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Shifting From Unconditional Spending To Conditional Investment

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Has your trade spend become the cost of doing business? Are you getting sufficient return from your investment? Do your terms drive sales, consumption, or market share for your brand? For too many consumer goods companies, the growing list of fees paid to a retailer are showing up on the P&L as a gap between gross and net sales that delivers no appreciable value.

In truth, your terms should deliver mutual benefits to you and your customer. You can only achieve this outcome by negotiating better terms. The “pay to play” approach is toxic to your bottom line. So let’s purge that mindset.

What are unconditional terms?

A term that has a condition attached-if you do that, you get this-provides some control for the supplier. Unconditional terms are those fees that are paid to a retailer regardless of the outcome. These “pay to play” expenses: listing and assortment fees,trading discounts, gondola fees, mailers, to name just a few. If you want to access the shoppers in a particular store, you pay the price. And the larger the customer, the bigger the fees-based on the assumption that they (a) have more shoppers and (b) operate more efficiently.

Take the listing fee, which you pay to a retailer to produce space for your product in-store. What costs are incurred by the retailer for listing? It’s marginal. The systems are all in place. It certainly does not cost the retailer the amount that they charge, but companies regularly pay. In return, the retailer gets a boost to the bottom line, while your “investment” has not created any change in your business performance. Without positive change, you get no ROI”.

Even some terms that are masquerading as “conditional” are actually unconditional because they are so loosely constructed. A manufacturer might agree to buy 100 gondola ends. While that sounds like it has a measure of accountability on the retailer’s part, the retailer is only committing to the gondola itself, not guaranteeing the location. Your shampoo, for example, could be co-located with pasta sauces, just to fulfill the agreement. This position adds no value to your brand.

Agreeing to a specified number of slots in mailers for the year also seems conditional. Once again though, the manufacturer has no controls other than committing to the quantity of slots. The retailer dictates the pricing, the date of the mailing, and the distribution. And these mailers will happen with or without the manufacturer’s participation, so the actual cost of including a product is negligible.

An industry outsider would look at this practice as a waste of money-and they’d be right-but they can’t see the underlying cause. The fees exist because the system is flawed. As retail has consolidated, larger retailers have used escalating demand for in-store visibility as a lever to extract higher levels of other income. Willing manufacturers have fueled the fire initially unwittingly and more recently to maintain close relationships with large retail customers. As a result the gap between gross and net sales will continue to escalate unless manufacturers find new ways to negotiate terms that are more effective.

Shift to true conditionality

We are currently seeing as much as 50 to 80 percent of trade spend paid toward unconditional terms. Best practice guides you to strive for 10 percent. Transferring from unconditional to conditional terms requires the manufacturer to demand that terms are tied to execution of activities that enhance the mutual performance of the business: Invest in things that grow your top line by changing shopper behavior-influencing shoppers to buy more product and more often. Invest in availability, communicating your brand message, and presenting attractive offers.

Then you should work on the bottom line. Find ways to do business more efficiently and be more committed to those terms that are conditional. We see businesses that have an overrider on returns but still accept returns, or they pay early payment discounts even when the payments aren’t made early.

Take your trade spending money and make two things happen:

1. Apply them to activities that are mutually profitable for you and your customer; and

2. Attach more conditions. If your retailer wants you to pay a listing fee, put in writing what you want (e.g., guaranteed amount of space per store, a specified number of facings, a gondola end for the launch, placement of in-store promoters, free access to the CRM database, and targeted messaging for key shoppers). When those conditions are met, the listing fee will be paid. If you don’t get the schedule of those items, you prorate the listing fee.

When you shift to conditional terms with a clear set of expectations in writing, you focus your money on those actions that will bring results.

Selling change to your retailer

Naturally, a retailer who is accustomed to collecting fees on an unconditional basis might balk at a sudden shift in the system. You begin by understanding the needs of the retailer. They have no interest in building your business. Their sole focus is to increase their revenue. But if you can show them how your plans drive more shoppers to their store, where they will spend more money and expand the category, you will have their attention. Focus on the strategic and commercial benefits to your customer. By investing time in preparing a strong shopper-based sales proposition that is tailored for the customer, you not only increase the profitability with that customer, but you build a stronger relationship as well.

