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JPMA: 50 Years of Invaluable Support

Posted By Ron Sidman, Wednesday, March 7, 2012
Updated: Tuesday, July 21, 2015

Hard to believe it’s been 50 years since a handful of enlightened juvenile industry CEOs recognized the value of competitors working together to serve their common interests. Thank goodness they did! As a former JPMA board member and officer, I’ve experienced the organization from the inside and out. And while, like other volunteer organizations, the inner workings sometimes feel more like Congress than a well-oiled machine, and while at times it has been misunderstood and underappreciated, I shiver to think what the industry would be like today if there were no JPMA. We all owe JPMA a debt of gratitude.

Like all organizations that survive the test of time, JPMA has continually evolved over its history to serve the ever-changing needs of its membership. Much of the credit for this goes to the many industry leaders who were willing to volunteer their time, often at the expense of attending to their own company responsibilities, to further the interests of the industry as a whole. Ironically, as is the burden of people willing to make tough decisions, they sometimes had to suffer criticism from some of the members they were working so hard to serve. Yet their selfless dedication to creating a better industry for all enabled them to persevere. Thanks also ought to go to the management and staff of Association Headquarters for knowing how to accomplish the daunting task of keeping a volunteer trade association alive, well, and productive. It’s not easy.

My own company benefited in countless ways. The JPMA-originated trade shows allowed us to position ourselves as a significant player in the industry. JPMA’s regulatory advocacy always injected some rationality into the regulatory process whenever emotion was driving things out of control. For example, life would have been a lot tougher if we did not have Rick Locker at our side during the phthalate crisis of the late 90’s. The certification program gave us a voice in standard setting and advance information that could guide our product development. JPMA did a great job of representing the interests of manufacturers like us with our retail customers on the tough issues we could not address on our own. And, my personal interactions with other board members and industry leaders at board meetings and other JPMA events greatly enhanced my understanding of what was happening in the industry allowing me to anticipate future trends and do a better job of running my company. The fact was JPMA was always there for us when we needed it.

But, the ultimate JPMA benefit in my opinion is the people you meet through the association in the industry and at AH who become your friends, your contacts, your confidants, your golf partners, and maybe someday even your employees as happened with me. We are all blessed with an industry made up of great, caring people. I suppose it should be no surprise. People who dedicate their lives to making the lives of parents and babies happier and safer happen to be good people. I had the pleasure of getting to know many of them through JPMA.     

What some JPMA members never realize, unfortunately, is that you will only get out of it what you put into it. If you just sit around and wait for someone to help you, you’ll be disappointed. Be an active member. Participate in the benefit programs. Sign up for a committee. Become a board member. Go to association events. Let your voice be heard. And, of course, don’t forget to take advantage of the JPMA CEO Mentor Program (a shameless plug)!

As much as ever before, the health of the juvenile industry requires an active, responsive, supportive trade association focused on, as stated in JPMA’s mission, advancing "the interests, growth, and well-being . . . of manufacturers, importers, and distributors". It will take the continued dedication of you, the industry’s leaders, to sustain this mission going forward. But if you do, JPMA will always be there for you too when you need it.

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How to Hire (and Keep) the Right People

Posted By Ron Sidman, Friday, January 27, 2012
Updated: Tuesday, July 21, 2015

I’ll be the first to admit I made a lot of hiring mistakes in my career. In fact, for me, personnel management in every aspect was probably the most difficult and stressful part of the CEO job. I’d always relish doing the fun stuff like formulating strategies, designing new products, or working on new marketing programs. But I frankly dreaded having to deal with staff performance reviews and issues, compensation decisions, or above all coping with the loss of a key employee.

I know I’m not alone. In discussions with other CEO’s over the years, I have been struck by how many of us struggle with the people side of the business. There are many reasons for this that I won’t get into now. But suffice it to say that your success as a CEO will be greatly determined by your ability to build and maintain a strong team. Here are some things I discovered over the years that you might find useful:

·         Recognize that finding the right people is and always will be an ongoing, high priority CEO responsibility.Depending on the size of your company, you may be hiring all the new employees yourself or only your direct reports. In any case, like it or not, it’s ultimately your responsibility to make sure you have the right people at all levels. And, the bigger your company gets, the more important it becomes. No matter how robust your business model is in theory, without staffing it with the right people you’ll have an empty shell or at least an under-performing business.

