Growing the Retail Business in Nigeria- Opportunities, the Challenges and Way Out

Jan 2009

Olu Akanmuwww.olusfile.blogspot.com

olu.akanmu@yahoo.com

Outline Retail Definition and Retail Business Model Retailing and Business Volatility Building the Retail Business

Segmentation and Value Propositions Customer Segment View versus Product View

of a Retail Business Taking Products and Services to the Market

Strong Brands and Communication Execution and Organization Structure of the

Retail Business

What is retailing? Direct Consumer Sales and Relationships

through little or no intermediary Not exactly what the fmcg companies are

doing? FMCG is not classic retailing Individual Product/ Brand Sales versus

Customer Shopping Basket View Hotel and theme park story Retailing is done at Shoprite, Airlines,

Banking, DSTV, Telecoms and fmcg with new thinking

The Retail Business Model Revenue is a function of

Customer Base Size and Quality

How many people come to shop in my store daily? How do I make more people to shop in our stores?

Who are they and what is the size of their pocket/ wallet? Transaction Volume

Product Purchase Volume and Frequency How full is their shopping basket when they come to my store?

How can I make it fuller? How many piun-piun sound do we hear when they are crossing

the till point? (Fees and Income) How often do they come to shop in my store?

Customer Loyalty and Retention Do they shop somewhere else and why? How do I make them to shop with me and no other? How will I keep them for life

The Retail Business Model

Key Drivers Customer Acquisition Product Usage Cross Selling or Upselling of new products

and services Share of Customer Wallet Customer Loyalty and Retention

The Retail Business Model

How can you move your customers from “transactions” to “relationships”

Data, Information and Analytics are critical

Retailing and Business Volatility A retail franchise is costly to build in the short term,

but tends to be a stable, less volatile business in the medium to long term.

Its cashflows when built are more predictable and less risky..

In corporate business (business to business), one stakeholder can terminate a relationship and a strong revenue in one day. In retail, 100,000 customers cannot walk away at the same time !

It is important to build a strong retail franchise to reduce the risk of business volatility.

Building the Retail Business Segmentation, Needs and Market Gaps

Segment your market and understand their needs Homogenous groups with distinctive behaviour or needs that can

be targeted cost-effectively for market action? What segmentation variable would you use to segment your

market? You need to use a relevant segmentation variable for your kind of

business The choice or combination of segmentation variable you use, could

reveal unique insights that your competitors have not seen. Slice your orange in a unique way

Are there market gaps or poorly satisfied needs Do you have the resources and capabilities to fill the market

gap? Can you fill this market gap in a sustained way?

Segmentation and Industry Commoditization Segmentation reveals unique customer

insights for product and service developments When you see, competitors do the same

things, compete in the same way, and mutually destroy their industry value by constant price wars, it is because someone has not taken a leap to see something unique that others have not seen, the basis of which new differentiated products and services could be designed.

Value Proposition Based on unique insights identified in the

segmentation process, a firm will develop unique customer value proposition

Wining Value Propositions is “I am New Horizons. This is your need and this is how I can meet it to your delight, and this is how I meet your need differently and uniquely than my competitors. This is what I can do for you that you cannot get somewhere else..”

Making the Value Propositions Tangible Products and Brands Services Channels Customer Experience Pricing

Price for value. If you are truly different, you can charge a premium but ensure you share the value you created with customers, so that even at you price premium, the customer will always see value in your product.

Unique versus better People tend to use unique and better as synonyms of

each other Better is not enough

Better is easily matched Synonyms of better are improve, enhance

Uniqueness is strategy Synonyms of uniqueness

Sole, one of its kind, unmatched It is unique products and services that makes you to

win on a sustained basis in the market It is hard to find uniqueness given rapid technology

and knowledge diffusion in the modern world

Finding Differentiation in a Product Commoditized Industry

Core product

Service

CustomerExperience

Channels

Build augmented valuearound your core product

Find uniqueness in augmented product..service,Experience, channels

Delivering the Value Propositions

Ensure your management systems, processes, back office, technology, people, capital are aligned with the value proposition you want to deliver.

The back office of Shoprite is a complex logistic and inventory system that delivers fresh meat and other products in the right quantity daily over 365 days

Customer Segment View versus Product View of the Retail Business

Customer Shopping Basket View

Products, yes but look at the total shopping basket Some products on their own may not look profitable but

when a customer is already acquired and you cross sell them, they increase your profitability

Hotel and Theme Park Story Customer Profitability is more important in retail than

product profitability Customer revenue (total shopping basket- acquisition

cost- cost of retention-cost of service delivery)

Customer LifeTime Value Was Glo stupid when it priced its sim card

five years ago at N1? In a retail business, sometimes the cost of

acquisition of customers are high, but taking a long time view, if you keep those customers, they can become extremely profitable in the coming years because acquisition cost for retained customers is zero.

This is why strong retailers are paranoid about customer base..!

Customer Profitability

Align cost to serve to customer value Do not treat all your customers the

same way Why airlines have first class and economy It does not mean you should deliver crap

to the economy class Use channel differentiation to align cost

to serve to customer value

Taking Products and Services to the Market

Build a Strong Brand A brand is “bundle of promise that is unique”

about a product. Brand says I am more than the “ordinary or the common”.

It gives the customer a re-assured confidence to choose you over others

It is a stamp of quality Brands are critical in a commoditized world It will help you to charge a premium because you

have helped the customer to reduce the risk of bad choice. Strong brands in banking.. PHB, Zenith, GTB..

Four Brand Equity Dimensions (Aakers)

Brand Awareness Recognition and recall Familiarity and opinion

Brand Loyalty Satisfaction at recent usage Consistently exceed my

expectations Regular usage even when

alternatives are available Will recommend it to others Will pay a premium for it over

alternatives Market share

Perceived Quality Most critical measure of

brand equity Degree of price premium Esteem and respect

Brand Associations Different from others in

relevant ways It is an interesting

personality. We do have a relationship

Perceived value-value for money relative to its price

I trust the firm behind the brand

Building Strong Brands Ensure that your service delivery is in tandem with

your brand promise Branding is more than advertising

Internal brand communications is as important as external brand communications

Your staff must understand the promise your brand has made to customers and what they must do individually to deliver it at every point of customer engagement

Appoint a custodian for your brand or sub-brands with the authority to compel internal alignment with brand promise

Taking Product and Services to the Market It is not enough to have a great product, it must be

supported by an excellent “go-to-market” strategy If your value proposition is right, you have done half

of the job, the rest is to ensure that the value proposition is well communicated Advertising, Pubic Relations Sales Promotion Sponsorships Personal Selling.. Strong Sales Force Direct Marketing.. In- Store Marketing and Sales

Precise Bombing The more targeted your communication, the

more effective it will be.. ( Precise bombing is better than scatter bombing)

Use the right media that your audience consume

Choose a good communication partner If your audience is small and not mass,

approach them directly. It is more effective than advertising.

Execution

Strategy is a mere statement of intention unless it gets done..

Translate product, channel, pricing and customer experience strategy into clear activity programs and a calendar of action of what, who, how and when..

Review at milestones, objectives and performance gaps, program calendar

Organization Structures

Product or Category Management Customer Segment Management Channel Management Different Combinations of the above

References and Further Readings

Visit www.olusfile.blogspot.com

Thank you.