And once you negotiate conditional terms, hold fast to them. Rigorously adhere to the terms. If you agree to 100 gondola ends with a retailer who then gives you only 50, prorate their account. By monitoring compliance, you demonstrate that you are committed to the agreement and the relationship.

The process of change will take time. Guide your retailers into this system one step at a time. Prepare a plan for your negotiation, one that clearly outlines the key benefits to your customer. If you view the two businesses as a joint venture, looking out for mutual interests, both sides will win.

For more information on constructing effective trade investment frameworks or negotiating better trade terms, contact me.

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Source by Toby Desforges

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Where to Find Those Efficient and Hardworking Affiliates?

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Everyone wants a hardworking affiliate, employee, associate, partner, or even spouse, and why not? It’s the next best thing to doing the work yourself. However with the massive outbreak of work and income opportunities available online, how can you beat everyone else and find that one (or more) ideal person who will make your online business explode with success? Here are some of the most ingenious and uncommon ways to snag the idea affiliates for your affiliate program

Direct Sales Agents

Direct sales people are really one of the most enterprising, hard-working individuals in business. They mostly work on commissions or rebates and are willing to literally go door-to-door offering their products to anyone and everyone they bump into. Imagine how much easier their job would be if they could be an affiliate and simply work via the Internet and a mobile device or desktop.

Also, most direct sales people tend to carry more than one brand in their product arsenal so signing up as an affiliate would be almost the same type of work but using a different approach.

Colleges and Universities

Many college kids would be interested in a part-time income opportunity if it would mean funds to help pay for their education, loan, or partying. All you have to do is make sure to offer them products they can endorse as a student.

Freelancers

Did you know that the U.S. Census Bureau’s latest annual report show that 75% of U.S. businesses used freelancers in 2011? Freelancers earned a whopping US$990 billion in 2011 which is a 4.1% increase from the previous year. The only industries where the number of freelancers decreased were in insurance, finance, and construction. Most probably your affiliate program isn’t a part of these 3 industries.

Furthermore, online business and finance experts are predicting the growth to increase incrementally every year even with an economy that is improving. People just want income security and more control over their earnings. With the spate of lay-offs, it’s understandable why many would prefer to work as an affiliate than as an employee.

Scout For Them At Affiliate Conventions

There are annual affiliate conventions held in different cities around the country. You should try to catch one when it is held somewhere near your location. The average turn-out for these types of conventions has increased regularly over the years. Last year, many of them were sold out weeks before the event.

Advertise!

The US Census Bureau has said that as of 2012, 15% of Americans are poor, 43% of young adults depend on their parents to some extent for money. Even more surprising is that the median income of young adults in 1982 was $31,583 and last year it was $30,604 for the same age group! Income is dropping and people are looking for ways to earn additional income outside of their 9 to 5 jobs. That’s where you can come in playing the hero and helping others realize their dream income.

Finally, go online and talk about your product. Make the affiliate marketers come to you and have the luxury of picking the best candidates. You will need some help in marketing your affiliate program so target a marketer who’s experienced in affiliate program and SEO.

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Source by Lina Stakauskaite

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Recession Is Here… Six Costly Mistakes Home Sellers Make During Recessions And How To Avoid Them

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The U.S. is officially in a recession. What is a recession? A recession is a business cycle contraction or general economic decline due to significant drop in spending and other commercial activities. Most pundits and politicians will blame Covid-19 crisis for the recession, but even pre-Covid-19 the proverbial writing was on the wall.

The U.S. had over 120 months of economic growth, which was the longest expansion in the modern history. Other indicators, such as negative yield spread on treasuries (long term bonds having lower interest rates than short term T-notes), were pointing to an imminent change of the economic cycle and an impending recession. The only real question was: when and how bad?

Then Covid-19 came… If the cycle was going to change anyway, Covid-19 acted as a huge and unexpected accelerant to make the recession much more immediate and severe.

Inevitably during recessions all classes of real estate, including residential homes and condominiums, will be negatively impacted as lower consumer spending and higher unemployment rates affect real estate prices and marketing times.

