7 big ideas for driving front-end growth
Guest moderator Dan Mack of the Elevation Forum
DSN hosted its 17th annual Industry Issues Summit in December, bringing together a leading panel of executives for an in-depth discussion into how retailers and suppliers can drive more productive partnerships, unlock category growth and ultimately forge more meaningful connections between consumers and their brands.
Click here to read the complete transcript of DSN’s Industry Issues Summit.
“What blocks growth on a very high level?” asked special guest moderator Dan Mack, managing director of the Mack Elevation Forum, setting the stage for the day’s discussion. “The three things that block real growth are not picking the right partners, not building a culture that’s distinct, [and not being afraid of being disliked]. The most disruptive brands — you either love them or you hate them, and that’s quite on purpose. And third, not hiring people with a growth mindset. We are all failing more than we’re succeeding, so the ability to get over loss quickly is a really unique trait of winning organizations. They’re very resilient, and they love to learn.”
What follows here are the seven big ideas that came out of the panel.
The boomer-millennial balancing act
THE SETUP: Marketers’ attempts to reach consumers over the age of 50, according to AARP, have been miserably unsuccessful; 83% of people over 50 dislike being stereotyped. There’s a big difference between 52- and 92-year-olds, even though we all fit into one big group. Meanwhile, the new consumer — the millennial — sees the world from a values perspective. Brands can’t buy them; they can only earn them.
How do you balance the need to build loyalty with aging boomers, with the need to connect with millennials? — Dan Mack, Elevation Forum
We have programs that are tiered toward boomers, such as our circular and our Wellness 65+ program, as well as a number of other programs specifically tailored for them. We also know we have to look at millennials in a different way. I think the danger is clustering consumers into groups and thinking you should market to clusters as opposed to going one step further and looking at all of your customers as individuals.
For example, we have been having a discussion recently on Hispanic merchandising — specifically, if products should be integrated into everyday planograms or as a freestanding section that segregates products away from the everyday department. The consumer research would indicate that older consumers like to find their brands segregated to make it easier to find the products they know and trust. The younger consumers have a clear preference to have all products in a single location. The point is, when you talk about a particular consumer segment as if they all act the same, you will not be meeting their individual wants and needs. — Bill Bergin, Rite Aid
There is a danger to bifurcate the customer base into these nice names: boomers and millennials. … I think about it in terms of how do we understand customers as individuals? …
… We’re still organized by category, and so are all of you, and so that makes shifting to a customer-based, customer-centered viewpoint very difficult because none of us are measured that way. … But what we’re trying to do now is to take the customer and the category — that intersection — and say, ‘When I’m in adult care … what is the predominant need in the category? Who is the predominant customer?’ And even, ‘What’s the predominant emotion that’s going on when I’m in this category…?’
Similarly, if I’m in vitamins and I’m looking at that set, who is the predominant customer there? What are their issues [and] challenges?
[These are tremendous] opportunities for us. So we look [at it] by category, and we try to say, ‘Hey, who is the customer in this category? What are her needs? What are the key challenges that we can overcome?’ And then we can go build a promotional plan, an ExtraCare plan. We can build a planogram that makes sense. — George Coleman, CVS Health
Optimizing trade investment
THE SETUP: As manufacturers complain that retailer pressures shrink their corporate margins, hindering consumer investment, how do we honestly discuss and improve trade investments while investing in the most productive brand-building and relationship-building activities? — Mack, Elevation Forum
We use our quarterly fireside chats to engage our vendor partners to ensure we are aligned. We need vendors to partner with us, and they cannot do that effectively unless they understand our strategy and what is important to Target and our guest. Ultimately, the goal is to create win-win-win opportunities where Target, our vendor partners and our guests all win. We also answer any questions our vendor partners have at this venue. It is a two-way street. Together, we have to ensure Target’s and our vendor partners’ investments are working as hard as they can to deliver value to our guests. — Doug Stukenborg, Target
I think it starts with transparency, and it’s transparency on both sides. I think change is so fast today — the old way of doing business [has changed] where it was tell me your story and I’ll tell you my story, but you never get equal sides of each. I think those days are gone. … Today, both retailer and manufacturer have to peel back the layers of their organizations and work together to stay current with the consumer … meaning, you each have to be authentic brand ambassadors.
I will tell you all the things that are necessary to do business with ShopRite and how to connect with our purpose, but you have to be as passionate about your brand as we are [about ours]. I think what you’re seeing happening in the marketplace is you see these new, unique brands emerging and they’re really connecting with the consumer, and they’re connecting because the path that they’re taking is very authentic … I often say, ‘I can’t fix your brand for you. I can only help you tell your story to our consumers, but it must be a compelling one.’ If your brand is not connecting with the consumer anymore, I think that’s a problem that you have to look at internally and fix. — Chris Skyers, Wakefern
I’ve been in retail [more than] 30 years now, and a long time ago, when I was first starting out in category management, my boss came to me and said, ‘I need you to increase your promotions and reduce your markdown line.’ You can’t do both, and he looked me square in the eye and he said, ‘That’s the job.’ That’s the job.