·         Hire based on the requirements of your business model.One of my favorite expressions is a paraphrasing of a statement from Alice in Wonderland’s Cheshire cat—“If you don’t know where you’re going, any path will get you there.” You can’t possibly hire the right people until you have decided what business design will enable you to get and sustain a competitive advantage. The requirements of that design (which includes the corporate culture you need to create) will dictate the talents and character traits needed in each key position. An obvious example—if you want your company to be a leader in product design, you obviously will need a world class head of that department.   

·         Hire people with a track record of appropriate accomplishments. Once you know the position(s) you need to fill and the things that the holders of those positions need to accomplish, hire people who have proven, based on past history, that they can accomplish it. Anything else is an expensive crap shoot. “Behavioral interviewing” is an important tool to have in your company’s recruiting toolbox to help find the right person—with not only the knowledge and skills needed to do the job but also the strength of character. If you’re not familiar with this technique, I’d recommend the book Hiring 3.0 by Barry Shamis. Done well, behavioral interviewing will reveal knowledge, skills, initiative, and character and has been proven to be more accurate in predicting success on the job.    

·         Don’t hire until you’ve found the right person. It is all too common to hire the best of the people you’ve interviewed rather than a person who can really do the job long term. Typically, you’re under pressure to fill a vacant position that’s causing you and your company a lot of pain until filled. Succumbing to this pressure is how a lot of hiring mistakes happen. In picking key employees or marriage partners it’s always better to wait for Ms. or Mr. Right to come along.   

·         Monitor the satisfaction of “stars” at all levels in the organization. Every company has critical employees in key positions. Make sure you know who the “stars” are and set up a process that minimizes the possibility of being blind-sided by having one of them move on unexpectedly. You can do this via regularly scheduled direct or skip-level 1:1’s or periodic informal discussions.

·         No matter how good you are at recruiting and retaining, you’ll make some hiring mistakes and you’ll lose some good people. While you certainly can and should do everything you can to minimize mistakes, you’ll never totally eliminate them. It’s just too difficult a process to always get right. 

·         Correct hiring mistakes quickly. When you have the wrong person in a key position, it is costly in multiple ways. It diminishes your company’s performance. It eats up your time. It demoralizes other employees. Fight the tendency to put it off because it’s too painful to make a change or you think you’re being too critical. The quicker you correct the situation, the better off your company will be. Believe me.

·         The time will come when someone who was the right person no longer is. This is a tough one. As your company grows and the world changes, some of your long-term, loyal key employees will no longer be the right people for the jobs they hold. What do you do? The best thing for the employees involved and the company is to take action, not ignore it. In my experience, it’s usually possible to offer them a lower level position that fits their skills and, if communicated properly, they will accept and in fact appreciate it. Most of the time they are well aware they are no longer doing the job.       

A juvenile product manufacturer CEO has a lot of things on his or her plate. None is more important than making sure you have the right people “on the bus”. Among other things, the emotional dynamics of personnel management make it perhaps your most daunting challenge as you go about managing your business. Giving it the attention it deserves will pay dividends.     

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And You Thought Aggravation Was a Bad Thing

Posted By Ron Sidman, Wednesday, December 7, 2011
Updated: Tuesday, July 21, 2015

The headline on the front cover of the December 5, issue of Time Magazine reads, “Why Anxiety Is Good for You”. The article talks about how anxiety can be a positive force as long as you don’t react to it in an unhealthy way. I agree wholeheartedly when it comes to running a business. Certainly, juvenile industry companies have no shortage of things to be anxious about—whether it’s the typical things like competitive pressures and personnel issues or the daunting industry-specific regulatory challenges. I don’t have to tell you that building a successful JP business is very hard work. As a CEO, there are probably days when you wonder where you can find the strength to cope with it all.

The point is that you absolutely can and should use frustration, dissatisfaction, and fear to your advantage! I have this theory that most successful businesspeople (and athletes) are perfectionists to at least some degree. And, it is that constant emotional tension between the imperfect status quo and a more perfect vision of what things could be like that is the fuel that keeps them going. Show me a very successful person and I’ll show you someone who is “relentless” in the positive sense of the word. They are driven to close the gap between current reality and their vision of a more perfect world. In business, this “gap-closing” is the essence of “business development”—not to be confused with “business direction” which is the day-to-day management of the business as it exists today. You need to do both.

