A JBDP is only worth the paper it’s written on when initiatives are not just agreed to but actually implemented – which we will discuss later.
So what is a JBDP?
“JBDPs are written, formal annual business plans or goals, developed in collaboration and with equal contribution by both the supplier & the retailer, outlining how they are going to work together in developing the Category over the next 12 months to achieve their goals.”
Typically a JBDP contains top level business strategy for the Category including historical and current research data, marketing plans, tactical plans, time frames and financial forecasts including responsibilities and accountabilities for achievement across each party.
Let’s separate JBDP from Business Reviews, which are a means of monitoring the JBDP on a regular basis, usually quarterly of more frequently if agreed and required, and quite tactical in application and measurement. We will cover these in more detail in a future article later in the year.
So what are the benefits of a JBDP?
- Joint commitment to growth, aligning Category plans and strategies to increase Sales and Profits for both parties – logical and fairly basic
- Have a clear understanding how this will occur – who does what and when
- Align the two companies behind one plan, all of the silos line up
- Develop the relationship for the future, and hopefully develop a bit of Trust along the way.
WHEN TO BROACH THE PLAN IDEA?
Before embarking on the process of developing a JBDP, ensure that there is internal alliance to both the process and the potential outcomes. Obviously clarity of your expected outcomes will be critical prior to commencement, but also understanding what unexpected requirements may be tabled or aggressively leveraged by your trading partner. Anticipating and understanding your level of flexibility prior to commencing the process is really a must.
When should we consider opening a discussion about a JBDP?
If you have a current or lapsed Plan, never too soon is the answer. If last year’s Plan was a success, usually restarting is easy, however a new conversation can be awkward especially if there is an incumbent supplier you want to usurp. Usually prior to the start of the financial trading period for both participants is a good time as a clear line of sight exists between the JDBP with each retailer and the Corporate Plan. Each is a jigsaw piece that fits in to build the overall Company budget.
WHAT’S IN A JOINT BUSINESS DEVELOPMENT PLAN?
There are six basic steps to creating a JBDP, somewhat similar to a Corporate planning session that is part of the Annual Budget Planning process. The focus here however is very much on the Category, or on multiple Categories if your trade in more than one Category.
Step 1 – Assembling and filtering background information is a key step in the preparation of the key performance criteria of the Category – last year’s Plan (what worked/ what didn’t/ why) sales and profit performance, supply/ inventory management and retail/ field operations, ranging, promotional performance, new line performance, Shopper data for that Retailer etc. Construct and circulate to the key participants as well as internal stake holders, having everyone singing from the same hymn book focuses on the same data and reduces confusion and distraction
Step 2 – Situational analysis or overview completed both externally and internally. What does a current snapshot of the Category look like? Determine what has changed over the ensuing period – a new competitor, changed Category dynamics such as ranging, source of supply or alternate usage (eg rice vs pasta consumption), GP% to name a few.
Step 3 – Internal and external SWOT analysis. This also identifies the key strengths that need to be leveraged as a point of potency for the future year, as well as weaknesses that must be identified and worked on.
Step 4 – What are the key commercial or financial objectives that will form the basis of this year’s Joint Business Development Plan – what do we both want out of the process? Sales growth? Profit growth? Inventory measures? Promotional investment? NPD? PL involvement and Retailer goals?
Step 5 – develop the Category growth strategy, or Category Development Plan. The key disciplines of RSVPPP are identified, clarified and developed :
- Range
- Space
- Visibility
- Price
- Promotion
- Persuasion
(The plan also needs to include retail/shopper objectives eg traffic, penetration, AWOP, spend, frequency).
Step 6 – Implementing is usually the hard part – see our questions at the start of the article. This is where the internal fortitude of each participant is tested, sometimes quite hard. Especially when a competitor arrives with an aggressive offer that tempts or gains agreement from the retailer. Or despite assurances from senior execs, initiatives are stalled or given a lesser priority.
The addition of an extra step, Step 7 is the most important, this is where the JBDP is monitored and fine tuned to ensure compliance, implementation, hopefully success and if not, the development of alternatives to further focus on achieving the commercial targets that have been agreed. Everything else is little steps to get to these measures, this is what ‘success’ is measured by, not how close we have been or what happened that resulted in missed Goals
So there is the theory and a step by step guide on how to develop a JBDP – there are plenty of templates around that can be used, or certainly the majors have their own templates that they preferred to use
WHERE TO FROM HERE?
So how relevant are they in today’s market?
It feels like we are going backwards at the moment, with focus given to Price/ Terms/ Projects that are “resetting” the way the industry has worked – the question is whether this is a cycle or this is now the way the industry will now work - a Darwinian evolution of sorts.
Not sure on that one yet, it is probably a little too early to give a clear indication, most likely in 12 months or so the answer will be clear, and will probably be driven by the relative and comparable performance of each of the dominant chains.
One clear sign that will answer the question is the implementation of the agreed initiatives that have cost suppliers new trading arrangements. Non-implementation with new terms would indicate that new relationship dynamics are being forced within a narrow time frame, without the agreed benefits accruing to both parties, certainly a lop sided result.
Implementation, either in full or in part, would indicate some degree of commitment to both the process, the relationship and on-going delivery, and therefore rationalize the relevant commercial arrangements. This means Trust – something that is running a little thin these days.