And that’s what I thought of when I saw this question. The job hasn’t changed; we’ve all been trying to do more with less over time. It’s just what that number is from year to year. And the vehicles change; I think the way we spend the money changes, and I’ll echo some of what has been said about both [the retailer and the vendor] having to win. We have to have ROI, and if it’s not working, we need to be transparent about that. We need to talk about it and figure out a way that we can both make it work. What’s working about it? What’s not working? And how do we make it better?
And the other piece that goes with that for me is agility. So the same tools we used a year ago don’t work now. … We’ve got to have the ability to change that quickly and change our plans going forward. — Maryann Herskowitz, Family Dollar
The value/premium conundrum
SETUP: We’re seeing growth in the upper end and we’re seeing growth in the lower end in terms of price/value relationships; the middle is shrinking in almost every category.
How does your company address both consumer groups? In other words, how are you partnering with manufacturers to build stronger everyday value and more premium products? — Mack, Elevation Forum
Value and premium, [that’s] every single customer; no matter what your income level is, you aspire to have premium and you’re also willing to pay for value as well. I don’t think it’s two separate groups. Are there people who lean toward one or the other? Absolutely. But you have to understand the category segment that you’re looking at, the products that you’re looking at and what matters to a customer, and sometimes the differentiation between the two.
But for me, at Walmart, does someone want to walk into a Walmart and not find premium? Absolutely not. They want to see that. It’s about providing a ‘wow’ experience regardless of whether you’re talking about value products or premium products. The most fun thing is seeing a customer say, ‘Wow! Look what I just got and look at how much I paid for it.’ And they get excited about the value that they just got, whether that’s on the private-label side or even in the premium range.
So I think it’s incredibly important that you understand the customer and the full range of what matters to a customer in every single category segment. You know, are we going to offer five different levels of broccoli? Probably not, right? But in certain segments, having differentiation between the different levels and understanding what matters to a customer from a premium perspective is incredibly valuable. — Annie Walker, Walmart
I think what I’d throw out there is we’re at a historic junction from a healthcare perspective, and I think the industry — retailers and manufacturers — needs to understand where we are and what we’re seeing in terms of this historic shift of cost and decision-making going toward the consumer. And that’s only going to accelerate I think over the next five, 10 years. … Now’s the time to grow equity in health care from a consumer perspective; they need us more than ever. They can’t get to their doctor, the cost of prescriptions and other healthcare costs are such that OTCs and self-care solutions are becoming more important than ever.
If that’s true, we shouldn’t be commoditizing health care; we should be building equity in health care. And that’s not about profit. I really believe long term that it’s about the ability for your companies to have the capital to invest in innovation. The reason I think we have a vested interest in not over-commoditizing health right now is so that your companies can continue to do the R&D, the NDAs, the new product development that are so critical to creating new solutions that are readily accessible to patients and customers. So if we over-commoditize now, we, in essence, are hurting the resources we all need to develop better patient and customer solutions, [and] I think in five and 10 years we’re going to look back and say, ‘You know what? We really blew it. We over-focused on value at a time when we should have been doing the opposite.’ — Robert Tompkins, Walgreens
We experiment every day at ShopRite and we can’t do that without the help of our manufacturers. I think of companies like Pharmavite; they add value by training all of our dietitians on supplements.
I think of companies like Pfizer; Pfizer adds value by helping us better engage our senior population where we are looking to create senior playgrounds for those communities in need. …
I think of companies like Unilever; they add value by bringing their brands to life in a very beautiful and efficient way in our stores.
… I think of what J&J has done to help us from a diabetic standpoint; what J&J has done from a caregiver standpoint with ShopRite. — Skyers, Wakefern
Niche brands notch up innovation
SETUP: Every retailer needs to win with the big players, but there are incredible new, innovative companies and entrepreneurs bringing great new brands to the consumer.