“Business development” is the creation and then continuous improvement of your business model. It doesn’t get done well by people who are content with the way things are. It gets done by people who have that “fire in the belly” caused by dissatisfaction. Of course, the trick is to not let the fire eat away your belly lining. Instead, you can convert anxiety into aspiration through a simple 5 step process:

1.       Create a culture of continuous improvement. When you or your staff members are anxious or aggravated about the way things are going, nothing is more demotivating than thinking this is the way it’s always going to be. Every good sports team I know of talks about getting better week after week. You can live through almost anything if you know that work is being done to fix what’s broken. As CEO, it’s your job to establish a corporate mindset that it’s everyone’s responsibility to keep making the organization better and better.

2.      Understand your current internal and external reality.In an earlier post, The CEO as “Chief Reality Officer” (link), I talked about some of the things you can do on an ongoing basis to stay in touch with current reality company-wide. Make sure you have an accurate picture of everything you and your staff can feel good about and whatever it is you need to be anxious about. A SWOT analysis is often the format used—internal Strengths andWeaknesses, external Opportunities and Threats.

3.      Create a shared medium-term (e.g. 3 year) vision. I encourage my clients to craft in writing a shared long-term vision(what you ideally want your company to ultimately be in the distant future) that probably never changes, but also a sharedmedium-term vision (e.g. where you want to be 3 years from now on the road to the long-term vision) that is revised annually as part of the business development process. It’s the medium-term vision that becomes the driving and guiding force. Just having it in place does wonders for company morale in tough times. Make sure it’s exciting and motivating while not being unrealistic. Not to go biblical on you, but remember Moses and his promise of “a land flowing with milk and honey”? That probably started out as a 3 year vision but ended up working reasonably well for 40 miserable years in the desert.

4.      Determine what business model changes/improvements (“strategies”) will close the gap. When you have an exciting picture of what things could be like in a few years, it’s surprising how easy and fun it is for you and your key staff members to come up with possible changes to your processes, product line, distribution channels, target consumers, etc. that will get you there. This is a creative process that lends itself to brainstorming followed by whittling the list down to the best options. 

5.       Implement the strategies. This is the toughest part. It’s like the difference between designing a new product and actually getting it to market successfully. Too many companies are very good at steps 1-4 and then fall flat on implementation because they don’t have a good process in place to create action plans, monitor progress, deal with the inevitable “real world” setbacks, and hold people accountable for results. Keep everyone’s eyes on the vision and make strategy implementation a company priority.

Remember, when you find yourself reaching for the Tums, you have a choice. You can take a woe is me attitude and beat yourself up or you can use your angst as fuel for your continuous improvement engine. And, don’t give in to the temptation to fix each problem that comes along in isolation or simply put out fires without fixing root causes. I can assure you you’ll be far better off taking a holistic approach like the one outlined above. 

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Getting Parents to Buy Your Products

Posted By Ron Sidman, Monday, October 31, 2011
Updated: Tuesday, July 21, 2015

One of the most common challenges for my JPMA CEO Mentor Program clients is how to market their product(s) to consumers. How much should they spend to stimulate consumer demand? Should they advertise? What’s the role of PR? How effective is social media marketing? And, of course, this is all complicated by the fact that no company, small or large, has extra piles of money lying around waiting for a place to be spent.

As anyone who has read my previous writings or worked with me will recognize, I recommend that CEO’s adopt the mindset of having a business model that is a perpetual “work in progress” that you are continuously improving. Marketing should be looked at as one cog in the business model wheel. Based on my own experience and what I observe in the marketplace today, here’s a sequence of questions that could lead you down the right marketing path for your company. And, as you will see, I don’t necessarily think that conventional advertising and PR need to be a priority for most JP companies. Let’s start with the basics.

1.      Do your products really, truly have a competitive advantage at the price you are charging? No amount of marketing is going to make a weak product successful. If your products aren’t up to snuff, fix that first before wasting resources on building demand. In today’s world of easy access to product quality and price comparison information, you can’t fake it. And, be honest with yourself. It’s very easy to fall in love with your own creations even when competitive products are objectively superior.


2.      How and where do your consumer customers make their buying decision? Whether the product is a self-purchase or a registry/gift item, it’s probably accurate to say that the mom is the decision-maker. But, how does she make her decision regarding your product(s)? If you don’t have a handle on this (and aren’t periodically checking to see if things are changed), you’ll be possibly wasting a lot of marketing dollars.

For some categories like nursing, car seats, or monitors, moms often most trust recommendations from friends with babies or reviews from resources like Baby Bargains or For cribs and other furniture, in-store personnel might be a big influence. For products like rattles and teethers, the purchase decision may well be made by moms without much outside input and not until standing in front of the display. Whatever your consumer’s buying process is, it should determine where you concentrate your communication efforts.


