Editor's Note: The decline in offline foot traffic is an indisputable fact. However, this does not mean that offline channels are no longer important, or that attention and investment should be reduced. Compared to embracing the endless stream of new retail formats, holding the fort of offline channels is more critical in the current volatile market environment. How to hold the fort? Only through meticulous cultivation and professional management to increase volume and efficiency. To this end, New Distribution, in collaboration with Mr. Cao Yang, former General Manager of Coca-Cola China's Key Account Management Group Channel, has launched a series of content titled "Key Account (KA) Management Practice," hoping to provide frontline channel managers with a complete methodology for managing offline key accounts in a "chaotic market." This series consists of about 20 issues in total, and this is the eighth issue, as follows.

This article introduces the Joint Business Plan.

This article will give you an in-depth understanding of three aspects: 1. The quality of current annual business plans is not high; you need to know what makes a good JBP. 2. An overview of the key components of an annual Joint Business Plan. 3. JBP is valuable in collaboration and emphasizes professional capability. Recently, Shi Jun started working on a Joint Business Plan. As usual, he wanted to consult Mr. Liu first, and after learning and understanding clearly, he would begin. Shi Jun: Mr. Liu, I am now starting to work on a Joint Business Plan. I have collected some materials, including the following:

  • Business review and data analysis
  • Identifying business opportunities through data
  • Determining business goals and strategies
  • Developing an execution plan
  • Implementing the plan
  • Measuring results and revising the plan Shi Jun: I feel these contents are quite complete. Is this all there is to a Joint Business Plan? Mr. Liu: I appreciate your proactive attitude in preparing in advance. Speaking of JBP, it is the abbreviation for Joint Business Plan. Mr. Liu: What you mentioned, including business review, data analysis, opportunity identification, and plan formulation, is the standard for a business plan and is also part of a JBP. Before doing a JBP, you need to know which ones are good and which are bad.

What is a professional and high-quality Joint Business Plan?

1. It's easy to go through the motions, but hard to be professional: The quality of current annual Joint Business Plans is generally not high. The Joint Business Plan was introduced to China from large international companies; it is an imported concept. Whether authentic or not, professional or not, many are constantly copied and imitated. What's the result? The current popular annual Joint Business Plans are generally of low quality and can be roughly divided into the following two categories: 1) Form over substance The main manifestation is that the enterprise and the retailer sign a cooperation agreement, with senior executives from both sides attending the signing ceremony and taking photos. News is released in the media, and then both sides have a written plan, but whether the plan is implemented is unknown to anyone. This kind of plan is just a formality; each side wants to achieve its own goals. Some show their strength to capital, as strategic cooperation is part of a company's strength; some show their enterprising achievements; some are just homework for the boss, etc. For example, the once-hot B2B strategic cooperation, from the overall effect, saw B2B e-commerce companies continuously signing contracts with multiple enterprises over a period, and the scene was indeed lively. If JBP were truly effective for business, it wouldn't have led to a batch of e-commerce companies disappearing. This is a typical example of form over substance. 2) One side is active, the other passive, leading to poor business results The enterprise wants to do a JBP with the retailer, but the retailer is not proactive for various reasons, making the enterprise the active party. As a result, the enterprise has to invest more resources, ultimately causing losses. 3) Both sides set a high goal but still execute with old methods This situation is also common. Both teams do a JBP, hold meetings with senior executives, and reach a consensus, but the market plan is just adding more resources on top of the original. This simple repetition and accumulation does not truly use professional methods. 2. Retailers and enterprises that are more successful in doing JBP In terms of doing JBP, offline retailers actually do it very well. The origin of JBP comes from offline Fortune 500 companies, which are collaborations between internationally renowned retailers and enterprises. In China, whether national or regional retailers, there are successful cases, such as Walmart, China Resources Vanguard, RT-Mart, Wumart, Jiajiayue, etc. The secret to success is one part collaboration and one part using professional methods to drive business. Shi Jun: From the brand perspective, which ones do it better? Mr. Liu: From a professional perspective, over the years there have been two schools: one is the P&G school, and the other is the Coca-Cola school. P&G has always done Joint Business Plans under the name of category management, and the professional operations introduced from abroad are relatively authentic. Coca-Cola has always emphasized strategic cooperation, combining international experience with China's national conditions, doing localization very well and being more practical. Shi Jun, so what are the standards for a good JBP? 3. Criteria for judging the quality of a Joint Business Plan Mr. Liu: The promotion of Joint Business Plans in China is somewhat similar to the development of billiards in China. More than thirty years ago, billiards came from abroad and was an elegant sport. After arriving in China, many people began to copy it. Billiard halls appeared everywhere, even at rural markets, mainly for entertainment, with many unprofessional players. In recent years, the number of professional players in China has gradually increased, and billiards has become more professional. There are five "whethers" to judge a professional JBP:

