Strategic partnership in changing retail landscape

(First of two parts)

Pong Ejercito

Pong Ejercito is currently a consultant for the supermarket operations of SM Retail. He used to be managing director of Unilever Korea.

Earlier, he was national sales operations controller of Unilever China and customer development director of Unilever Philippines.

He shares his thoughts about customer development and trends in retailing, among other topics.

Question: You are an industrial engineer and you started in 1977 as methods officer in the finance function for Unilever (then PRC). How did this influence your thinking process in your long career in customer development?

Answer: Industrial engineering, in my view, is the application of science in business. The professional advance of customer development (previously called sales) from traditional beginnings has made it beneficial for practitioners more honed in logical and quantitative business disciplines such as industrial engineering.

One of the mantras in industrial engineering that I like is: “There is always a better way.”

This idea has motivated me to address any problem with a better solution than I started with.

Industrial engineering equips one in both total system and detailed process approaches. These points of view enable one to move from looking at the big picture to delving into detailed processes to improve results.

One learns in industrial engineering that the organization performs best when the organizational goal and the individual goal coincide. This was motherhood for me until I saw the potential motivational impact when it happens. So it is really worthwhile finding out how to make individuals put a stake in the organization.

Being a methods officer and projects manager in my initial work took me around the business and enabled me early on to see and understand the different processes of the company and how they are interlinked in generating business results.

This gave me the perspective that, in order to deliver higher sales, one cannot go it alone. In customer development, one has to be well supported by the demand side (marketing), the supply side (supply chain), and the enablers, such as HR, finance and IT.

As part of the finance function then, I was steeped in the mind-set of expense control and risk management to optimize profit—very important indeed even if one was responsible for the generation of revenue or in pursuit of market shares.

Q: You became sales director and board member of Unilever Philippines in 1999. You worked with many trade customers and developed preferred supplier status with many of them. What does it take to be a strategic partner of trade?

A: When I was in Unilever Philippines, we valued the vital role of our customers in enabling us to gain effective access to shoppers and consumers. How we dealt with each key retailer and channel was part of the total company strategy. In allocating scarce resources—human and financial—we had to consider both the short term and long term value of the relationship in the success of brands and the business as a whole.

We had to understand and respect the vision, mission and character of each retailer we dealt with. This way, we could chart a road map based on our partnership with each one.

We were fortunate to have had a slew of brands that had a strong footprint in the stores. This meant we could engage retailers in a number of categories where our brands were important.

We trained and developed our key account managers to be competent in representing the company and managing the interface with customers. The relationship was not to be transactional but strategic, therefore win-win and long term.

We also built inside the local business or tapped—regionally or globally—expertise in a host of mutually relevant issues such as shopper marketing, category management, use of information technology, supply chain, etc., that can benefit our business with key retailers.

Indeed, all the capabilities inside the company could be harnessed in the service of our customers if needed.

The guiding formula to achieve strategic partnership was a proper balance of brands, science and relationship. The approach of building trust and relationship is still, and will always be, important in any human interaction.

All things being equal, who would like to deal with the less reliable, less pleasant and selfish supplier?

However, this is no longer enough. The supplier must bring valuable knowledge, insights and expertise that will lend credibility to his proposals and enable a beneficial exchange of viewpoints.

Finally, the interaction should truly add value to the supplier’s brands and retailer’s category in the store, which must in turn be significant in the retailer’s business.

Q: Your team has won many customer collaboration awards. What are the critical success factors of collaborating with key retailers since manufacturers and retailers often have conflicting goals?

A: In principle, manufacturers and retailers need each other. While there may be conflicting goals, they have an important common goal of maximizing sales in the store, which is a strong reason to collaborate.

Each retailer seeks to build his competitive, sustainable strength in the market through unique qualities, capabilities and target shoppers. The manufacturer should recognize and take into account such differentiated qualities of the retailer in creating and implementing a strategy for growing with the retailer. Different strokes for different folks, not one size fits all.

The retailer will appreciate a manufacturer’s initiatives that not just gain for the manufacturer’s brand, but also for the total category and total store.

Successful collaboration requires mutual trust that each party will behave in a certain way. Both must adopt a win-win approach and a long-term view, and this philosophy has to be demonstrated continually over time.

In my experience, support from the highest level (CEO) and across the different functions in the manufacturer’s organization for customer strategy, initiatives and relationship will be extremely valuable. The quality of the customer team and their compatibility with the retailer will be vital. The ability to execute basic processes, such as order-delivery, promotions, etc., and initiatives and deliver commitments will be an essential prerequisite to deepening the collaboration. Being able to share useful updates and insights on relevant industry and category developments would be helpful as well.

To continuously improve in the manner of collaboration, one must listen closely and openly from the retailer, either through direct feedback or through some form of survey on the perceived priorities for improvement.

(To be continued)