Upload
anthony-evans
View
225
Download
3
Tags:
Embed Size (px)
Citation preview
Jointly Agreed Growth (JAG) New Ways of Working Together
A Pragmatic Approach for Developing and Implementing Jointly Agreed Growth Plans
TOOLKIT
Jointly Agreed Growth
2 - Version June 2008 - 22
This toolkit is developed with input from the following companies
Jointly Agreed Growth
3 - Version June 2008 -
This document is a summary for general information only and does not constitute legal advice.
• Any examples provided are hypothetical and do not refer to any specific company
• Each company is responsible for defining its own policy with each of its trading partners
• Please refer to the appendix for general competition law guidelines. Advice of appropriate legal counsel must be sought prior to any consideration of the issues raised herein
Jointly Agreed Growth
4 - Version June 2008 -
AGENDA
• Case for change
• JAG objective and principles
• Process to develop & implement the JAG plan
• Conditions for success
• Appendix: competition guidelines
Jointly Agreed Growth (JAG)
Jointly Agreed Growth
5 - Version June 2008 -
0
2
4
6
8
10
12
14
2001 2002 2003 2004 2005 2006
EU 27
USA
Japan
France
Germany
0
2
4
6
8
10
12
14
2001 2002 2003 2004 2005 2006
Inflation rate
Householdconsumptiongrowth
Householddisposableincome growth
Household
savings ratio
Percent Percent – EU 27
"We need find a better balance between the reforms which stimulate offer and the ones which
stimulate demand" – OECD
"Let’s give the desire to buy" –
ECR Conference
ECR identified a 70 billion EUR annual growth potential in Europe in 2005
Source:OECD; Eurostat; European central Bank; ECR Europe
THERE ARE STILL SIGNIFICANT GROWTH OPPORTUNITIES IN EUROPE
Household savings ratio in Europe is much higher than in USA and Japan
In Europe, we can increase consumption by driving demand, reducing household high savings
Jointly Agreed Growth
6 - Version June 2008 -
Source:ECR Europe Conference
How focused on the consumer and shopper, on driving demand and generating growth, is the current negotiation model in Europe?
“We need to create and develop economic activity by blending risk taking, creativity and/or innovation with sound
management“ – EU Commission “Action Plan for
Entrepreneurship”, 2004
0
10
20
30
40
50
60
Not at all focused
Not really focused
Focused Relatively focused
Very focused
“We have become risk averse: rather than Play to Win, we
would rather Play Not To Lose -ECR Co-chair Demand
Entrepreneurship is one of the 7 indicators of innovation tracked by the European Commission in its European Innovation Scoreboard
THERE IS A LACK OF ENTREPRENEURSHIP, HENCE INNOVATION
Jointly Agreed Growth
7 - Version June 2008 -
Almost 80% of the market is ours to fight for
Source:ECR Europe Conference
"It is well known that each component of consumption expenditure has a different
elasticity in relation to household income. In general,
the expenditure on items linked to the satisfaction of basic needs (food) is more inelastic that expenditure
linked to other consumption components" – The European
Consumer in the Enlarged Union, Statistics in focus,
Population and social conditions, February 2005
"We taught the shoppers to be price focused …" – ECR Conference
WE NEED TO MOVE FROM A PRICE TO A VALUE FOCUS…
Jointly Agreed Growth
8 - Version June 2008 -
• Jointly develop clear , fact based, understanding of market context and trends
• Jointly develop growth strategies
• Sign a business plan focused on growth and not sharing of the pie
• …
• Offers a framework for negotiation
Jointly Agreed Growth (JAG)Current approach…
Less time to buildstrong fact base
Growth actions less effective
Less growth
More % marginneeded to finance
More time spent negotiating
Less time to agree on growth actions
JAG
"It is not the last penny you leave on the table that determines whether or not the retail company is going to be successful. It is whether or not you work together to best satisfy that customer … that allows you to sell more" – ECR Conference
… AND OFFER A MORE RATIONAL FRAMEWORK FOR NEGOTIATION, WHICH WILL ALLOW MORE INNOVATION TO COME ON THE MARKET
Jointly Agreed Growth
9 - Version June 2008 -
“Innovation is also about the service and the environment we provide for the shoppers in store. Sometimes just a re-organisation of categories or display generates more growth than additional products“ ECR Conference, Demand Side Plenary
The Levers of Growth
Service Offerings Product Offerings
Shopping Environment
Communications• Advertisement• Promotion Events• Loyalty Programmes
• Assortment Range (current &.NPI)
• Product Presentation• Price
• Employee Skills / Attitude• Shopper Services• Convenience Areas
• Store Location• Appeal / Layout of Stores• Quality of Facilities
ECR Europe , Consumer Value Measurement,1999
“We need to focus on fewer, better and faster innovations” CEO Forum 2006
Optimisation
Foundation
Identify Target ShoppersAssess Current Business Situation
Assortment / New Items / Availability / Pricing / Promotions
Fixture Enhancement
Information, Education, Communication
Category Adjacencies
Services
At all levels of shopperinteraction in the store…
… let’s give the desire to buy !
