By Exceedra APAC Sales Director, Simon Elsby
Promotions are beginning to evolve away from simply cycling last year’s calendar and activities to a more tailored approach by retailer. And there is increasing recognition that gifts with purchase and win-in-store mechanics play different roles to pure price promotions.
This evolution requires understanding what works at a more micro level than in the past. But what is feasibly measurable, and how do you know that the data inputs you have will give you accurate results? In other words, how do you avoid garbage in, garbage out?
Planning, Objective Setting & Modelling
Firstly, there’s the price promotional program and planning depths and frequencies. And being aware of the role of price promotions. Whilst there’s some evidence that price-off may encourage higher AWOP in categories like wine, much price promotion simply cycles shoppers around brands rather than driving traffic.
Then there’s ‘consumer promotions’ like GWPs and win-in-stores.
Thought needs to be given to what the goals are for each individual promotion, which requires planning further out than the current typical couple of months. From a consumer standpoint, is the objective to increase awareness of a category or brand, drive experience and product trial, retain customers, increase brand share, acquire new customers? From a store execution standpoint is it to drive ranging, stock weight, space allocation at shelf, off location display visibility? Is the retail objective footfall, spend and transaction value, AWOP, frequency, or basket penetration? What’s the financial objective – revenue, margin, volume? Is there an ROI benchmark?
How will you differentiate your promotions both by retailer and versus competitors, considering we currently live in a world of giveaway BBQs and camper trailers? How will you tailor activities for chains versus independents, for different independent groups, or by state?
And how to allow for retailer-requested or driven activities that may not deliver a return but are a requirement to retain a seat at the table?
Once you’ve sorted out your objectives for each promotion, the scenarios need to be modelled, ideally using historical data. Typically, 2-3 years’ sales promotion data history, including price points, will allow for predictive promotions scenario planning.
What’s feasibly measurable?
For Trade Promotions Management (TPM), the level that promotions are planned and reconciled with back to the finance systems is crucial, as is the lowest level at which accurate sales history can be received. Sales information needs to be captured at different points as the product moves through the supply chain to a consumer; 1. What leaves the manufacturer’s warehouse (shipments, or sell-in), 2. What gets sold through distribution/wholesalers (depletions, sell-through), and 3. Particularly for promotions, what the retailer finally sells to the consumer (POS/Scan sell-out).
In reality, the number of stores, promotions and products most manufacturers would need to hold in a database to analyse store level data would run into billions of lines of data and not necessarily drive outcomes or decisions that would help them. In general, POS data aggregated to some level above store – usually geographical, say by state, is sufficient to understand promotional influence and trend. Exceedra’s TPM software, for instance, enables analysis by offline and online channel, retailer (including multi-site operators and banner groups), and by state. A TPM system can also look at a portfolio P&L – by SKU overlaid against sales and revenue performance and versus the retailer’s profitability in order to determine where the value sits. Systemising and using a joint promotional P&L view and ROI view for multiple promotions and comparing and reviewing them needs to be a key component of pre and post event activity analysis.
To ensure data accuracy and match third party data with what’s in your ERP system, a constant mapping of product, dates, customers, and activities (given what was planned for may not be what is actually activated), back to the ‘source’ data.
The TPM system provides visibility. Visibility of ROI, to enable you to see which promotions have a negative or positive ROI or perform to a minimum standard, i.e. 20%. TPM can also prove or disprove the effectiveness of your promotional strategy itself. Visibility of trading terms and any SKU’s cannibalised by the promotion. Visibility of which promotions benefit the brand, and which benefit the retailer, based on inputs around messaging and attributes such as support spend on catalogue and above the line media.
A good TPM system also provides further insights through aggregated feeds collected from retail execution solutions including DMS systems, Loyalty Data, and store back KPI’s which all help to provide more insights on the contributors to which promotions are meeting your original objectives, and which aren’t.
Ultimately a TPM system enables better decision making around how and where to invest in promotions, and how much, by driving both promotional efficiency and effectiveness through visibility of promotional performance. And removing the contributors to the ‘garbage in, garbage out’ syndrome.