3.      How much of your resources can you afford to spend on marketing? I don’t believe in marketing on faith. Every company ultimately has to live within its means. And every dollar you spend needs to provide a return on the investment. So, when it comes to establishing a marketing budget, you need to look at the cost and benefit sides together. The questions are, (a) specifically what measurable things are you trying to accomplish in what time frame, (b) how much will it cost, and (c) does that make financial sense? Beware of marketing agencies that say, tell me how much you want to spend and we’ll spend it. Instead, they should be asking what outcomes you are looking for, telling you how much it will cost to achieve those outcomes, and holding themselves accountable for achieving them.


4.      What’s the most cost-effective marketing process for you? Once you’ve made sure your products are in fact superior to a sufficient segment of the market, you understand how consumers decide whether or not to buy your stuff, and you know what marketing needles you are trying to move and how much you can afford to spend to move them, you’re ready to design (or redesign) the marketing process portion of your business model. Given the importance of word-of-mouth in the juvenile marketplace, one of the first and most cost-effective opportunities you might want to look at is leveraging your existing consumer customers—as few or as many of them as you may have. They could easily become your “consumer sales force”.

One of the best marketing programs we ever created at The First Years was what we called the “Parents’ Council”. It started in the early 70’s as just a periodic gathering of moms who used our products and lived near our headquarters. Eventually it expanded via the internet to include many thousands of parents (mostly moms) nationwide. To this day, I run into people who tell me they were proud members of the Council and really appreciated the way we interacted with members. If I were doing it all again, I would be even more aggressive in trying to get everyone who bought one of our products to join the Council and even more diligent about making sure every member became a raving fan and enthusiastic spokesperson for our brand.

The way you can fuel the word-of mouth engine is first by having great products, but then by establishing ongoing positive relationships with the people who buy and like your products. If you’re nice to them, they’ll have positive things to say about your brand and the ball will start rolling. You can sign up people via inserts in packages, on your web site, or via social media. Once they’re on board, maintain an ongoing mutually beneficial dialogue. Help them with their issues, provide member benefits and purchase incentives, provide member-only information, ask their opinions, get reactions to new designs, make them realize you care. And, if you sell multiple infant/toddler products as we did, you can bring your other products to your customers’ attention on an age-appropriate timed-release basis. Finally, (see question #3) you can track effectiveness by seeing how many new members of your “club” were influenced to buy your products by existing or past club members.

Hopefully, this gives you some new things to think about when it comes to spreading the word. Don’t be afraid to try new marketing approaches compatible with the rest of your business model and institutionalize what works.  



Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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Getting the Most Out of ABC

Posted By Ron Sidman, Saturday, September 10, 2011
Updated: Tuesday, July 21, 2015

Many juvenile product companies have at times questioned the value of the annual trade show. However, as long as retail customers are willing to make the trek, there are some highly beneficial things that can be accomplished at an industry-wide exposition, even beyond what you might expect.

To take full advantage and make the best use of your time there, you need to go in well-prepared and with the right mindset. Here are some things you can do in Louisville to maximize the return on your trade show investment:

·         Make sure you are presenting an ideal corporate image.In this era of virtual companies, on the show floor you can still look like a major force in the industry even if your headquarters is a desk in your living room. Of course, it’s important that you have crystallized in advance your compelling corporate competitive advantage—what I called a “superiority theme” in my previous post. Everything your company shows, does, and says at the show should reinforce this. While it may be too late to change the design of your booth for this year, at least make sure you have reminded your staff of the core message(s) you want to emphasize. 

·         Think of the show as part of your ongoing industry market research. While your number one priority at the show is always presenting your product line to customers, a close second should be proactively gathering information about your current and future competition as well as industry trends. In a previous post, The CEO as “Chief Reality Officer”, I talked about the responsibility CEOs have for being aware of what’s really going on inside and outside their company. I’m not suggesting you use a periscope to peer over the walls of competitive booths. There’s a lot to be learned by just walking the show, attending show events, and of course networking. Make sure you allocate enough time for these activities.

·         Observe how effective your sales force and reps are with customers. During the course of the show, you will have a golden opportunity to observe just how well your sales people know the key customers and how well they deliver the message. This is something that otherwise would take you hours of sitting in airports and flying around the country to accomplish. And, don’t feel uncomfortable about listening in. Remember, like a coach on the sidelines, your job is to be aware of the quality of your team’s performance and to make sure that appropriate training or remedial action takes place.