  • Whether both sides have the concept of win-win cooperation. The concept is the foundation for mutual trust. Building trust is relatively easy; the trust here refers to trust between companies, not just between bosses.
  • Whether retail data supports it. If retailers do not open data, the difficulty of discovering business opportunities increases. Most enterprises lack the ability to analyze data, which is also why retailers are unwilling to share data with enterprises. If no benefits are generated, retailers will only share data with enterprises that have analytical capabilities, category management capabilities, and can drive business growth.
  • Whether there is departmental liaison and cross-departmental cooperation. JBP requires liaison between departments of both the retailer and the enterprise. Both sides need cooperation among internal departments, and the methods must be professional.
  • Whether there are regular senior executive meetings. As mentioned above, everyone does this in form, but the purpose of senior executive meetings is not to be formalistic; it is to solve problems that arise in the JBP and ultimately drive business growth. This is the essential difference.
  • Whether there are common goals and a joint scorecard. The goals are mutually recognized, with common outcome indicators and process indicators. For example, retailers' gross profit indicators are unacceptable to many enterprises. The joint scorecard is used to track the achievement of indicators monthly, requiring strong support from departments within both the enterprise and the retailer. Shi Jun: It seems that only a few enterprises currently have data analysis capabilities, and those who understand category management are even rarer. To achieve business growth through these is indeed too difficult. Mr. Liu: A true Joint Business Plan requires parity, like a marriage, where families should be well-matched. Our company is just starting in KA management, and there is still a long way to go. Shi Jun: How can we achieve a truly meaningful Joint Business Plan? 4. A true JBP requires the enterprise to have the concept, team, and methods Mr. Liu: You've hit the key point. From the above five standards, to have the ability to create a JBP, you need to have three things.
  • Possess advanced customer management concepts In KA management, concepts are very important. We see that many domestic enterprises lack KA management capability, and the key is the concept, especially the management's concept, because JBP needs to be initiated by the boss and pushed and executed from top to bottom. Enterprises should have a customer-centric concept. For example, the indicator for the supply chain department is not the company standard, but the data provided by the customer, the ranking among customers, and setting goals with the customer. This is the order fill rate. Without advanced concepts, the order fill rate cannot reach above 90%. Shi Jun: The order fill rate indeed requires the cooperation of multiple departments such as sales, marketing, finance, production, procurement, logistics, and warehousing. Departments often neglect customer needs to achieve their own goals. Mr. Liu: Win-win thinking. Don't think about getting more benefits from the customer through the Joint Business Plan, such as more display space and end caps. Remember, we also need to give customers what they want, such as competitive prices. Shi Jun: In the past, when I told non-business departments to think about the customer, I was often rebuffed: Does the company need to make a profit? Do departments need targets? Are you standing on the company's side? You can't always accommodate the customer; you need to be firm. It seems like only non-business departments make huge contributions to the company. It turns out it's a matter of concept. Mr. Liu: The problem you mentioned is not just about concepts, but also KPIs. Taking the order fill rate as an example, if the supply chain department's KPI only cares about how much it shipped and transported, that's from a departmental perspective. But the order fill rate is a customer indicator, viewed from the enterprise's perspective. The mindset of talking about gains and losses in departmental KPIs to show that you are protecting the company's interests is not acceptable. We need to calculate the big picture from the company's perspective; standing from the department's perspective is the small picture. Win-win means that in the big picture, both sides can achieve their goals. However, some customer managers are not up to par. They speak unprofessionally to non-business departments and even fabricate stories to achieve their goals, causing distrust among non-business departments. This situation is also common.
  • Have professional people and professional methods Mr. Liu: That is, professional people do professional things. You need to be proficient in key account management operations, such as creating a professional JBP, which is a professional method. I have seen some KA managers who only learned a bit of key account management skills. They seem okay on the surface, but they are not systematic and comprehensive enough. Shi Jun: Mr. Liu, please tell me how to do a JBP.

