Page 276 - Performance Leadership
P. 276

Chapter 14 Supermarket Performance Network • 265


            being a trustworthy customer. Being a trusted customer lowers the trans-
            action costs of doing business, as the supplier feels comfortable with less
            stringent monitoring systems, payment agreements, and other control
            processes. These lower transaction costs translate into a higher margin.


            Managing Joint-Value Relationships
            In joint-value relationships, there is no strict customer/supplier
            dynamic anymore. Both partners contribute unique characteristics to
            codevelop products to a mutual set of customers. Particularly with pri-
            vate labels, there is an opportunity to cocreate a unique supermarket
            label with products that are not sold elsewhere, effectively lifting a
            supermarket label to an A-brand level. Both partners, of course, meas-
            ure profit of the joint initiative. From the supermarket’s point of view,
            the profit margin should be compared to the margin on other products,
            and other suppliers, to optimize the margin of the overall portfolio. The
            more successful the partners are with building the private label, the
            higher the margin created by asking A-brand prices.
              A true measure of success is revenue growth within the product cat-
            egory. The private label should substitute for unbranded or lesser-
            known brands, and grow its market share within the particular product
            group. If the private label introduces a completely new product, that
            has no alternative, it is a product group by itself, with 100 percent mar-
            ket share. Less market share and other brands entering the market are
            good things. They are a validation of the strategy, and all brands col-
            lectively grow the overall market.
              Next to profit and growth, the partners seek each other’s opinion and
            trust. Opinion is not based on customer satisfaction surveys, or any
            other once-in-a-while initiative. Opinions are shared continuously on
            an operational level, with people working together on a daily basis, as
            well as on a managerial level, as a continuous theme through com-
            bined management meetings. Trust grows from contractual trust to
            goodwill or relationship trust, in which the partners feel that each
            would make the right decisions while representing the joint initiative.
              Of course both partners have relationship requirements as well, and
            the interaction needs to be fast, right, and easy, and the price needs to
            be right. Fast interaction leads to a low time to market, and a short time
            for interorganizational decision-making processes, ideally as efficient
   271   272   273   274   275   276   277   278   279   280   281