Building the Retail Business-Opportunities and Challenges


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The thoughts here could apply to retail bankin or any form of retail consumer service business. Also visit my blog for more insightful essaysg

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Building the Retail Business-Opportunities and Challenges

  1. 1. Growing the Retail Business inNigeria- Opportunities, theChallenges and Way Out Jan 2009 Olu Akanmu
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. The Retail Business Model How can you move your customers from “transactions” to “relationships” Data, Information and Analytics are critical
  7. 7. Retailing and BusinessVolatility 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.
  8. 8. 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?
  9. 9. Segmentation and IndustryCommoditization 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.
  10. 10. 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..”
  11. 11. Making the Value PropositionsTangible 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.
  12. 12. 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
  13. 13. Finding Differentiation in aProduct Commoditized Industry Customer Experience Service Core Build augmented value product around your core product Find uniqueness in augmented product..service, Channels Experience, channels
  14. 14. Delivering the ValuePropositions 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
  15. 15. Customer Segment View versus Product View of the Retail Business
  16. 16. 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)
  17. 17. 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..!
  18. 18. 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
  19. 19. Taking Products and Services to the Market
  20. 20. 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..
  21. 21. Four Brand Equity Dimensions (Aakers) Brand Awareness  Perceived Quality  Recognition and recall  Most critical measure of brand equity  Familiarity and opinion  Degree of price premium Brand Loyalty  Esteem and respect  Satisfaction at recent usage  Consistently exceed my  Brand Associations expectations  Different from others in relevant ways  Regular usage even when alternatives are available  It is an interesting personality. We do have a  Will recommend it to others relationship  Will pay a premium for it over  Perceived value-value for alternatives money relative to its price  Market share  I trust the firm behind the brand
  22. 22. 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
  23. 23. Taking Product and Servicesto 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
  24. 24. 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.
  25. 25. 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
  26. 26. Organization Structures Product or Category Management Customer Segment Management Channel Management Different Combinations of the above
  27. 27. References and FurtherReadings Visit
  28. 28.  Thank you.