Here are the six costly mistakes home and other real property sellers make during recessions and how to avoid them:

Mistake #1: This will pass and real estate market will be hot again soon

First thing to remember is that real estate cycles are much longer than general economic cycles. Even if the general economy recovers, which eventually it always does, a typical real estate cycle takes as long as 10 to 15 years. The cycle has four key stages: Top, Decline, Bottom and Rise.

Let us consider the last real estate cycle, which lasted approximately 14 years:

  • 2006 – Prices hit the Top
  • 2006 to 2012 – Prices Decline
  • 2012 – Prices hit the Bottom (Trough)
  • 2012 to 2019 – Prices Rise*
  • 2020 – Prices hit the Top
  • 2020 to? – Prices Decline

*NOTE: In 2016 the national residential real estate price index reached its pre-recession 2006 peak levels. It took 10 years for the real estate market to recover.

The way to avoid this mistake is to recognize that real estate cycles take years to run and plan accordingly. Additionally, nobody knows for sure when the prices will hit the top or bottom until after the fact.

Mistake #2: Low interest rates will make the economy and real estate market rebound

Between 2006 and 2011 the interest rates (Fed Funds) were continuously cut by the Federal Reserve Board and went from low 5% to almost 0%. However, that did not stop the real estate recession and depreciation of property values.

Undoubtedly, low interest rates made the economic decline and real estate recession less severe and saved some properties from foreclosures, but it still took six painful years for the real estate market to hit the bottom and then four more years for the prices to go back to their pre-recession levels.

Some markets had never fully recovered. For example, residential home prices in some parts of California, Arizona and Nevada are still below their 2006 highs.

To avoid this mistake, one needs to realize that although low interest rates help stimulate the economy and the real estate market, they do not cure them.

Mistake #3: I don’t need to sell now, so I don’t care

If you do not need to sell until the cycle plays out, which typically is over ten years, then you will not be as affected, especially if you have a strong equity position, limited mortgage debt, and solid liquid assets.

However, it is good to keep in mind that “life happens” and either professional or personal circumstances can change and we may need to sell property before the downturn runs its course.

Furthermore, if a property has a mortgages and its value declines to the point being “upside down,” meaning the mortgage loan balance exceeds the value of the property, then the options of selling, refinancing or even obtaining an equity line of credit, will be significantly limited.

This does not mean that everybody should be rushing into selling their real estate if there is no need to do so, just keep in mind that circumstances may and often do change and property options will be affected, so plan in advance. As one wise proverb says: “Dig your well before your thirst.”

Mistake #4: I’m selling, but I won’t sell below my “bottom line” price

This is a common and potentially very costly mistake. Generally speaking, every seller wants to sell for the highest price and every buyer wants to pay the lowest price. That’s nothing new. When selling real estate, most sellers want to achieve a certain price point and/or have a “bottom line.”

However, it is important to understand that the market does not care what the Seller, or his/her Agent, think the property value should be at. The market value is a price a willing and able buyer will pay, when a property is offered on an open market for a reasonable amount of time.

Overpricing property based on Seller’s subjective value or what is sometimes called an “aspirational price,” especially in a declining market, is a sure first step to losing money. When a property lingers on the market for an extended period of time, carrying costs will continue to accumulate and property value will depreciate in line with the market conditions.

Additionally, properties with prolonged marketing times tend to get “stale” and attract fewer buyers. The solution is to honestly assess your selling objectives, including the desired time-frame, evaluate your property’s attributes and physical condition, analyze comparable sales and market conditions, and then decide on market-based pricing and marketing strategies.

Mistake #5: I will list my property for sale only with Agent who promises the highest price

Real estate is a competitive business and real estate agents compete to list properties for sale which generate their sales commission incomes. It is not unusual that Seller will interview several agents before signing an exclusive listing agreement and go with the agent who agrees to list the property at the highest price, often regardless if such price is market-based.

Similarly to Mistake #4, this mistake can be very damaging to Sellers, as overpriced properties stay on the market for extended periods of time costing Sellers carrying expenses such as mortgage payments, property taxes, insurance, utilities and maintenance.

