What is it?
“Clout” refers to your relative bargaining power in a business relationship. If the other party needs you more than you need them, you have the capacity to negotiate an advantage. You need to drill down to the detailed “moment of truth” to understand how this will deliver competitive advantage in practice – otherwise it too easily becomes a crude argument for scale.
When is it useful?
In the FMCG drinks business, for instance, “distribution clout” refers to the negotiation power the drinks company has with their distributors and retailers – relative to their competitors. It is a very real source of competitive advantage that can result in better promotion, visibility and trade terms than the competition.
Drilling down to a “moment of truth” where the drinks company Sales Director is sitting with the distributor MD negotiating trade terms, it is clear that distribution clout is not just about scale. You get much more negotiating leverage from having a tight portfolio of “must-stock” brands than from having a much greater volume of second-tier brands that require distributor or retailer ‘push’ for sales.
The bottom line - who will suffer more if your products are delisted in this channel?
If consumers are loyal to your products, they will choose to buy them elsewhere. The manufacturer will not lose much volume after the delisting - it will be picked up in other channels. On the other hand, the retailer not only loses these sales, he also loses potential customers who are now visiting competing channels.
If consumers are more loyal to the store than the product, they will continue to buy from this channel and switch their purchase to a competing product.
True distribution clout comes from loyal customers, not scale
How do you do the analysis?
You can measure switching behaviour in stores - every time you have a stockout, it is a mini-experiment in delisting.
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How can you adapt this concept?
This concept applies equally in B2B. The "Intel Inside" advertising programme increased Intel's negotiating clout with PC manufacturers by making consumers more loyal to Intel than they were to any PC brand.