How do you try to balance the big relationships while being open to new relationships? — Mack, Elevation Forum
I think the thing that concerns me the most about some of our largest CPG partners now, it’s really small, incremental thinking. … Big thinkers, even if they’re a bit different, even if they activate differently, [or] maybe they’re not the best internal collaborators … you don’t see a lot of those types of folks in big CPG work their way up, especially in brand organizations. And it seems to be tolerated that small, incremental thinking is OK. And I would just throw the challenge out to some of the biggest CPG companies to allow for really disruptive thinking and maybe just stop accepting small, incremental thinking within your brand groups. — Tompkins, Walgreens
I have a challenge for the suppliers. There are a lot of big suppliers that hold on to small brands. And I could give you multiple instances where small brands have been sold off to small suppliers and they grow. So the question really is, are you willing to invest in what you have today; even in the smaller brands that you have, the little guys that are at the tail end of your assortment, that you don’t put any money into? You have the opportunity to grow there. You’re just lost in the averages today. So that’s a challenge. — Walker, Walmart
I would remind everyone that we are in a time-challenged industry. I think one of the challenges for smaller suppliers is how you can bring initiatives to a category manager and do it in a very efficient manner. When it comes to smaller suppliers, if you can form a coalition or bring an initiative that bands multiple suppliers together in a meaningful fashion that’s very efficient for a category manager. It can help them be a part of meaningful initiatives. The unfortunate reality for some of the smaller suppliers is that most category managers are highly focused on winning with their largest suppliers. You can’t gain share versus your competition without winning with companies like P&G, J&J and Unilever. But the role and importance of smaller suppliers is one that we very much embrace. — Bergin, Rite Aid
Creating a seamless omnichannel experience
THE SETUP: By 2017, 20% of market leaders will lose their dominant share position because of some company that was founded after the year 2000. The game has changed right before our eyes: Uber is now the world’s largest taxi organization; Airbnb is the largest provider of rooms; Netflix is the largest movie house; Facebook is the largest content provider; and Alibaba is the most valuable retailer in the world. …
When you see strong companies that connect with millennials, they have created a strong digital/omnichannel experience. Making it seamless is the game, and it’s even harder with big organizations. How are your companies working to make that experience seamless for the customer? — Mack, Elevation Forum
We used to define ourselves as convenience. … That’s a huge part of our value proposition as a pharmacy because we’re on the corner of Main and Main, and that’s not enough anymore. So we are embarking on how do we redefine convenience for our customers and for our patients. …
I’m in the consumer healthcare business, and it’s a very confusing shopping experience in many cases. Which cold medicine is right for me? Which allergy medication? What do all these letters mean in vitamins? What are these herbals all about? What does turmeric do for me? There are a lot of questions that people have that are difficult to answer. They are doing a lot of research now pre-shop, and then they also want to talk to someone or they want to have their own unique question answered, so maybe it’s through a chat service. In different categories, the solution is going to look different.
And so we don’t look at it like, ‘Hey, we’re going to be the best at delivery or buy online/pick up in store, curbside and all that.’ We are looking at all those things and we’re testing all of them, in fact, but ultimately we’re also going to have to use digital technologies to be able to answer questions that people have both pre-shop and in-aisle. All of us are pretty challenged in terms of adding labor into our stores, so we’re not going to have a bunch of people out there [in the aisles]; we’re most likely not going to have healthcare advisers like there are beauty advisers. …
So how do we use digital technologies to help answer those questions for people in the aisle? Because vitamins [are] going to be a different set of questions than adult care. You know, adult care, I’m standing around I don’t know, I’m nervous about being there; I don’t want to talk to anybody, frankly, but I do have questions. How do I get the right product? Well maybe I can use digital technology to do something that is discrete but gives me really accurate information, so that allows me to purchase and we can convert the sale. — Coleman, CVS Health
We believe that to get to a seamless experience we need to have an enterprise mindset. We are working hard to integrate our teams and our systems and tools so that our organization encourages enterprise thinking. Now when I do my monthly forecast, we talk enterprise performance — it’s both the dot-com and store performance together. We’ve moved our merchandise planning function to be enterprise-wide, so they manage product flow for both channels. And we’re experimenting at the divisional level, [with] having the dot-com teams report through the divisional, as well as the store teams. As vendors supporting Target, you should be asking yourselves about whether your structure should change as we evolve to ensure proper alignment.
It is a journey bringing our systems together, but our goal is that when you touch Target be it through your mobile phone, your computer or our storefront, that it feels like a connected experience. As far as how vendors can help, first focus on the fundamentals, like item setup and content. That will be critical to get the guest experience right. It’s not sexy but is one of the most important actions you can take. In addition to that, are you assessing how your products look on our site? This should be a new routine just like comp shopping a store. Trips are starting on the mobile phone so making sure you like what our guest sees when they view your product is increasingly important. — Stukenborg, Target
Winning the localization/personalization game
THE SETUP: Forty percent of consumers buy more from retailers who personalize the experience. … And 75% of chief marketing officers think that custom content, custom ideas, custom solutions, even custom products are the future of marketing. The goal is the right item, the right message to the right customer at the right time.
So, what are the challenges you’re having with brand partners concerning localization of category assortments? — Mack, Elevation Forum
I think one of the things they can do is help us with the data. I got great data the other day from a supplier on where birth rates are going to over-index — in what states — and we can create a plan around that when we’re building our promotional plans. … But also being prepared that you might not get distribution in all 8,000 stores, and that’s OK. … This can be a way that we get better ROI, by having the right product in the right place at the right time. But it’s not just about the product itself. When you have a chain of 8,000 stores, it can be about volume, too. Not every store in an 8,000-store chain performs the same way. So therefore, they don’t need the full mix in some stores. And that’s OK, too, because we can do more with less [in] those stores.