·         Take advantage of the opportunity to meet senior level managers at retail accounts. Under normal circumstances, it’s difficult just to get a few moments with the buyer in his or her office. At The ABC Show, you will have the opportunity to get exposure to senior level retail managers as well and in an atmosphere where you can position your company and products in the best possible light.  Making contacts at the show can also pave the way for follow up communication without appearing like you are going over the buyer’s head.

·         Get early trade reactions to products in development. In addition to promoting your existing and new products, don’t miss the opportunity to get early trade input on products you have in development. All you really need is a sketch or a model. There’s a confidentiality tradeoff here so be careful who you show things to. But, you can avoid some serious mistakes and improve the ultimate rate of sale by factoring in retail buyer perspective on design, packaging, and pricing at an early stage. It may also be a way to learn if there’s a competitive product out there you need to know about. You should be able to tell by a buyer’s reaction whether or not your concept is unique and appealing.

Best of luck at this year’s show. Hope to see you there!


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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Creating a Steady Stream of Great New Product Ideas

Posted By Ron Sidman, Monday, August 22, 2011
Updated: Tuesday, July 21, 2015

The lifeblood of many successful juvenile product companies is the regular introduction of innovative new products. Products have life cycles. At some point, whether because of new competitive entries or changing consumer tastes, sales of running items will start to tail off. So, if you want your sales to keep growing, and you’ve reached full distribution of your current line, you probably need to keep introducing new products to replace the tired old ones. Also, as I mentioned in an earlier post, it’s always safer to have a “diversified portfolio” of products rather than banking on just a few. Imagine then how much more successful your company could be if you could consistently generate a steady stream of great new product ideas year after year.

Many juvenile companies, even some larger players, rely heavily on submissions from outside sources or getting the US distribution rights for products found overseas. These are workable tactics and you certainly can be successful with those approaches. But, what if you didn’t have to depend on outsiders for great ideas? What if you could eliminate expensive royalties and limiting distribution contracts?

New product development is very much a numbers game. The more good ideas you can pour into the wide front end of the product development funnel, the more successful new product introductions will come out the other end. For consistency of quality and quantity year after year, you need a proactive idea generation process that keeps that funnel full of promising concepts. Here are some activities that could be part of your process to control your own new product destiny: 

·         Start with an understanding of your “corporate competitive advantage”. Before doing anything else, make sure you have a unique “superiority theme” that will run through all your products. For example, it might be exceptional durability, contemporary design excellence, superior facilitation of child development, state of the art technology, extended use for older ages, unparalleled convenience, or some other attribute that you can broadly apply. Having and consistently utilizing such a theme will both help you generate new ideas and help ensure their success in the marketplace.

·         Look for interesting products in the juvenile marketplace that would be even better if you put your stamp on them. This is one of the easiest and surest ways to generate new product ideas. If you have a sufficiently strong “superiority theme” (aka brand identity) of your own, you can succeed just by applying your secret sauce to a concept that already has shown traction with consumers. If you’re the “design aesthetics excellence” company, you could successfully compete by doing knock-em dead design versions of existing products. I’m not talking about “knock-offs”. That’s typically not a viable strategy. I’m talking about leveraging your unique brand strengths to create a product that is far more appealing to your target market than what the competition is offering. The reality is that often the company that first introduces a product concept is not the one that ultimately has the most success with it. What would be your brand’s version of that product is the actionable question.    

·         Immerse yourself in the consumers’ world and find ways to make their lives better. Every juvenile product company is in business for one purpose—to make the lives of new parents and their children better in some way. Parents perform multiple “processes” in their roles as caretakers—nurturing, feeding, bathing, grooming, educating, transporting, and so on. What if you approached new product idea generation as an exercise in parenting process improvement? What if you or your staff routinely observed how parents are performing these processes now and routinely looked for ways that they could do it with less stress, with more enjoyment, in less time, for less cost? Again, make sure you always look at things through your “superiority theme” lens. You’re bound to find ideas you can add to your list.

·         Proactively scan other marketplaces for new concepts that have juvenile product applications. One day a number of years ago, my wife came home from the supermarket with a new product for storing leftovers called GladWare. As you will recall, this Tupperware-like product was appealing because of its low cost and “semi-disposability”. Since my company was in the business of making cups, bowls, dishes, and utensils for toddlers, it occurred to me that there might be an application for this thin-wall injection molding technology in juvenile products. The Take and Toss line of products we developed quickly became by far our highest volume product group and is still highly successful today. Of course, it’s not necessary or desirable for you to wait for your wife, husband, or partner to bring home the stimulus for your next great creation. You and your staff could make a practice of doing periodic scans of new ideas and technologies in other fields. 