GROWTH WILL COME FROM BEING INNOVATIVE ALONG ALL LEVERS
Jointly Agreed Growth
10 - Version June 2008 -
The European Commission Innovation Scoreboard covers• Product or Service
Innovation • Process Innovation• Organizational Innovation • Marketing Innovation
"The different aspects of organizational innovation should be better explored as they play an increasingly crucial role"
– European Innovation Scoreboard 2006
"In the EU-27, the share of new or significantly improved products in total turnover of enterprises stood at 8.7%"
– Eurostat, May 15, 2007
"On average, 90% of retailer’s yearly sales are from the current range"
"The most innovative companies in Europe are characterized by a close cooperation with other businesses"
– CORDIS, European Commission, 2006
"Many enterprises innovate through non-technical forms of innovation• Knowledge: better use or
exchange of information• Organization or Management,
integrating different activities• Change in relationship with
other firms or institutions"
– European Innovation Scoreboard, Eurostat, October 2007
GROWTH WILL COME FROM BEING INNOVATIVE ALONG ALL LEVERS
Jointly Agreed Growth
11 - Version June 2008 -
AGENDA
• Case for change
• JAG objective and principles
• Process to develop & implement the JAG plan
• Conditions for success
• Appendix: competition guidelines
Jointly Agreed Growth (JAG)
Jointly Agreed Growth
12 - Version June 2008 -
• Grow the grocery market in a sustainable, profitable and competitive way to ensure the highest shopper and consumer satisfaction
• Deliver commercial benefits for each party
• Be open to every company bringing in knowledge and capabilities, regardless of its category
• Establish a fact-based joint process in which data and insights are shared
• Be committed to a clear execution plan
• Allocate the required resources for the execution of the plan within the agreed time frame
• Review the JAG process on a regular basis
• Respect the Confidentiality Agreement
• Comply with all laws: competition, health, environment, and intellectual property
• Involve senior commitment to ensure the 3-year time frame engagement required by the JAG
WHAT ARE THE JOINTLY AGREED GROWTH (JAG) PRINCIPLES?
Jointly Agreed Growth
13 - Version June 2008 -
Jointly Agreed Growth (JAG)Trade barriers
Lack of strategic alignment
Lack of long-term visibility / focus
Fear of private label match impeding product introduction
Slow distribution of new products / general availability issues
Lack of KPIs to measure effective return
A Jointly Agreed Growth strategy
A three-year framework plan
An agreed category strategy and set of principles
Long-term integrated process avoiding supply chain disruption
A set of agreed pre-defined growth criteria, balancing financial, marketing and operational KPIs
Source:ECR Europe Conference May 2007
PARTNERS NEED TO OVERCOME SOME BARRIERS TO GROWTH
Jointly Agreed Growth
14 - Version June 2008 -
CurrentYTD (n) Year n n+1 n+2 n+3
SHOPPER METRICSPenetrationFrequencyLoyalty
Plan
Currentn-2 n-1 YTD (n) Year n n+1 n+2 n+3
SALES TURNOVER FOR SUPPLIER BRANDS IN CATEGORY (sell-out from retailer)Current Assortment
- Without initiatives- Initiatives impact
Assortment Extension- Existing products not previously listed in the store (listed elswhere)- New products (to be launched)
Total (Current Assortment + Assortment Extension)
Achieved Plan
Currentn-2 n-1 YTD (n) Year n n+1 n+2 n+3
INCOME LEVELLowMiddleHigh
Achieved Plan
… a Jointly Agreed Growth strategy in a 3-year time frame…
Starting with a shopper / consumer centric approach,…
… leading to higher shopper and consumer satisfaction…
… brings incremental sales …
… through current range activation, e.g., innovation in store,
… and through new products introduction
Flexible toolkit can be adaptedto your specific needs. These are
recommendations – it is up to both parties to define level of detail and to adjust
process/templates accordingly
WHAT IS A JOINTLY AGREED GROWTH (JAG) PLAN?
Jointly Agreed Growth
15 - Version June 2008 -
WHAT IS THE ADDED VALUE OF THE JAG ?
Commercial discussion starting with a shopper and consumer-centric approach for stimulating demand
More focus on business development – "Anything about accelerating the business"
A longer time horizon – "Working earlier together, more strategically"
Openness to multiple players in the category
A fact-based framework for negotiation
Jointly Agreed Growth
16 - Version June 2008 -
WHAT WILL A JOINTLY AGREED GROWTH (JAG) PLAN ALLOW?
To monitor and work more closely on new trends development
To address the imperatives of sustainability
To build strategic vision and assess more effectively strategy’s returns
To offer a framework to improve the current commercial mindset
To build business continuity
It allows more innovation to come into the market
And consequently,
Jointly Agreed Growth
17 - Version June 2008 -
AGENDA
• Case for change
• JAG objective and principles
• Process to develop & implement the JAG plan
• Conditions for success
• Appendix: competition guidelines
Jointly Agreed Growth (JAG)
Jointly Agreed Growth
18 - Version June 2008 -
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for success
Step 2Review
sales and agree on
prioritized growth levers
Step 3Define
and agree on 3-year JAG plan
Step 4Execute the
JAG plan
PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION
Jointly Agreed Growth
19 - Version June 2008 -
• Review economic and shopper context and trends at market level
Key activities End products
11
1. Market and shopper dynamics
Why?