And then the last thing I would say … in terms of customization — [is that] not every retailer is the same. Quite frankly, I get disappointed with presentations that start with … ‘Here’s how the market will react to this item.’ Well did you put it in front of a consumer who only makes $40,000 a year and has a family of four living under one roof? What did she say about it? And, typically, they don’t know. So it can be a different plan by retailer because we all have different customers. — Herskowitz, Family Dollar
Developing next-gen leaders
THE SETUP: The No. 1 difference between a Nobel Prize winner, according to Peter Drucker, and others, is not IQ; it’s the ability to ask bigger questions.
What are the traits you look for in a future leader? What are the traits of leaders who ask bigger questions? — Mack, Elevation Forum
For me, there are three traits that I’ve always looked for in my team: intellectual curiosity, passion and an ability to “porpoise.”
Intellectual curiosity leads to asking new questions that lead to novel approaches and feeds differentiation … .
Passion brings the positive energy that encourages the team and helps get through the challenging times and mundane tasks.
The ability to “porpoise” is the ability to dive deep into issues when necessary, but to also be able to pop back up over the surface to make sure you are still headed in the right direction. Most people do one or the other well. The rare person that does both can really make a difference as a leader. — Stukenborg, Target
Q&A: The state of generics with GPhA’s Chip Davis
As Congress continues to look into the question of drug prices with hearings in early February featuring industry experts, one of the organizations being turned to is the Generic Pharmaceutical Association, whose president and CEO Chip Davis recently responded to the Senate Health, Education, Labor and Pensions Committee about the state of the generic drug industry. Drug Store News spoke to Davis about the year ahead for GPhA and what some of the biggest battles for the generic drug industry will be.
DSN: You started the year calling for the passage of the FAST Generics Act — what are some of the biggest benefits the industry and patients will see if that bill makes it to the president’s desk and he signs it into law?
Chip Davis: Misuse of FDA REMS patient safety programs is one way that certain brand drug companies delay generic competition. Failure to address the loophole that makes these abuses possible is a missed opportunity to encourage more competition in generic drugs and to generate billions of dollars in additional savings for patients and the health system.
DSN: One of the items GPhA is wary of is compounding alternatives to certain drugs. What are some of the potential pitfalls of allowing compounding to take the place of approved generics and how do you hope to find a different solution?
Davis: Rising health costs are unsustainable for patients and our health system. However, encouraging mass compounding via “outsourcing facilities” or drugs that are unapproved by the FDA, such as the compounded alternative to Turing’s Daraprim, creates avoidable patient safety risk. Circumventing the FDA approval process is not the answer.
Generics are currently 88% of prescriptions delivered at less than a third of total U.S. drug costs. Competition from FDA-approved affordable generic alternatives remains the best way to drive down health costs. There are ways to boost access working through, not around, FDA safety and approval processes. The backlog of 3,800 generic applications pending approval must be addressed. Misuse of FDA REMS safety programs by some brand drug companies continues to impede generic access and must be stopped. GPhA will continue leading a constructive dialogue that prioritizes patient safety and savings to ensure generic competition can keep drug costs low.
DSN: Another safety issue GPhA raised recently concerns labeling and adjustments that manufacturers would have to make without FDA approval — what are the issues with this proposed change and what’s a way to avoid them?
Davis: GPhA is pleased that the Food and Drug Administration will continue to evaluate the wide range of concerns expressed over the currently proposed changes to generic drug labeling requirements. GPhA continues to support the Expedited Agency Review, a better way forward that strengthens the communication of drug safety information without putting patients at risk. Current law requires brands and generics to carry the same label to assure healthcare practitioners have consistent information to inform their decisions and patient conversations. The proposed rule would change this by requiring generic manufacturers to update labels based on incomplete information without first receiving FDA approval. However, no single manufacturer has access to the full range of available data — the proprietary data from clinical studies or the data held by each individual applicant holder.
The FDA is the only entity with all of the data needed to recommend a safety information change. Instead, the EAR suggests time parameters for the FDA to take action and encourages the adoption of e-labeling for real-time information sharing rather than continuing the reliance on paper label changes that take months or years to adopt. The EAR also takes important steps to make sure that multiple different labels do not exist for products with the same active ingredients, safety and efficacy. GPhA will continue to work with the agency and other stakeholders committed to advancing and protecting patient health to ensure that any changes to labeling regulations do not put patient safety at risk and avoid causing provider confusion.
Visit DrugStoreNews.com/DigitalEditions to view the full Generic Drug Report 2016.