If developing successful new products year after year is important to you, you need to decide which techniques your company can best use to “mine for gold” and then apply them on a consistent basis. At The First Years, our marketing and design folks collaborated on idea generation using techniques like these as a part of their overall responsibilities. But, everyone in the company was encouraged to submit new product ideas and was recognized for it when they did. In future posts, I’ll be talking about how you can screen and enhance these ideas as they move through the product development process.   


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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The CEO as "Chief Reality Officer"

Posted By Ron Sidman, Sunday, August 7, 2011
Updated: Tuesday, July 21, 2015

Do you really know what’s going on—inside your company and in the marketplace? Chances are that if you’re not getting the business results you expected, the answer might well be no. Understanding reality, current and probable future, is one of the things all CEO’s need to own. It’s only from that understanding that you can determine whether the business model you have in place is appropriate to get you where you want to go or whether it’s time for a modest or major redesign.

You’d think that understanding what’s really happening would be simple. After all, it’s all around you. All you have to do is pay attention, right? Not so easy. What complicates things is that there are two important dimensions of reality you need to grasp—things you can readily measure (“objective reality”) like sales, profit, and service level, and things more intangible (“subjective reality”) like employee concerns, growth opportunities, brand reputation, and competitive threats. Many companies do a reasonable job of tracking objective reality with “key performance indicators” of one sort another. But these measurements often tell you only what’s happening—not why it’s happening, how much better you could be doing, or what’s creeping up on you behind the scenes.

To get the full picture, you need to monitor both reality dimensions. Unfortunately, subjective reality is not as easy to uncover. In fact, there are probably people working hard to hide the “story behind the story” from you. Or, you may actually be inadvertently making it difficult for them to communicate with you. That includes your suppliers and your employees. And, even your customers are not going to go out of their way to tell you how they really feel and are likely to paint a rosier than true picture if you ask them. The problem is only compounded as you grow and add management layers. So what can you do?

Every business model should include a feedback system that not only gives you the numbers you need but also makes it super easy for employees, suppliers, and customers to provide you with crucial subjective feedback as well. Here are some suggestions to help you keep your fingers on the subjective pulse of your business.

·         Make honesty, transparency, and continuous improvement part of your culture. This has to be step one.If you really want to know what’s going on, your company’s culture has to encourage visibility of the good, the bad, and the ugly. And, this has to be a two-way deal. You won’t hide important information from your employees and they won’t hide things from you and each other. It also has to be understood that top management’s job is to ensure that what’s supposed to be happening is actually happening at all levels of the company. The rationale for all of this is continuous improvement—something that is essential to the ongoing success of the company and therefore in everyone’s best interests. You can’t fix things if you don’t know they’re broken.

·         Make it easy for employees at all level to tell you what’s really happening. I used to gain a lot of insight into the tenor of the times at my company through a monthly “lunch with the president” with groups of randomly selected employees. Another practice is to hold so-called “skip-level” 1:1 meetings with your direct reports’ direct reports. If done right, these and other techniques can be very valuable for both gaining insight into how well your direct reports are managing as well as recognizing up and coming talent. With both of these initiatives, you need to be sensitive about what you ask and how you react to what you hear or you’ll risk discouraging the very openness you’re looking for.          

·         Get out of your office and look around. There are some things you can only observe on the “battlefield”. Management by Walking Around” (MBWA) is nothing more than another mechanism for staying in touch with subjective reality. Your personal schedule should have set times to visit key venues and mingle with the troops and customers. Sam Walton is famous for annually visiting every store in the Wal-Mart chain until there were too many to visit. When there, he walked around observing, talking to everyone (including delivery truck drivers), and taking notes. When he got back to Bentonville, he fixed what needed fixing.

·         Check in regularly with your retail customers. Even though your sales force has primary customer relationship responsibility, do you make a habit of periodically phoning or visiting key retail customers without the salesperson present? This can be difficult if you’re an introvert, which many CEO’s are, but I believe it’s critical. Retail buyers and managers will tell you things they’d never tell the person calling on them—especially if you ask probing questions or solicit reactions to possible new policies or services. Above all, you don’t want to find out you have a problem by losing an account. 

