NEW YORK -- Lever Bros. here has unveiled a redesigned trade promotion program this year as one of the final touches on a major re-engineering of its business operations.
The new program eliminates case rate allowances and creates a category-funding system, according to John Crook, vice president of sales planning and strategic planning at Lever. "It's really a rearticulation of our trade promotion budget to a category-funding approach."
"We have funds out there to drive the business. We have gone to a new concept this year with category funding. Every account team has its own category fund; each account manager has his own category fund. We put together plans that are going to work best at different accounts," he said.
In terms of overall re-engineering, he said, Lever has essentially changed from a volume-driven to a profit-driven business philosophy. As part of the restructuring, Lever has created cross-functional key account teams and category development managers and analysts to bring decision-making closer to its retail trading partners. The re-engineering took place largely last year, beginning in March with the creation of the first account-specific teams.
Crook outlined the new Lever organization at an account-specific marketing conference here sponsored by International Business Communications, Southborough, Mass.
The new trade program, he explained, is national in scope and for all customers -- not just for key accounts. In the re-engineered Lever, there is a need to focus trade promotion spending and effort on high-return events. Another
mandate is to eliminate unprofitable and inefficient trade spending, according to Crook. A trade marketing consultant familiar with Lever's re-engineering said the new promotion program is a major commitment to empowering field people. "The allowance levels and the design of programs are now flexible enough for the field people to do what the trade needs to be done," explained the consultant, who wished to remain anonymous."They're also putting every field sales manager through a training course on trade penetration and development: how to get to senior managers and what to talk about when you're at senior management. It's not selling cases, per se. It's developing issues, and understanding what resources Lever can bring to bear that will help the retailer be more productive. That's a hell of a commitment in itself."
The sales organization is now called Customer Management and Service. It consists of cross-functional key account teams and category development managers and analysts.
Crook said Lever so far has created eight teams: a Wal-Mart team; teams for the mass merchandiser, chain drug and club store channels, and four supermarket teams that each are responsible for about eight different retailers. Each team consists of eight to 10 people, depending on which team it is and how many accounts the team is responsible for. Teams consist of executives from several areas, including marketing, logistics, finance, reordering and category management. "They are really making a commitment to getting a full-fledged team," said the consultant. "Other people are doing 'team' in name only, but they're not putting real resources to bear. To get a financial person in the field is good. To get a logistics person is good. So [Lever is] doing a lot of things right."
Crook said the eight teams are just the first of many category teams. "Hopefully, we'll be going to more category teams as we roll this thing out," he said. "But we still have a structure of account managers in place, as well." Crook said it's too early to tell how many account teams there ultimately will be. "We really want to analyze what the key account teams are producing right now before we make any further evaluation. We're moving cautiously to make sure we make the right steps."
In its category development efforts, Lever has added 65 people to the key account teams to analyze the business. "They work very closely with the key account teams, analyzing data, so we can make more informed decisions and share the information with our retail partners," he said. "Category analysts are very important because they help bring information to Lever's retail partners," according to Crook. "There's a lot of information out there. How do you communicate that information to the retailer? He has a lot of information coming in. We have a lot of information coming in. How do you manage that whole process? That's one of the biggest stumbling blocks we have right now in our relationships with retailers. "What we wanted to do in terms of account-specific marketing is to bring value-added service to that retailer," he said. "Help him manage that information. To give him information on how he can run a category much more effectively. And how we can both -- manufacturer and retailer -- make decisions that will build volume as well as profit." Lever can bring these "value-added ideas" to its retailers and thus strengthen the partnership, he said. "We really changed the culture of our entire organization [to a profit-driven company]. If we as a company are going to prosper in this [new business] environment, we have to make money. Being in the competitive environment that we've been in, we've had to make a lot of investment over the years. "Now we have an organization where everybody is really on the same page, driving for profitability," he said. Changing the structure of Lever required shifting from one set of operating principles to another.
Crook said the three keys to the change were:
1. Partnership/Customer Focus -- Changing from a brand-trade promotion focus to objective category management. "What we really wanted to do in terms of a partnership was to get into objective category management and empowering our teams on the local level to make those important decisions," he said.
2. Profit Focus -- Changing from a volume-driven to a profit-driven strategy. The traditional field sales force was replaced with third-party merchandisers. "We want to be profit-driven. To do that, we had to educate our people on how to go about developing profitable promotion plans. That really meant really sharing a lot more information with our account managers and our teams than we ever had before," he said.
3. Flexibility -- Changing from a functional, headquarters decision-making company to cross-functional integration with empowered teams. Instead of consumer-spending being centrally determined, there is some use of local consumer promotion funds. Programs are customized rather than standardized. "We want to empower these teams on the local level to make decisions. Give these the necessary information to make these decisions to be able to make the trade-offs at the account level," he said. According to Crook, shifting from a volume-driven to a profit-driven business philosophy reflects a need to increase the company's overall return on sales and align measurement and incentives with selling profitable volume. It also means managing the customers' product and service mix to optimize category profitability. According to Crook, the cross-functional account teams aim to:
Anticipate and meet customer needs and market opportunities to provide competitive advantage.
Monitor and improve account profitability.
Approve account strategies and quarterly plans.
Improve account-level forecasts.
Provide evaluation and analysis of quarterly performance.
The teams help Lever to know its consumers better by deploying marketing resources in the field, according to Crook. They also lead to faster decisions because Lever delegates authority to the teams.
"Lever has made this commitment fully to change the culture, to change the strategy," said William Wyman, president of Rockwell Consulting, Ridgefield, Conn. He spoke on sales reorganization before Crook, and introduced him at the conference. "Lever has just gone through a re-engineering, a restructuring," he said. "It's the only organization that I know of in the United States that does not have a sales force. It's sales organization no longer exists. It's called Customer Management and Service. Their marketing research department is no longer called marketing research. It's called Consumer Marketplace Understanding." Wyman said the "vision" for the new Lever is printed and hangs on the wall on every floor by the elevators at its headquarters. "It reads: 'We will know our consumer better than our customers. We will partner with our customers and suppliers more effectively than anybody else. We will satisfy consumers and meet customer needs by empowering people to act. And we will become known as the most successful innovator.' "