• Get common fact base on market evolution
• Share starting point to estimate category baseline growth
STEP : REVIEW THE ECONOMIC AND SHOPPER ENVIRONMENT
• Develop common understanding on overall context for growth
• Build rationale to justify growth targets
Objectives
Jointly Agreed Growth
20 - Version June 2008 -
Agreement on market dynamics and first growth assessment: (e.g., market, consumption)
Data source: Eurostat, EIU, all research services providers
Few extracts for illustrative purpose
Who? Marketing teams provide analysis to support
Buyer- Seller discussion
Growth (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3GDPPrivate Consumption - Food - Beverages - Personal care - HouseholdOut of home food and beveragesHousehold disposable incomePopulationInflationHousehold savings ratioValue growth (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3HypermarketsSupermarketsConvenienceDiscountDrugstoresTotalRegion value share (%) n-4 n-3 n-2 n-1 n n+1 n+2 n+3Region 1Region 2Region 3Region 4Region 5Population segmentation (No. Of households)
n-4 n-3 n-2 n-1 n n+1 n+2 n+3
1 member household2 members household3 members household4 or more members householdGrocery shopping behavior n-4 n-3 n-2 n-1 n n+1 n+2 n+3Average No. of facia visited/yearOnly shop at one retailer (%)Shop at 2 fasciaShop at 3 fasciaShop at 4 fasciaShop at 5+ fascia
ForecastAchieved "Consumption growing yearly at 2%, ..what about our sales
growth?
"Convenience channel growing at the expense of
…"
"1-member households growing, what does it mean
for our offer?"
"Shoppers splitting purchases over 5 fascia"
“Do households have money? Are they using it?”
11STEP : REVIEW THE ECONOMIC AND SHOPPER ENVIRONMENT
• Share understanding of market context and economic trends, using forecasts of external agencies• Share grocery market understanding and consumers/shoppers insights from external
agencies/providers and internal sources• Ideally, drill down one level deeper to ensure real visibility of trends (e.g., by format, region,
segment…)
Approach
Jointly Agreed Growth
21 - Version June 2008 -
EXAMPLE
Supplier Objective & Opportunity Review"Putting
The Partner’s Shoes on"
In what way could brand X support my more general portfolio development plans?
How can my brand growth objectives be aligned to help deliver a retailer’s portfolio plans?
Drive Meal Solutions to defend against out of home alternatives
Drive penetration of premium pasta products (pasta, sauces, ready pasta dishes, dry and frozen)
Meal Offerings ensure the solution is genuinely motivating
to the shopper
Collaboration builds greater knowledge of the shopper needs
Collaboration builds increased focus and resources to reach the shoppers
Solutions• New Products (ready meals)• Categories Adjacencies (all in one)• Communication/Education (ATL, POS)
Retailer Objective & Opportunity Review
Agreement on market dynamics and first growth strategy assessment
11STEP : REVIEW THE ECONOMIC AND SHOPPER ENVIRONMENT
• 1995: Retail: 70% of Food Consumption vs. 30% Out of Home• 2005: Retail: 66% of Food Consumption vs. 34% Out of Home
Start from data
• Growing Out Of Home Food Consumption at Retail Purchase Expense
Interpret data
• "Rise of indulgence, a desire and pleasure society"• "Time pressure”: working parents, single households
Complement with shopper and consumer surveys
Jointly Agreed Growth
22 - Version June 2008 -
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for success
Step 4Execute the
JAG plan
Step 2Review
sales and agree on
prioritized growth levers
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
Step 3Define
and agree on 3-year JAG plan
PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION
Jointly Agreed Growth
23 - Version June 2008 -
Share shopper and category strategy, including consumer value perception
Analyze past and current sales growth in the category
Prioritize future growth levers based on:
– Shopper Strategy– Estimated incremental
sales– Level of
investment/ROI– Ease of
implementationAssess interrelationships between growth levers
Summarize and draft action plan for priority growth levers
Key activities End products
1. Agreement on strategy
2. Performance review and joint SWOT analysis of trade partners
3. Growth levers and incrementals
4. Action plan
Why?
• Ensure JAG initiatives are fulfilling shopper needs and are aligned with agreed strategy
• Help to understand where sales growth came from
• Understand which growth lever is performing well / not well and why
• Understand through which shopper variable incremental sales are generated
• Focus on highest impact levers
• Factualize ROI discussion
• Plan activities for priority levers to include in JAG plan
2.12.1
2.22.2
2.32.3
2.42.4
22STEP : REVIEW PERFORMANCE AND AGREE ON PRIORITIZED GROWTH LEVERS
• Diagnose category dynamics
• Understand where incremental growth comes from
• Select, estimate potential financial impact and prioritize growth levers for the category
• Draft action plan for priority levers
Objectives
Jointly Agreed Growth
24 - Version June 2008 -
CATEGORY ROLE:
• …
• …
SHOPPER STRATEGY:
• Identify, attract and retain shoppers (new or from competitors)
• Benchmark and differentiate value proposition for these consumers
• Start by discussing corporate strategy • Agree on category role & shopper strategy (profile target)
Approach
•stock
•rate
•
•Days of
Variable
Total number of shopping
trips
Percentage of shop
trips that contain the
category
Value transaction
size (basket)
Retailer sales value
Percentage of gross margin
Actual profit
Operational expenses
3 generic totalopportunities
Traffic (increase the total
number of shoppers/
freq)
Basket size /transactionBuild)
Basket/Categoryprofit
Out of
Service
Inventory
stock
Range
Conversion (Convert
more shoppers
to the category or more often)
Build forLargerSize orImpulsefamilies
Convenience,loyalty;Low pricesensitivity
Skus withHighPenetration,High frequency
Skus with Low volumeLowerfrequency
Effectiveness Efficiencies
SHOPPER PROFILECurrent
SHOPPER METRICS Year n-2 Year n-1 Year n-YTD Year n Year n+1 Year n+2 Year n+3PenetrationFrequencyLoyalty
INCOME LEVELLowMiddleHigh
HOUSEHOLD SIZE1 member3 members4 or more
NUMBER OF CHILDREN1 child2 children3 or more
Achieved Plan
Source: ECR - The essential guide to day-to-day category management
2.12.1STEP : SHARE SHOPPER AND CATEGORY STRATEGY
Jointly Agreed Growth
25 - Version June 2008 -
Performance review and joint SWOT analysis of trade partners
Good on-shelf availability for
shoppers? How many sales missed?