Key Points of a JBP Joint Business Plan

Components of a Joint Business Plan Mr. Liu: The components of a Joint Business Plan include goals and KPIs, data sharing and opportunity discovery, promotion and display to drive growth, and leveraging the supply chain for efficiency through order fill rate.

  • Both sides set common goals, and a scorecard monitors KPIs
  • Multiple types of data exchange and sharing, professional analysis to discover opportunities
  • Professional integration of both sides' resources, promotion and display leading growth
  • Product mix and shelf space, category management to improve quality and efficiency
  • Cost reduction and efficiency improvement in both supply chains, seeking growth from order fill rate The key to a Joint Business Plan is collaboration; it is a joint effort by both sides. This is very important. Let's introduce them one by one. 1. Both sides set common goals, and a scorecard monitors KPIs Common goals are the key interests of both the enterprise and the retailer, and they are approved by both management teams. KPIs, as key indicators, are communicated and summarized regularly by both teams in the form of a scorecard to accurately achieve the goals.
  • Common goals include sales revenue, store execution pass rate, front-end gross profit, and order fill rate.
  • Principles for setting goals: higher investment, better store execution, higher sales volume, and higher returns. Case 1: An enterprise and a retailer set a JBP plan with a 15% growth target. Before the bosses met, each team approved the target of 15%! When the two bosses met, they chatted happily. When they were about to sign, they thought the 15% target was too conservative, so they agreed on a 65% growth target. The teams had no choice but to accept. The pursuit of higher goals is absolutely correct, but the question is whether both teams have the methods to achieve the 65% target? After that, the teams just added resources on top of the old methods. As a result, the enterprise used ultra-low prices. Although the target was achieved, it caused the enterprise to lose money on this retailer's business. 2. Data analysis to discover opportunities
  1. Find gaps with customers through market share: Look at the difference between customer growth and market growth, and also the difference with competitors in categories and brands. Look at the brand first, then the packaging, and finally the SKU, to find opportunities.
  2. Find store gaps through retail data: Is your growth faster than the customer's growth? Is your growth faster than competitors? In which stores is your growth low? Where are the gaps?
  3. Classify and rank SKU sales opportunities. Retail data is key and rich in information, including not only sales data but also consumer information, such as when they buy, what combinations of products they buy, and what products they like. A business plan developed using retail data can truly drive business growth! 3. Consumer promotions
  • Consumer promotions are an effective way to attract consumers to purchase. Determine the promotion packaging, method, theme, and stores, as well as the display method and quantity.
  • After listing consumer promotions, use ROI tools to evaluate whether they meet the company's gross profit requirements.
  • Create a timeline to schedule different promotions, aligning with the retailer's DM publication schedule.
  • Follow up on execution, make sales forecasts, use store scorecards, and connect the marketing, sales, procurement, and operations departments of both sides. The investment from both sides is crucial. The enterprise should have hit products and continuously launch new products, with very effective consumer promotions and displays. At the same time, the enterprise should control promotions within the ROI range. The retailer should provide sufficient display space and time slots. Again, the enterprise's ROI is very important! We often see enterprises desperately lowering prices, but relying solely on low prices is not sustainable. If the enterprise always loses money, the JBP will not continue. 4. Category management Category management mainly solves two problems:
  • First, whether the products are suitable for target consumers and whether the product mix is optimized.
  • Second, whether the product display space is optimal. Consumer promotions cannot solve these two types of problems; only category management can. Some retailers have strong category management capabilities, and some are willing to cooperate with enterprises. Only a few enterprises have the ability to do category management. 1) Three-step method for product mix optimization: Through extensive data analysis, know which products need to be retained, which need to be deleted, and which SKUs need to be added. This is not a simple addition, subtraction, multiplication, or division; it requires a large amount of consumer behavior insight. Case 2: Retailers use bottom-end elimination as a method to screen products, aiming to select the best and eliminate the worst in limited space resources. However, some procurement managers simply delete the last SKUs in an Excel sheet based on sales volume, gross profit, and other factors. They do not consider consumer demand factors. Category management requires comprehensive evaluation because some single items are only bought by a fixed consumer group, with stable but small sales volume. If consumers cannot find them on the shelf, they will go to other supermarkets, causing consumer loss. 2) Shelf space management: This aims to maximize product benefits through consumer purchasing behavior. Three elements: conform to shopper psychology and behavior, maximize display revenue, and set display standards and implement them. This is not management for a specific enterprise or brand; it is about optimizing the combination of all enterprises' brands and packaging from the retailer's perspective. Case 3: A customer director from a well-known FMCG company wanted to do category management with a local hypermarket. With an exciting PPT, he made the hypermarket's procurement director feel that category management was high-end and would be a performance achievement if done well. Without professional category management personnel, without analyzing data, and without consumer insights and research, he directly placed 95% of the shelf space in a category with his products, shrinking competitors' displays to the minimum. After a period, the procurement director found that his department's business had declined. It turned out that products from different manufacturers meet different consumer needs. Because consumers could not find other products they wanted to buy, and there were frequent stockouts, consumers had to go to other stores to buy. The ultimate goal of category management is to meet the needs of different types of consumers, configure different products according to consumer needs, and optimize the product mix and space display. This FMCG company's KA director successfully used the concept of category management to fool the customer and achieve his own exclusive sales purpose. Soon, the procurement director discovered the problem, understood the reasoning, and restored the original multi-brand shelf planogram. The essence of category management is to configure the product mix based on consumer demand for different products and purchasing behavior, and then arrange shelf space. Every enterprise hopes to have the largest share of shelf space and the best position in stores. Category management is from the perspective of consumers and retailers, managing all categories of products and shelf space arrangement. 5. Supply chain optimization The most important place for FMCG to improve efficiency and reduce costs is in the supply chain, because product prices are not high and gross profit margins are limited. Improving efficiency and reducing costs in the supply chain has good results. Order fill rate is a very important indicator in the supply chain. Every 4% increase in order fill rate can bring 1% POS revenue. Order fill rate maximizes sales volume through on-time, full-quantity delivery and efficiency improvement. Case 4: When an enterprise and a retail customer were discussing JBP, they found that the order fill rate was only 60%. According to the law that every 4% increase in order fill rate increases POS sales by 1%, increasing from 58% to 90% is an increase of 32%, meaning POS would grow by 8%. This 8-point growth does not require spending a penny of market expenses. So both teams established an order fill rate scorecard, monitored it monthly, and finally achieved the 90% target. It should be noted that the connection between the supply chain teams of both sides played a decisive role, indicating that JBP is not just the business of the sales and procurement departments, but the result of cooperation among multiple departments.

