Training sweetens Hershey's core strategy

T+D, May, 2003 by Linda Strange, Paul Hennessey

In the midst of management reorganization, some labor unrest, and a potential sale of the company, Hershey foods went ahead and invested not only funds, but also two days of its salespeople's time to attend training.

The prognosis was uncertain: Workers in the largest factory were on strike. The management team had just been reorganized. The potential sale of the company was being explored seriously, although not publicly announced. First-quarter numbers were weaker than expected.

One immediate question: Would the planned sales training be delivered, or cancelled?

In many organizations, the answer to that question would be a quick and decisive, "No." Management would likely want to wait until the dust settled. But at Hershey Foods, the answer was, "Yes, it's too important to postpone."

What made the difference? It was a conscious effort to connect the content and delivery of training to a specific, mission-critical business initiative called "Blue Chip."

First, some background on how candy is sold. Hershey Foods, like most CPG (consumer packaged goods) companies, distributes its products through a variety of distribution networks. Its customer sales executives call on customers in a number of trade channels, each of which buys products and markets to end-consumers in different ways. These channels, which represent more than 2 million retail outlets across North America and around the world, include large grocery chains such as Safeway and Albertson's, large drugstore chains (for example, Rite Aid and Walgreen's), convenience stores such as Circle K and 7-11, wholesalers, small retail outlets, and brokers who sell products (chocolate syrup and the like) to grocery stores.

A hallmark of marketing in the CPG industry is "trade funding," money accrued by a retailer, which is invested back into joint promotional programs. For example, Hershey's might share the costs of a drug chain's advertising flyer or provide assistance in creating special end-of-aisle displays to support a special Valentine's Day promotion or help fund a "three Hershey/Reese's bars for 99 cents" promotion. In the CPG industry, trade funding is standard operating procedure and retailers expect it as part of their relationship with companies such as Hershey Foods. Hershey's, like many other CPG companies, considers trade funding to be an accepted cost of doing business--a sales and marketing expense that all industry players incur in order to maintain relationships with their retail channels and to drive top-line sales.

Introducing Blue Chip

In early 2002, based on the results of extensive analysis, including a customer satisfaction survey conducted by Cannondale Associates, Hershey's decided to make important changes in the way trade funding was allocated. The new strategy had a name: Blue Chip.

The Blue Chip strategy is based on two simple ideas: Simplify the trade funding process and pay for performance:

Simplify the process. In the past, Hershey's retailers felt that promotion strategies were too complex. They and Hershey found it hard to decide how to allocate trade funds for mutual benefit. The Blue Chip strategy would simplify that process by focusing on a single annual customer plan developed jointly by Hershey and its customers, rather than a "promotion by promotion" approach to allocating trade funding. These dollars would be provided based on an agreed-upon annual promotion plan and the customer's ability to comply with its promotional commitment.

Pay for performance. In addition, the sharing of trade funds wouldn't be as automatic as in the past, but instead would be allocated on an annual pay for performance basis. The goal would be to reward customers that were the most successful at growing the candy category with Hershey.

Even though the Blue Chip concept is relatively simple, its execution entailed risks. Customer service executives would have to work with customers under new rules of engagement that would be more demanding than before. And the consequences of failure could be severe, including possible loss of market share as well as lower customer satisfaction.

The Blue Chip strategy was launched at an all-company Sales Summit in May, 2002, Hershey's first national sales meeting. Now, a year later, the results of Blue Chip are coming in. With many customers, sales volumes are increasing and the new pay for performance approach is becoming an accepted way of doing business.

New strategy, new skills

The foundational introduction of Blue Chip at the Sales Summit wasn't an executive speech or just a set of PowerPoint slides. It was a two-day experiential learning initiative called Situational Sales Negotiation, provided by an outside supplier, BayGroup International. The program had a clear goal: to help Hershey sales professionals develop the skills, plans, and confidence necessary to implement the new Blue Chip strategy with their North American customers.

What turn of events led to a situation in which a training program acted as the centerpiece of a newly launched, high-visibility marketing strategy? Why would executives devote more than half of a critical meeting that included their entire salesforce to such a time investment in training?