Who?Marketing teams drive analysis to
support Buyer-Sellerreview
• Recommended level of analysis:
– Total category at market level– Total category at retailer– Supplier performance in category in
market– Supplier performance in category at
retailer
• Ideally, drill down to level of:
– Formats– Shopper segments– Regions
2.22.2STEP : ANALYZE PAST AND CURRENT SALES GROWTH
What brought more sales uplift in last
year? 3-year trends?
Growing at the rate of the
market?
How is shopper
behaving in the category?
At retailer? With supplier
brands?
• Analyze the drivers of growth for the category• Jointly review category performance at retailer and on market (SWOT) • Develop joint perspective on the development of the category, ideally benchmarking
and drilling down to level of: format, shopper segments and regions
Approach
Jointly Agreed Growth
26 - Version June 2008 -
Agree on growth impact assessment per lever as a basis for future growth forecast
• Review of tactics used to incentive shoppers purchase in-store (e.g., Secondary placement through displays – permanent or promotional), in store media,…
• Assessment of promotional activities (amount, frequency, types), their impact on shopper and sales and their ROI
• Evaluation of the average ROI and incremental volume from a sample of promotions
• Define Skus/segments growing and those losing sales • Review planogram
• Define NPI need and inclusion into assortment, their contribution to sales and ROI
• Assessment of missed sales and opportunities
Review
In-store activation/ Promotions
Assortment
Product innovation
On-shelf availability
Growth lever
Data source: EPOS, panels as well as shopper research (e.g., behaviors in store, in front of shelf, media exposure)
Who? Cross functional teams provide analysis to support
Buyer- Seller discussion
• Type, frequency, duration, timing, location within store, space location, cross merchandising…
• By store, shopper segment, format, region, competition…
• By store, shopper segment, format, region, competition…
• Levels based on competitive and shopper positioning
Check Metrics
2.22.2STEP : ANALYZE PAST/CURRENT SALES GROWTH AND FUTURE GROWTH LEVERS
Jointly Agreed Growth
27 - Version June 2008 -
EXAMPLEWho?
Cross functional teams provide analysis to support
Buyer- Sellerdiscussion
Agree on improvement areas for collaboration to support growth strategies
2.22.2STEP : ANALYZE PAST AND CURRENT SALES GROWTH Collaboration assessment
Approach: Review collaboration process and its possible impact on sales results(e.g., failure in communication led to supply problem impacting NPI)
Approach
Jointly Agreed Growth
28 - Version June 2008 -
• Assess incremental sales for every growth lever based on– Impact on each component of demand– Top-down estimates– Pilot results
Approach
Current year
Year +1 Year +3
Incremental sales for retailer (volume + value)No. of units and EUR Millions
First estimation of incremental sales
Year -1Year -3
Three approaches to estimate incremental sales
Increased penetration / traffic (Y+3)
Increased frequency of purchase (Y+3)
Increased transaction size (Y+3)
Current sales (Y0)
Top-down estimates from benchmarks or past experience (e.g., similar initiative in another country,initiative with a similar retailer/ supplier)
Run a pilot with limited scope and timeframe (e.g., a few stores, a limited number of products) and extrapolate results
Assess impact on the components of demand*
Who? Cross-functional teams provide analysis to support
Buyer-Seller discussion
*For supplier: number of shoppers buying my product at this retailer x Frequency of purchase of my product per shopper x Average transaction size on my products – Current sales
2.32.3STEP : ESTIMATE INCREMENTAL SALES
Jointly Agreed Growth
29 - Version June 2008 -
• Summarize previous year’s investments and ROI per growth lever, including both level of investment as well as frequency/ number of investments per activity
• Agree on investments required to support various JAG Plan activities
Approach
Also qualitative investment assessment:
Number and frequency of promotions, GRPs for media plan, etc…
Year n Year n+1 Year n+2 Year n+3
2.32.3STEP : AGREE ON TOTAL INVESTMENT
Who? Cross-functional teams provide analysis to support
Buyer-Seller discussion
Jointly Agreed Growth
30 - Version June 2008 -
• Define actions to take for each growth lever• Refine incremental sales estimation• Estimate investments needed for each action• Prioritize growth levers based on incremental sales, sales ROI, shopper relevance and ease of
implementation taking into account the long-term effect (e.g., model shapes for new launch types)• Take into account time sequence (e.g., some activities need to be organized prior to others)
Approach
Sales ROI* and/or shopper benefit
Assortment
On-shelfavailability
Product innovation
High
Low
Medium
Low HighMedium
Ease of implementation
Who? Cross-functional teams provide analysis to support
Buyer-Seller discussion
In-store activation/ Promotions
*Calculated on multiple-year basis
2.32.3STEP : PRIORITIZE GROWTH LEVERS BASED ON SALES ROI AND EASE OF IMPLEMENTATION
Jointly Agreed Growth
31 - Version June 2008 -
• Assess correlation of activities between growth levers• Define their subsequent time sequence (e.g., in-store activation when new
product introduction)
Approach
In-store activation/ Promotion• Feature/displays (2nd
placement• In-store communication • Additional activities (e.g.,
services, product testing)
Product innovation• Is NPI a lever?• Are other NPI
projects anticipated?