Final Thoughts:

A Joint Business Plan is valuable in collaboration and emphasizes professional capability.

Shi Jun: Mr. Liu, after listening to your guidance, I have a certain understanding of the Joint Business Plan. It is very different from what I understood JBP to be. The biggest difference lies in the "collaboration" between both sides and the "professional methods." Mr. Liu: Your summary captures two key points: 1. The difficulty of a Joint Business Plan lies in the ability to create it, including data analysis capability, planning capability, and execution capability.

  1. Data analysis capability: The difficulty lies in having enough good data.
  2. Planning capability: The difficulty lies in resource allocation, which must meet ROI requirements and be profitable.
  3. Execution capability: The difficulty lies in the team being able to execute 100% according to the plan. 2. JBP emphasizes collaboration
  4. The idea of trying to get more resources from the other side without wanting to give more is wrong. From the enterprise's perspective, they want retailers to provide more display resources and promotion windows. From the retailer's perspective, they want enterprises to provide more low prices and spend more money to buy displays. The so-called collaboration means joint contribution, not unilateral contribution.
  5. Regarding retail data, many Joint Business Plans lack retail data analysis, so they cannot truly find business opportunities. Retailers regard retail data as their lifeblood. On one hand, they worry that data leakage will be detrimental to them; on the other hand, they worry that enterprises lack the ability to analyze data, causing waste.
  6. Trust is very important. In strategic cooperation, trust between both sides is gradually established. Joint Business Plans that are mere formalities have low trust. In summary, enterprises and retailers must prove themselves with strength. Without enough strength, it is difficult to achieve true collaboration. Strength includes business scale, brand power, team professionalism, as well as the personal relationship between the heads of both sides and whether the corporate cultures match. A Joint Business Plan is not difficult to create; the difficulty lies in the trust between both sides, whether both sides are willing to contribute resources, and whether they can sustain long-term cooperation. Shi Jun: Mr. Liu, after listening to your guidance, I feel that the Joint Business Plan is highly professional. Our company still has a long way to go. I will start from the basics! -END- Are you "watching" me?