Furthermore, there is the “opportunity cost” since the equity is “frozen,” and it cannot be deployed elsewhere till the property is sold. However, the most expensive cost is the loss of property value while the real estate market deteriorates.

During the last recession, we have seen multiple cases where overpriced properties stayed on the market for years and ended up selling for 25% to 40% below their initial fair market values.

The solution is to make sure that your pricing strategy is based on the market, not empty promises or wishful thinking.

Mistake #6: I will list my property only with Agent who charges the lowest commission

Real estate commission rates are negotiable and not set by law. A commission usually represents the highest transactional expense in selling real properties and is typically split between Brokers and Agents who work on the transaction

Some real estate agents offer discounted commissions, in order to induce Sellers to list their properties with them. But does paying a discounted commission ensure savings for the Seller? Not necessarily.

For example, if the final sales price is 5% to 10% below property’s highest market value, which is not that unusual, due to inadequate marketing, bad pricing strategy, and/or poor negotiation skills, it will easily wipe out any commission savings and actually cost the Seller tens of thousands of dollars in lost revenues.

The solution is to engage an agent who is a “Trusted Advisor,” not just a “Salesperson.” A Trusted Advisor will take his/her time and effort to do the following: 1) Perform Needs Analysis: listen and understand your property needs and concerns; 2) Prepare Property Analysis: thoroughly evaluate your property and market conditions; 3) Execute Sales and Marketing Plan: prepare and implement custom sales and marketing plan for your property; and 4) Obtain Optimal Results: be your trusted advocate throughout the process and achieve the best possible outcome.

Finding such a real estate professional may not be always easy, but it certainly is worth the effort and will pay off at the end.

In conclusion, this article has outlined six costly mistakes real estate Sellers make during recessions and how to avoid them. The first mistake is not understanding that real estate cycles are long and take years. The second mistake is a misconception that low interest rates alone will create a recovery. Another mistake is not realizing that circumstances may change and not planning in advance. Mistakes number four, five and six pertain to understanding the market value, proper pricing and selecting the right real estate professional.

By understanding and avoiding these mistakes, real estate Sellers have significantly better chances of minimizing the negative impact of a recession while selling their properties.

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Source by Robert W. Dudek

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Useful Tips To Build The Best Gaming Computer

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Every gamer will want their computer to be the best gaming computer among their peers. Sometimes, with a little knowledge and tips and tricks, it is possible to build the best gaming computer and show it off to your peers. This article will show you how:

1) You can’t get the best gaming computer from computer retailers

If you want to get the best gaming computer, you have to build your own. Different gamers have different requirement for their gaming machine. Unless you are willing to pay a high price, you will not be able to buy a commercial computer that fulfills all your gaming needs. The only option you have is to build your own gaming computer.

2) You don’t have to be rich to build the best gaming computer

It is not necessary to burn a hole in your pocket to build the best gaming computer. With some due diligence, do some market research and compare prices around the marketplace. Merchant such as TigerDirect and NewEgg give regular discount to their products and you could save a lot of money if you catch them during their promotional period.

3) Most expensive parts do not have to be the best part

Sometime, the latest model or the most expensive model does not have to be the best part for your computer. It requires various components to work together to form the best computer system. When choosing a computer part, what matters is how well it can integrate with the rest of the components. Compatibility is more important than individual performance. What use is there if you spend lot of money on the latest quad-core processor and find that your motherboard doesn’t support it?

4) You don’t need to change the whole PC to own the best gaming computer

It is a misconception that you have to change the whole gaming machine to build the best gaming computer. If you already have a good barebone system, what you need to do is to upgrade the necessary parts and your gaming computer can roar back to life instantly.

5) Brand is important

Unless you want to see your computer system malfunction every few days, it is important that you purchase the parts from branded manufacturers with strict quality control. Motherboard brand such as Gigabyte, ABIT, ASUS are some quality brands that you can consider

If you follow diligently to the tips stated above. You will be on your way to build the best gaming computer. While price can be an issue, it is better not to scrimp on important computer parts such as motherboard, CPU, RAM and graphics card as it will cost you more to upgrade in the future.

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Source by Damien Oh

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