• Joint innovation projects?
On-shelf availability• Distribution
build-up?• Discontinuatio
n of delisted SKUs?
Assortment • Review
planogram (primary placement)
• Which/per channel/cluster of stores
• Delisting implications for other products in the category?
On-shelf availability• Distribution
build-up?• Discontinuatio
n of delisted SKUs?
In-store activation/ Promotion• Feature/displays (2nd
placement• In-store communication • Additional activities (e.g.,
services, product testing)
AssortmentProduct
innovation
Launch new product Activate current range
TWO EXAMPLES
2.32.3STEP : ASSESS CORRELATION OF GROWTH LEVERS
Detailed information on growth levers can be found in ECR Blue Books* *http://www.ecrnet.org/04-publications/blue_books/pub_2000_essential_guide_daytoday_catman.pdf
Jointly Agreed Growth
32 - Version June 2008 -
Activities to support growth
Actions 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Assortment/ Planogram
Action 1
Action 2
Action 3
Product innovation
Action 1
Action 2
Action 3
In-store activation/ Promotions
Action 1
Action 2
Action 3
On-shelf availability
Action 1
Action 2
Action 3
Year n+3Responsible
Year n+1 Year n+2
• Agree on actions per growth lever and their estimated sales uplift• Assess overlap between different activities for total incremental impact• Define their subsequent time sequence (e.g., in-store activation when new
product introduction, synchronization of above-the-line and in-store media)
Approach
Who? Cross-functional teams provide analysis to support
Buyer-Seller discussion
Core JAG template
2.42.4STEP : DETAIL JAG PLAN ACTIVITIES
Jointly Agreed Growth
33 - Version June 2008 -
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for success
Step 4Execute the
JAG plan
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
Step 3Define
and agree on 3-year JAG plan
Step 2Review
sales and agree on
prioritized growth levers
PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION
Jointly Agreed Growth
34 - Version June 2008 -
• Discuss investment allocation and ROI
• Agree on JAG plan and have it approved by senior management– Sales Target– Activities to Support the
Targets– Force Majeure and
Contingency Plan– KPI targets and report
frequency– Human resource
allocation and motivation (e.g., incentives)
Key activities End products
1. Agreement
2. JAG plan for signature
Why?
• Possibly modify JAG plan based on discussions
• Get support for sales target, as well as allocation of resources
• Define actions to take when events jeopardize the JAG plan
• Monitor JAG implementation and results
Finalise JAG plan• Agree on sales uplift• Agree on
investments allocation
• Agree on activities• Agree on KPI & JAG
plan monitoring
Objectives
3.13.1
3.23.2
33STEP : DEFINE AND AGREE ON 3-YEAR JAG PLAN
Jointly Agreed Growth
35 - Version June 2008 -
• Discuss investment allocation between trade partners
Approach
Investments in scope: • Marketing expenses (e.g., above-the-line: carried individually by trade partners to support growth activities)• Trade investments (e.g., below-the-line: shared or not – element of discussion) • Indirect investments that support the growth initiatives: e.g., shelf-ready packaging, cross-docking
Year n Year n+1 Year n+2 Year n+3
3.13.1STEP : DISCUSS INVESTMENT ALLOCATION
Jointly Agreed Growth
36 - Version June 2008 -
n-2 n-1 n, YTD Year n n+1 n+2 n+3
SALES TURNOVER FOR SUPPLIER BRANDS IN CATEGORY (sell-out from retailer)Current Assortment (Total all growth activities to support sales)Linear growth (market/consumption growth rate), no specific initiativesIn-store activities (displays, features, in store media…)Price/ discountsAssortment Extension
- Existing products not previously listed at retailer (listed on market) - New products (to be launched)
Total (Current Assortment + Assortment Extension)
GROWTH RATE (%)Sales of Supplier brands in Category at retailerRetailer Category Sales nationwide
INVESTMENTS (Marketing, Trade, etc…) in VALUEManufacturerRetailer
LOGISTICSInventory Turnover Annual TurnsInventory Level (N° of Days)Service level
DISTRIBUTION Number of ChannelsNumber of StoresSales Weighted Distribution
SHOPPER METRICSPenetrationFrequencyLoyalty
RetailerAccount Manager Buyer Director DirectorVP VP
Manufacturer
Achieved
Agreement on Growth Strategy and its relevant targets
Current Plan
Signature levels vary by company and level of JAG Plan
Core JAG template
3.23.2STEP : HAVE JAG PLAN APPROVED BY SENIOR MANAGEMENT
Jointly Agreed Growth
37 - Version June 2008 -
Activities to support growth
Actions 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
Assortment/ Planogram
Action 1
Action 2
Action 3
Product innovation
Action 1
Action 2
Action 3
In-store activation/ Promotions
Action 1
Action 2
Action 3
On-shelf availability
Action 1
Action 2
Action 3
Year n+3Responsible
Year n+1 Year n+2
• Confirm activities to support JAG Targets (initial plan may have followed financial agreement and final ROI estimates)
Approach
3.23.2STEP : INCLUDE THE FINAL LIST OF ACTIVITIES
Core JAG template
Account Manager BuyerDirector DirectorVP VP