·         Find ways to engage with consumers. Social media is changing the dynamics of communication to and from consumers. Certainly you should find out where in cyberspace existing and potential customers are talking about your products and regularly listen in to what they are saying. But there’s also no substitute for a dialogue where you can present specific product or service ideas, get reactions, and follow up. While your staff will handle the bulk of this activity, you’ll find it both revealing and stimulating to periodically dialogue directly with consumers yourself—either online, in focus groups, or even at baby fairs.

Even large, seemingly well-established companies have failed because the CEO assumed he or she knew what reality was rather than always obsessively seeking it. The one thing you can be sure of is today’s reality will not be tomorrow’s. Are you as the CEO doing what you need to do to stay in touch with both your company’s objective and subjective reality?


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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Your Pricing Policy: Opportunities and Dangers

Posted By Ron Sidman, Thursday, July 21, 2011
Updated: Tuesday, July 21, 2015

Considering how critical pricing policy is as a component of a business’s design, it is surprising how many companies of all sizes often make pricing decisions in a reactive, inconsistent way as opposed to being directed by a thoughtful, long-term policy tied to corporate purpose, vision, and values. The potential negative results can include:

·         Failing to optimize retail price points

·         Encouraging retail buyers to always bargain your price down

·         Destroying credibility with buyers

·         Communicating a lack of confidence in a product’s potential

·         Undermining the value perception of consumers

·         Inability to sustain consistent overall profit margin because of profit disparity between customers

A well-crafted policy should address both how you initially set your base prices product by product as well as how you vary prices for the same product customer to customer. This is a complex topic that I can only touch on briefly in this blog. But, let me give you some suggestions from my own experience that might help you improve your profitability.

1.       Set base prices for products based on consumer perceived value not cost. Money is often left on the table by not pricing products high enough when you have the added value to support it. Consumer surveys and/or focus groups comparing your offering to the competition, if any, can help you get a sense for consumer perceptions before you finalize the price. The results may surprise you. On new products, if in doubt, go out at the higher price. You can always come down but you can’t go up. Remember that the price you set communicates both to retailers and consumers the level of quality and the confidence you have in the product. 

2.      Understand current marketplace reality. You’ve got to do your homework long before you start walking into those lions’ dens known as buyer’s offices. Retailers tell me they are shocked at how poorly prepared company personnel or sales reps often are. If you can’t offer a retailer pricing that allows them to meet their margin requirements while being competitive at retail with their principal competitors, maybe you shouldn’t be presenting the product to them at all. If you don’t have at least a sense of what your competition is charging for comparable products, you could be embarrassed. If you don’t know the retailer’s requirements up front with respect to sales allowances, special requirements, and other deductions, you might be pricing too low from the get go. 

3.      Assume that buyers and employees are going to change companies. Being able to sleep nights was always one of my priorities and I assume it’s one of yours. There’s no reason why you can’t or shouldn’t establish a pricing policy that can be justified no matter who becomes aware of it. You should expect that the prices you charge different customers for your products are going to become public at some time. And, trying to explain it by saying to buyer B that buyer A got a better price because she threatened to drop the product is not going to make anyone happy. Does that mean you have to charge everyone the same? No! But there ought to be an acceptable rationale, a set of guidelines, to justify the differences. Any customer that meets the guidelines should get the same price.

4.      Aim to equalize profitability by customer. Arguably the best basis for price variation by customer is equalization of profit contribution percentage*. It’s also the fairest. Why shouldn’t every customer contribute proportionately to your bottom line? Why should customers that pressure you for extra allowances, are costly to service, or abuse return policies get a better deal than other equal volume customers? Instead, build these costs into your price. Of course, you typically want to give better prices to your larger customers. Profit contribution-based pricing justifies and enables that because economies of scale reduce direct costs. Another benefit to equalizing profit contribution by customer is that you won’t find your margin suddenly eroding because the balance of your sales shifts to lower profitability customers. 
* Profit Contribution Percentage = (Sales – Direct Costs) ÷ Sales

5.       Be willing to walk away.This is a tough one, but if you or your salesmen are routinely lowering prices strictly based on pressure from customers, you’ve got serious problems. If you can’t set and hold to fair prices for your products, you better take a cold hard look at your competitive advantage product by product and your overall business model. Personally, I think you need to establish a reputation with buyers that the price you quote is the price they pay—unless the buyer is willing to work with you to pull some cost out of the product in some way so profit contribution is maintained (package change, minimum quantities, etc.). If you simply crumble under the pressure, guess what’s going to happen every time you quote a price to that buyer for evermore? You may lose some business in the short term with this approach but you’ll be better off overall by far!

