Vnc Case Study In Strategy Execution & Business Transformation

Objectives of Transformation

Double the Turnover of the company

Scale up current products using effective trade marketing, distribution & brand building strategies

Consolidation in current markets

Gaining share in weak potential markets : Chennai, Kerela, Hyderabad

Launch of new brands targeting the hardware channel

Manufacturing Cost Efficiencies & Capacity Expansion

Transform the culture of the company from passive & reactive to proactive & result oriented

Balanced Scorecard Implementation

Trade marketing strategic framework implementation

Channel partner management framework

Brand portfolio management strategic framework

Capability development

VNC Group Case Study

Transformational Change Objectives

Transformation : Brand Management

Transformation : Manufacturing

Transformation : Sales & Distribution

Transformation : PRM

Transformation : Trade Marketing

Transformation : Vision

Brand Management

Differentiated Branding & Portfolio Management

Specific branding positions for products

Design on dialogue branding as well as image branding

Power Brands : Welding, Fencing, Construction

Systemized customer feedback

Identification of vacant brand spaces for Bestwire & Bestarc brand of products

New Brand Launches

Launch of new brands like Bestfence Barbed Wire. Extension to Bestfence Chain Link

Re-launch of Bestwire with a Differentiated “Moustache Wire”

Bestarc extending to Special Electrodes & Welding Consumables

Brand Performance Management

Brand scorecard & performance management systems

Segment specific communication development

Loyalty programme management

BESTARC : Weld for Life

Business results

Brand retails at a premium of 15-25% as compared to organized competition (regional players)

Leader in Tamil Nadu & Kerela

Strong platform of quality & welding strength

Brand registered gains in weak markets like Karnataka & AP

Brand Extension into include low hydrogen & special electrodes

BESTFENCE : Your Lakshman Rekha

Business Results

Barbed Wires

Grew from 0 to 120 Tonnes per month in just six months after launch

Rural activation exercise through agri-fairs

Direct Sales through intermediaries like bar benders, stone pillar makers, contractors

Strong brand differentiation in a commodity market

Successful launch of Chain Link

Bestwire : Wired with Trust

Business Results

“ Moustache Wire”

First attempt to brand an unorganized , low involvement category

Attracts a price premium of 20-30% over unorganized competitors

Since Brand Launch the demand has outstripped supply necessitating a capacity expansion

Manufacturing

Cost Efficiencies

Design on utilization , efficiency & waste

Design on saving by each supervisor

Improving productivity

New Product Development

From Make to Buy/Assemble

Development of new specialized electrodes

Development of unique barbed wire & chain link products

Capacity expansion for a few existing products

Performance Management & Employee Involvement

Balanced scorecard implementation

Target setting & performance planning

Root cause analysis, 5 Why analysis & Value Loss Analysis

Employee Incentivization based on target achievement

Kaizen based employee involvement

5 S Implementation

Make vs. Buy Alignment

From Long to Hybrid : Mix of Long & Short Characteristics of Short Channels Characteristics of Long Channels Producer factors Manufacturer has adequate resources to perform channel functions Manufacturer lacks adequate resources to perform channel functions Broad product line Limited product line Channel control important Channel control not important Competitive factors Manufacturing feels satisfied with marketing intermediaries ’ performance in promoting products Manufacturer feels dissatisfied with marketing intermediaries ’ performance in promoting products

Market Prioritization On Retail Credit & Industrial Development Index A 1 Markets A 2 Markets B Markets

Hybrid Strategy

From Distributor Only to Hybrid Strategy Adopted: Direct Sales & Distributors

Market prioritization

A Class markets under direct sales or to high performing distributors

Non-performing distributors in A class markets like Hyderabad & Chennai replaced with Direct Sales

Kerela moved to direct sales

Low potential districts within Kerala being given to distributors

For markets like Hyderabad : Distributors co-exist with Direct Sales with a territory-wise demarcations

Indirect to Direct Sales

More than 95% of sales through the direct channel

Removal of the indirect channel so as to reduce undercutting & territory violations

Removal of wholesalers from the network resulting in temporary loss of sales

Close monitoring & auditing of price in key wholesale markets like Chennai, Trivandrum

Disciplines: Anywhere One Price

RCP fixed after calculating the Distributor P & L: Profit margin of 3%

Dealer margins rationalized to 5.25% from 2%

Significantly lower than competition margins of 15-30%

Administering a fixed price & preventing under-cutting in a general purpose electrode

market was a key challenge

Distribution Score Card Goal alignment, Target setting & Monthly review of performance

Key Account Management

Key Accounts Management by Company

Key accounts most profitable due to high margins & high exit barrier

Cohesive key account strategy

Specific sales people trained & ear-marked for key account management

Key account management by company sales force

Channel incentivized for business development/servicing

Distributor/dealer commission for leads

Credibility : Design on certifications, approvals & referrals

Targeting industry associations for endorsements

Product line being aligned to changing needs

Designed sales collateral

Key Account Management : Framework Sales Strategy Framework Sales Management Control System SPIN Approach To Selling Sales Force Management Incentive Planning Sales Meeting & Everyday Effectiveness

Partnership Relationship Management (PRM)