RetailerManufacturer
Jointly Agreed Growth
38 - Version June 2008 -
Approach:
Incremental sales or other targets of JAG plan are not being achieved …
Market reactions
Supplier issues
Retailer issues
Due to …
• …
Examples
• …
• …
Both parties need also to agree upfront on how to solve potential issues and possibly review the JAG plan and agreement
• …
Suggested actions
• …
• …
• On top of list of activities to deliver on the JAG plan and its shopper strategy, list events that could jeopardize incremental sales and overall JAG Plan
• Define resolution process into the JAG execution and monitoring plan• Insert conditions into JAG plan (including confidentiality agreement)
Force Majeure: “an event beyond the control of either trade partner, not foreseeable, not involving anyone’s fault or negligence “
3.23.2STEP : AGREE UPFRONT ON FORCE MAJEURE CONDITIONS
Jointly Agreed Growth
39 - Version June 2008 -
KPI Unit Year n-1 Year n Year n Year n+1 Year n+2 Year n+3 Do we use this KPI? (Yes/No)
Report frequency Source
Financial KPIs YTD Target Target Target Target
Category sales - Volume units Category sales - Value Euro
Category Growth - Volume % Category Growth - Value % Sales per store Units
Sales per sqm Euro Incremental supplier sales EUR
Consumer / Shopper KPIs
Penetration % New category shoppers % Purchase frequency define time
Repeat Purchase % Loyalty % Shopper Satisfation (activity) % Shopper Awareness (activity) % Average transaction size Euro
Operational KPIs
The ECR Europe Essential Guide to Day to Day Category Management (Appendix 5) lists a set of consumer, market, financial and productivity measures with the data source origin and the recommended report frequency
http://www.ecrnet.org/04-publications/blue_books/pub_2000_essential_guide_daytoday_catman.pdf
On-shelf availability
Assortment / Planogram
Product innovation
In-store activation/ Promotions
Financial KPIs
Consumer / Shopper KPIs
• On top of the metrics and targets agreed in JAG plan (e.g., incremental sales, shopper metrics …), select relevant KPIs
• Possibly add specific KPIs for categories/growth levers • Agree on target level and define frequency of KPI reporting, e.g., monthly, quarterly, yearly (balance usefulness
vs. cost / time of collection)• Agree on source, hence reliability, for KPI collection (retailer, supplier or external agency)
Approach
Core JAG template
Account Manager BuyerDirector DirectorVP VP
RetailerManufacturer
For a full list of KPIs, please refer to ECR Blue Books
3.23.2STEP : AGREE ON KPI TARGETS AND REPORT FREQUENCY
Another option is to define and measure KPIs split per growth lever
Jointly Agreed Growth
40 - Version June 2008 -
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for success
Step 4Execute the
JAG plan
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
Step 3Define
and agree on 3-year JAG plan
Step 2Review
sales and agree on
prioritized growth levers
PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION
Jointly Agreed Growth
41 - Version June 2008 -
• Communicate JAG plan within both organizations
• Set up and execute implementation plan - milestones per growth lever
Key activities End products
1. Communication plan
2. Implementation plan
Why?
• Align on what should be communicated and to whom, defining responsibilities
• Ensure successful execution through clear detailed planning
• Ensure alignment on JAG plan
• Develop clear implementation plan that ensures a fluent progress of execution
Objectives4.14.1
4.24.2
44STEP : EXECUTE THE JAG PLAN
Jointly Agreed Growth
42 - Version June 2008 -
EXAMPLE
Who do we need to talk to?
What do we need to communicate?
What result do we want from them?
What is the benefit to them?
How? When do we need to do it?
Source:ECR Europe Collaborative CRM workshop, 2005
4.14.1STEP : COMMUNICATE JAG PLAN IN BOTH ORGANIZATIONS
Jointly Agreed Growth
43 - Version June 2008 -
STEP : EXECUTE JAG PLAN – IN-STORE ACTIVATION4.24.2
Displays and featuresEXAMPLE
Year n+1 Year n+2
Jointly Agreed Growth
44 - Version June 2008 -
Product introduction launch plan preparation
Draft templates
Discontinuation Plan for SKU to be deleted Stock
Extracts of step process for illustrative purpose
4.24.2STEP : EXECUTE JAG PLAN – PRODUCT INTRODUCTION
EXAMPLE
Jointly Agreed Growth
45 - Version June 2008 -
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for success
Step 4Execute the
JAG plan
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
Step 3Define
and agree on 3-year JAG plan
Step 2Review
sales and agree on
prioritized growth levers
PROCESS STEPS FOR SUCCESSFUL JAG COLLABORATION
Jointly Agreed Growth
46 - Version June 2008 -
• Monitor business
• Review KPIs and implementation, overall and per growth lever
• Set up regular status meetings
Key activities End products Why?
• Allow quick reaction by buyer-seller through monthly tracking of sales
• Spot issues quickly and address them
• Ensure involvement of key stakeholders
JAG plan sales follow-up
• JAG Scorecard• Performance
assessment• Monitoring per
growth lever
Meeting plan
1.
2.
3.
