“Our rate of sales returns from different retail stores continues to alarm us. I once heard you talk about the need to have the right products in the right stores. You mentioned the term placement. Kindly elaborate on this in your column. I guess we have an issue in this area.”
– Mr. Sol Lee
 
 
Last summer, I conducted a training session on financial acumen for distributor managers in Shanghai, China. Before the training day, I had the chance to check some stores near my hotel – a habit I couldn’t break. I was delighted to see more Filipino-owned products placed and prominently displayed in supermarkets and convenience stores. When I was also in Bangkok last time, I saw many of our own snack products selling well in convenience stores. Alongside the well-performing products though were the stock-keeping units or SKUs that I thought shouldn’t be in those stores in the first place.
 
 
Putting the right products in the right distribution channels seems too obvious a topic to even intelligently discuss. But, as long as we see this violated in the marketplace, we will continue to remind people in sales and marketing.  Placement means having the right product available in the right channels of distribution.  Not all customers or prospects are fit for your type of products or services.  For example, a 1,000 ml shampoo will sell in big supermarkets but maybe not in sari-sari or retail variety stores. Each type or size of distribution channel caters to a particular set of shoppers with different buying preferences. In this case, selling 25 ml sachets in a sari-sari store would be a wiser course of action.
 
 
You need to find out the right mix of products for each type of customer segment by studying your sales data.  Find out which SKUs are regularly moving per type of channel and customer over a period. This information will give you an idea what moves where. When a pattern is established, I suggest you develop standard guidelines for sales people to follow in placing their products to the customers.  Some companies call this Retail Performance Standard (RPS) where they list the type of products and SKUs that each type of distribution channel and customer must carry or sell. Sales people find this very helpful. This approach helps avoid selling the wrong products only to be returned later due to low sales off-take.  There are serious implications if this is not immediately controlled.
 
 
HOW WRONG PLACEMENT AFFECTS THE BOTTOM LINE
Repeat the mantra: Place the right product in the right store! This may sound obvious to anyone but this is still a common mistake in sales distribution.  When sales and marketing people start to panic for sales volume, the tendency is to place as many products in as many outlets as possible. As a consequence, when the wrong channels and customers fail to move out the products, sales will salvage the situation and implement a sell-out promotion to deplete the inventory.  This, of course, is an added expense to the company. When stocks still don’t move, they are eventually returned to the company, oftentimes in bad condition. Add the physical distribution and mechanical costs of this futile exercise. If you do the math, the cost is enormous, thus, adversely affecting the firm’s bottom line and brand image. The key is to stick to the placement standard and avoid the whole scenario in the first place.
 
 
HOW PLACEMENT AFFECTS MARKET SHARE
One cardinal rule in advertising is ‘to never advertise in an empty market.’  When a firm starts to spend for upstream marketing programs like a television advertising campaign, products should be placed only in the target channels and customers.  When they are not, the firm loses the opportunity of converting potential shoppers and consumers when they start to look for the brand.  When there is no brand trial, obviously there will never be retention or loyalty to the brand. Your marketing investments will be wasted and you can also forget about your market share ambition. 
 
Again, the key is to develop a placement or distribution standard for your sales team. Continue to monitor and evaluate behavior of shoppers by looking at the product sales split per type of distribution channels and customers. It will also help if part of your sales policies covers sales returns control. You see, policy influences behavior. Happy selling!
 
 
Mr. Macasaet is a partner and chief distribution strategist of Mansmith and Fielders, Inc. (www.mansmith.net), the leading marketing and sales training company in the Philippines. Please also send your marketing, sales, strategy and innovation questions to mentors@mansmith.net.