The Partner determines the quality of the Customer experience, and therefore has a fundamental impact on the relationship that exists with the Customer

PRM : Key Challenges

Key Challenges

Maximize channel revenue & profitability

Increase partner loyalty

Gaining partner mindshare

Risk of partners selling competitive products

Improve collaborative sales, marketing and service

Enhance visibility into channel performance

Reduced control over the sales process

Optimize resources across programs

Complex forecasting process

VNC Channel Partnership :Processes Domains Partner Program Management Partner Lifecycle Management Define Integrated Multi-channel Strategy Collaborative Marketing Collaborative Sales Collaborative Commerce Collaborative Service Partner Customer Self-Service, Verification, & Assignment Establish Market Development Program Manage Collaborative Campaign Establish Channel Promotions Develop Channel Sales Strategy Proactive Field Engagement Closed-loop Lead management Conflict Management Channel Forecasting Establish Partner Incentive Program Agreements Administer Partner Registration & Enrollment Maintain Partner Relationship Train Partners Manage Partner Performance Partner Self-Service & Escalation Partner Service Request Management Partner Customer Service Feedback & Analysis Launch New Product to Partners Develop Channel Marketing Strategy Partner Vision & Succession Red: Little/No Movement Yellow : Partial Development Green : Good Development Manage Partner Community Design Partner Program & Allocate Resources

Partner Lifecycle Management

Understand the Partner’s Current Reality & Organization Structure

Build a vision for the Future

Create a relationship with the employees in your partner’s organization.

Information is at the core of what partners want

Deliver tools & techniques that will improve the productivity & effectiveness of your partner’s employees.

Training the partner’s employees on sales call planning, trade marketing etc.

If you make it easier for them to do their jobs, they’ll reward you with their mind share

Partner Lifecycle Management

Create Community

The ultimate goal of community is to create these ties.

These relationships come in many forms. The basic one is the relationship your employees have formed with your partners’ employees

A more sophisticated relationship is one that is formed between community members (partner to partner)

These relationships represent more than just the concept of friends. They also represent many other values

It is easier to get information you need from a person you have a relationship with

Community members also build business & personal linkages. This creates a high exit barrier for partners

Best Practice: Partner Performance Measurement

Best Practice

Structured partner manager methodology (MCS Partner Portfolio Management)

Partner Scorecards

Expend resources on top performing & high potential partners (A’s)

Benefits

Scalable, fair approach to managing partnerships

Quantitative measure of partners’ total contribution

Aggregate portfolio performance improves

Partner loyalty increases

PRM : VNC Current Reality

Current Practices

Limited performance data

Over reliance on revenue metric

Subjective opportunity assessment

Reactive deal support & inconsistent policy enforcement

Result

Over/Under investment

Inability to measure overall contribution

Inconsistent results

Poor partner loyalty

Resource Allocation Drives Portfolio Performance HIGH LOW HIGH Partner Revenue (Potential > Actual) Resources “ Under Investment” (Opportunity cost) “ Over Investment” (Cost of Sale) A Partners A Partners B Partners C Partners

Partnership: Distributor Benchmarking

A Partners : Qualitative Assessment

Commitment to continuous improvement

Acceptance of innovation & change

Design on cycle time reduction

Utilization of quality management procedures

Flexibility is seen as the prime goal

Employees share common core values of customer concern

Actively seek to improve communication

Partner Profiling

Technique where, instead of asking a subject many questions all at once, the researcher asks a few questions initially and then comes back later to gather additional information.

By allowing the subject’s profile to grow over time, the profiling process becomes much less intrusive

Profiles tend to be far more up-to-date and accurate than one accumulated in a single session

Relevant for Distributors since

Unwillingness to part with complete information on account of tax, competitive products, general mistrust

Progressive Profiling through

Training, Incentive Programs, Surveys, Feedback forms, Informal Interactions, Field Visits

Retailer Engagement

Service : Doorstep Delivery with Loading & Unloading

Crunched TATs from Order to Delivery : Logistics Plan, Sales Forecast & Rationalization of packaging & SKUs

Retailer Contact Programmes

Loyalty Rewarding Promotional Schemes

Continuous Dialogue through Newsletters etc.

3 P’s of Trade Marketing

If you are not there you don’t sell : Presence

If you are not at the right place you sell less : Position

If you are not best presented you don’t maximizes sales : Presentation

Trade Marketing:Position & Presentation

Bestarc rarely sat at the Hotspot.

Trade Marketing

Design on Basics

3 Ps- Presence, Position & Presentation

Regular Service

Trade Marketing Audits & Continuous Improvement System

Presence: Self Analysis Example 15 10 10 12

Service : Correlation between Sales Visit & Outlet Share Relationship between Sales Visits and Outlet Share 0% 10% 20% 30% 40% 50% 60% 70% 80% 1 2 3 4 5 No. of sales visits per month Outlet Share Linear co-relation between sales visits and outlet share Correlation between service and outlet share. Service provided (reflected by sales visits) is a competitive advantage

Trade Marketing Disciplines: Continuous Audit

Continuous internal audit, validated by external one is a key requirement for ensuring continuous feedback & improvement opportunities for trade marketing

Vision for VNC Group: Next 5 Years