5.15.1
5.25.2
5.35.3
55STEP : MONITOR THE JAG PLAN AND ITS EXECUTION
Ensure realization of targets of JAG collaboration• Review project
plans to monitor progress on key initiatives
• Evaluate overall collaboration
Objectives
Jointly Agreed Growth
47 - Version June 2008 -
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecMarket
Grocery Sales (total)vs LYvs Planvs 3 year average (trend setting)
CategoryRetail Sales (EUR)vs LYvs Planvs 3 year average (trend setting)Manufacturer Sales (EUR)vs LYvs Planvs 3 year average (trend setting)New Product Sales at retailer (EUR)vs LYvs Planvs 3 year average (trend setting)Penetrationvs LYvs Planvs 3 year average (trend setting)Frequencyvs LYvs Planvs 3 year average (trend setting)Loyaltyvs LYvs Planvs 3 year average (trend setting)
YTD Market Category ActivitiesNew Product LaunchPromotionsAdvertising
• Monitor sales development and market activities • Store reporting helps to spot issues and quickly address them
Approach
Track market development (benchmark)• above: conquest• below: capabilities issues? Shopper proposition?
Market Activities monthly : unplanned events/competitor activities which can affect sales results and growth activities
•Trends on 3 years allow to check NPI « take off » vs seasonality effect (what is take off and what is increase due to seasonality)
Track and identify shoppers behavior
Such data exchange systems are already made available
by several retailers to their trade partners
(daily, weekly Epos sales tracking)
5.15.1STEP : MONITOR BUSINESS
Jointly Agreed Growth
48 - Version June 2008 -
KPI Unit Year n-1 Year n Year n
Financial KPIs YTD Target
Category sales - Volume units Category sales - Value Euro
Category Growth - Volume % Category Growth - Value % Sales per store Units
Sales per sqm Euro Incremental supplier sales EUR
Consumer / Shopper KPIs
Penetration % New category shoppers % Purchase frequency define time
Repeat Purchase % Loyalty % Shopper Satisfation (activity) % Shopper Awareness (activity) % Average transaction size Euro
Operational KPIs
Consumer / Shopper KPIs
Financial KPIs
Updated KPIs
Updated collaboration assessment
Additionally, discuss key progress and obstacles, progress planned and concerns. Also discuss whether interventions by management are needed
5.25.2STEP : REVIEW KPIs AND OVERALL IMPLEMENTATION
Jointly Agreed Growth
49 - Version June 2008 -
• Review KPI• Review execution (assessment of collaboration) • Define required actions
Approach
5.35.3STEP : REVIEW MEETING
Jointly Agreed Growth
50 - Version June 2008 -
AGENDA
• Case for change
• JAG objective and principles
• Process to develop & implement the JAG plan
• Conditions for success
• Appendix: competition guidelines
Jointly Agreed Growth (JAG)
Jointly Agreed Growth
51 - Version June 2008 -
Trust between collaboration partners
Jointly Agreed Growth Agreement
Information sharing
Sufficient and quality resources
People performance review
WHAT ARE THE CONDITIONS FOR SUCCESS?
Jointly Agreed Growth
52 - Version June 2008 -
Goals Roles
Procedures
• Set common goals and align strategy
• Define criteria for success
• Agree on working mode of organizations, e.g.,– How frequently do we meet?– What is the process for sharing information?– Do we have a joint terminology?
• Sign of JAG Plan as well as confidentiality agreement
• Agree on lead in each organization
• Assign team members • Define team roles ("Who
does what and when?")
• Develop team charter stating goals, roles, and procedures of collaboration• Translate JAG principles in concrete agreements including confidentiality
agreement• Ensure collaboration charter and JAG plan are both signed by senior management
Approach
JOINTLY AGREED GROWTH (JAG) AGREEMENT
Jointly Agreed Growth
53 - Version June 2008 -
• 5-10 people in each organization fill out assessment (e.g., twice a year)• Share results between organizations• Define actions based on evaluation
Approach
ADDRESS LEVEL OF TRUST BETWEEN PARTNERS
Jointly Agreed Growth
54 - Version June 2008 -
Growth lever 3 team
• …
Growth lever 2 team
• …
Growth lever 1 team
• …
Core team
• Buyer-seller
Ad-hoc support
• …
Steering Committee (top-to-top)
• …
Minimal setup
Extended setup
PROVIDE SUFFICIENT AND QUALITY RESOURCES
Size of team will vary by company
organization size and geographic
scope
Jointly Agreed Growth
55 - Version June 2008 -
• Global data standards allow companies to be more efficient
• ECR Europe has promoted the exchange of information using global standards in a set of publications (e.g., CRM, Collaborative POS Data Management, Guide to CPFR …)
• Yet, the Case for ECR (2006) still defines the inability to have the right data and information at the right time as an important roadblock on the path to growth. Issues that appear are– Accessibility of data– Supporting data exchange– Data Quality
• Without the appropriate access to data and data standards, buyers and sellers won’t be able to engage into Jointly Agreed Growth plans
Context
• Sales data (e.g., EPOS)
• Shopper data (e.g., ClubCard)
• Shopper segmentation approach
• Planogram process
Retailer data examples
• Market data (e.g., Nielsen)
• Consumer research (e.g., focus group, brand funnel performances)
• Promotion effectiveness tool
Supplier data examples
•Data source f or the industry measure of New Product eff ectiveness : the barcode (new barcode= new product)
What we learned…
•Any modifi cation of packaging (size, count, price) leads to new barcode/ SKU for same product (Global Data Standardization allocation rules)
our I ndustry reports on innovation across categories include promotional activities, explaining thereby the relative low rate of new product success (demand take off )
Source: ECR Conference, Demand Side Plenary, 2007
AGREE ON INFORMATION SHARING
Jointly Agreed Growth
56 - Version June 2008 -
Adopt review assessment and reward systems which will better support the implementation of the Jointly Agreed Growth Process by commercial teams
Approach
Note:GCI New Ways of Working Together Project Group is established to tackle this issue
DEVELOP PEOPLE PERFORMANCE REVIEW
Jointly Agreed Growth
57 - Version June 2008 -
AGENDA
• Case for change
• JAG objective and principles
• Process to develop & implement the JAG plan
• Conditions for success
• Appendix: competition guidelines
Jointly Agreed Growth (JAG)
Jointly Agreed Growth
58 - Version June 2008 -
ECR EUROPE: DEMAND SIDE PROJECTSEU COMPETITION LAW GUIDELINES
These guidelines offer only general guidance and are not a substitute for legal advice on specific situations. Companies are individually responsible for their compliance with the law and are therefore urged to obtain legal advice of their own before committing themselves to any demand side or other ECR project. For the avoidance of doubt, no liability can be accepted in connection with the use of these guidelines.