6.      Proactively add value to your products. Products have a life cycle. You should enjoy the widest profit margin when the product is new and your competitive advantage is greatest. But, as you know, nature abhors a vacuum and competitors will flock to grab a piece of the action. Don’t wait for this to happen and then react. Create a product improvement process, if you don’t have one, and systematically improve especially your higher volume and most profitable products at least annually so that you can preempt competition without having to lower price. Don’t let your products become commodities.

Establishing an effective pricing policy can have an enormous impact on your level of business success. It’s well worth taking the time to think it through with your staff, document it, communicate it, and enforce it. Have you done this yet?

Questions? Comments? Let me know what you think.

Want to learn more? Sign up for a Skype session through the JPMA CEO Mentoring Program Page. It is a cost effective way to learn some tricks of the trade!


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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Working with Toys R Us

Posted By Ron Sidman, Thursday, July 14, 2011
Updated: Tuesday, July 21, 2015

Jerry Storch, Chairman and CEO of Toys"R"Us, is a very impressive and successful leader. In his breakfast keynote presentation at JPMA’s recent Summit in DC, he made it clear that his company, already one of the dominant retail forces in the industry, intends to continue to try to gain market share wherever it can in the US and abroad. The phrase, "We’re playing to win", has been used very successfully by Mr. Storch to motivate his company in this direction, evidenced most recently by reported market share increases in 2010 at the expense of his competitors.

But while leading in toy and baby market share and becoming the industry "voice of authority" is their goal, it was also clear from Mr. Storch’s very presence at our Summit and his comments about vendor partnerships that they also recognize how important branded suppliers are to their business model.

Having said that, it’s possible his comments about the critical importance of exclusive products and their intent to accelerate their private label program sent shivers up the spines of some of the manufacturers in attendance. This is not new news or a change in strategy for TRU. These strategic themes go back to at least the Marty Fogelman era if not before. As Mr. Storch admitted, TRU simply does not have the cost structure to compete with the likes of Walmart head to head on price and therefore needs as much as possible to have a different set of products in their stores. He highlighted Mayborn’s Tommee Tippee feeding line as an example of an exclusive TRU/BRU program that has been successful for both Toys"R"Us and the supplier.

The Challenges:

·         Those of you who count TRU/BRU among your customers are very fortunate in many respects but you also have some hairy issues to deal with.

·         Can you and should you create exclusive products for them?

·         Is it possible that one of your high volume, high profit products could appear some day in a Babies"R"Us private label package—a brand that Mr. Storch says scores very well with consumers.

·         Should you take the initiative and provide private label products to them yourself as Mr. Storch suggests?

·         What are the implications of TRU/BRU becoming a higher and higher percentage of your total business?

Some Suggestions:

Keep working at maximizing your competitive advantage.

Unless you’re Procter and Gamble, you are never in a great bargaining position with large retailers. And even P&G occasionally gets put in their place by the big guys. However, the more appealing your brand and products are to consumers versus the other guys, the stronger stand you can take on all these issues and still remain a supplier. Increasing competitive advantage is what strategic planning is all about.

Design your products with the ability to create multiple versions.

Exclusives of one sort or another are a fact of life in this industry. When you are in the design stage, plan for multiple versions in a way that minimizes tooling, production, and inventory costs.

Continually improve high volume products.

You can’t totally stop knock-offs either by competitors or retailers, but you can stay ahead of the game by annually upgrading your key products. That way they are always superior to copies whether by competitors or private label. Of course, you should patent whenever you can as long as the patent is strong enough.

Stay true to your core competencies and strategy.

Be careful about trying to be all things to all retailers. If your competitive advantage comes from being the low cost producer, it might make sense to consider being a private label provider to retailers. However, if your culture and product line is all about superior quality and performance, think three times before getting into it because you won’t be leading you’re your strength and you’ll dilute the focus of your staff.

Diversify, diversify, diversify.

That maxim that applies to investing applies just as much to your business. As the big retailers get bigger it becomes more difficult, but you will sleep better at night to the extent you can keep any customer from getting so big that losing all or part of their business could be fatal. Diversifying your customer portfolio needs to always be a strategic priority.

What are your thoughts? Submit a comment or question and I’ll respond to it.


Disclaimer: No warranties, express or implied, are contained herein. Purchasers, or users, of this information acknowledge that any errors or omission in the performance of the material contained herein or, any injuries resulting from its use, are the sole responsibility of the purchaser or user, and not JPMA or the author. Opinions expressed are those of the author only.

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