In demand side projects such as Consumer Value Management, Category Management, Efficient Product Introduction, JAG, etc, close co-operation and confidence between retailer and manufacturer is key to the project's success. However, it is also essential that all ECR projects are planned and implemented without violating EU competition rules. The European competition rules apply to all businesses in all circumstances, inside or outside the ECR context. Below, we wish to explain the most important application of these rules to ECR demand side projects. The competition rules are however also applicable to supply side projects.
The following basic rules should always be applied. Failure to do so would mean running a serious risk of violating the law. In order to avoid any misunderstandings in their day-to-day practice, trading partners could adopt point 1 of these rules as part of their agreement to co-operate in ECR demand side projects.
Jointly Agreed Growth
59 - Version June 2008 -
ECR EUROPE: DEMAND SIDE PROJECTSEU COMPETITION LAW GUIDELINES
1. The respective role of manufacturer and retailer
According to the established practice of the European Commission, any agreements or understandings between a supplier and a retailer restricting the retailer's freedom to determine his resale prices are a violation of Article 81 EC-Treaty (resale price maintenance is prohibited). A supplier may only give non-binding "recommendations" on resale prices – without any contractual commitment on the part of the retailer to implement such recommendations (and without any pressure or economic incentive by the supplier on the retailer to implement the recommended prices).
Similarly, a retailer must not enter into any agreement or understanding with a manufacturer on what products (notably of competitors) should be present on the shelf or what the terms and conditions for stocking any products should be. The manufacturer can of course agree with the retailer which of that manufacturer's own products are to be listed.
Therefore, it is essential that the manufacturer only gives non-binding recommendations to the retailer on how to target specific consumer groups, how to improve the category, what products should be included (removed, retained or added) in the category, what recommended retail price ranges to apply (for example "premium", "discount" range), or how to make a newly launched product more successful on the shelf.
Jointly Agreed Growth
60 - Version June 2008 -
ECR EUROPE: DEMAND SIDE PROJECTSEU COMPETITION LAW GUIDELINES
1. The respective role of manufacturer and retailer (continued)
The retailer remains free to follow or not to follow the manufacturer's recommendation. The retailer should not enter into any agreement or understanding with the manufacturer concerning the setting of retail prices in the category, the selection of products for a category, or stocking/listing terms and conditions.
A category adviser may not seek to further its own interest by attempting to persuade the retailer to exclude or apply less favourable treatment to competing products.
Nor should there be any agreement to boycott any third party.
Jointly Agreed Growth
61 - Version June 2008 -
ECR EUROPE: DEMAND SIDE PROJECTSEU COMPETITION LAW GUIDELINES
2. No agreements or exchanges of confidential information between competitors
It is a fundamental rule of competition law that there must be no exchange between competitors of commercially sensitive information, such as prices, sales volumes, terms of supply, etc and certainly no agreement or understanding on these issues. This is not just limited to direct exchange between competitors but also exchanges facilitated by third parties (for example manufacturers must not pass any retailer confidential information, including information on pricing, to another retailer and retailers must not pass any manufacturer confidential information to another manufacturer).
There must therefore be no discussion, agreement or understanding between competitors on their shares in the product assortment, composition of the assortment, prices or promotions. A manufacturer may, to the extent necessary for his category management mission, receive information from the retailer on a competitor, but limited to product sales volumes and current retail prices of specific brands. The category management team at the manufacturer must keep all such information confidential and must ensure that the information goes no wider than the specific category management team concerned (i.e. the information is not passed to other teams within the manufacturer, whether dealing with the retailer on other projects or not). A manufacturer must never exchange information with a competitor on his prices, promotions, or other sensitive business information.
Jointly Agreed Growth
62 - Version June 2008 -
ECR EUROPE: DEMAND SIDE PROJECTSEU COMPETITION LAW GUIDELINES
2. No agreements or exchanges of confidential information between competitors (continued)Competitors must not jointly develop a methodology with the intention to give them access
to sensitive information on their competitors, which they would not have had without the jointly developed methodology, or to collude with competitors. For example, competing retailers should not use a common category adviser to exchange sensitive information with other retailers or to receive co-ordinated pricing or listing recommendations. Also, manufacturers should not use their category adviser position with a view to co-ordinating their conduct with their competitors, for example by conferring or agreeing on category shares, promotions or prices.
Category management should always be a relationship between only one retailer and one manufacturer. The decision to appoint or become a category adviser must be taken on a one-to-one basis (one manufacturer and one retailer) and there must be no communication between competitors on this matter.