Category Archives: Trade Promotion

TPM Systems: Connect Corporate Planning and Business Intelligence to Event-Level Planning

TPM Systems: Connect Corporate Planning and Business Intelligence to Event-Level Planning

By Tim Vollman, President S3 Mobility and Rick Pensa, President/CEO CPGToolBox.com, LLC

Many companies today perform high level corporate planning (customer P&L planning) and tactical Trade Promotion Management (TPM) event level planning in two different systems. This is a major factor in the ‘disconnect’ between original budgets, revised planning, and the detailed planning that exists within the TPM system. In most cases, once the detailed plan is created, there are no controls or processes to ensure that it is connected to your overall corporate plan. The breakdown between these two systems can often result in TPM overspends and plan shortfalls.

Guiding Principles to Planning

One of the keys to effective planning is to have a system that permits you to establish goals, and then set the related tactical event plans to execute your plan objectives. This would include goals such as market share by brand, customer profit margin, and other similar metrics.

Another critical key is to connect the corporate plan to the tactical event plan, which requires that you first decide on the level of planning for both corporate and the event level planning. Typically, your corporate plan is performed at a customer and product summary level. This allows for more of a macro planning approach, in which you can perform ‘what ifs’ and quickly determine the changes in pricing, costs, and the impact to overall profit. This permits users to set goals, and then create tactical event plans to meet these goals. Top down planning using allocation methods are essential to create quick directional views that subsequently provide for an iterative process.

Clearly, setting your customer and brand-level tactics is not something you want to first perform at an event level, as you must first determine if your volume, pricing and related costs will derive your desired results.

Once your goals have been set, and you have created your plan, the next step is to ‘connect’ this plan to your detailed tactical event level plan. A seamless process must also exist so that base volume, lift volume and related spending at the corporate level are truly connected at the event level. This means that downstream tactical event level changes are managed, recorded and summarized back to the corporate planning level, thus keeping the respective systems synchronized.

Additionally, trade spending controls are implemented at the tactical event level providing the account manager and senior management with an understanding of how the tactical plans will impact the higher level strategic planning goals and KPI’s. This is done through an effective trade funds management (TFM) process that assigns tactical event funding from one or more trade spending budgets/funds.

Building in the Proper Controls

Proper controls must be implemented throughout the planning process. Controls such as spending limits, spend per unit, and related lift-to-cost ratios are all essential to forcing compliance and approvals throughout your process. This reduces the work flow time from contract initiation through approval and finally through resolution.

Best practices such as…

  • Having a rule-based system, allows for a streamlined process, where only outliers require oversight.
  • Having process driven oversight capabilities allowing visibility to non-compliant events
  • Knowing planned spending by event or product visible up the hierarchy
  • Utilizing cost information to review margins and contribution
  • Providing visibility to historical pricing and to protect against margin erosion
  • Connecting actual settlement spending with specific tactical events

…all provide important processes, metrics and overall controls to connect Corporate and Event planning, while providing the efficient workflow processes.

About the Author:

Rick Pensa is the president/CEO of CPGToolBox.com, LLC and has more than 23 years of focus on the Trade Promotion Management process, TPM analytics and system implementation in the CPG industry. CPGToolBox.com, LLC is focused on providing sales and marketing tools built on the Force.com platform.

Tim Vollman is the president of S3 Mobility and has spent more than 25 years focused in Corporate Planning, Trade Promotion Management, and related Business intelligence systems. Mr. Vollman has founded three software companies in the Planning/ Optimization sector.


Trade Promotion Management Change Management: How To Gain Sales Team Acceptance

So you have made the decision to leave spreadsheets behind, and you are moving to a trade promotion management software solution. What will it mean to your sales organization to get out of spreadsheet hell?

The whole issue of change management is a huge one that will impact the success or failure of the TPM project. Let’s look at the issue from a couple of perspectives – Sales, Supply Chain, Finance, Management and IT. Each of these departments may see a benefit, threat or a little of both.

Sales may see the departure from Excel as a potential increase in workload, and that there is a new piece of software that they will have to learn and manage. Many companies adopt the mantra that they want to see their sales teams “selling” rather than sitting behind a computer; yet they want those same sales people to evolve to be thoughtful, proactive, collaborative ‘business managers’. It is a paradox in that many Sales Managers don’t understand or fully realize the upstream and downstream implications (and importance) that their business plans have on the broader organization, and often times they view a TPM tool as just ‘too much work’:

Consider the following:

  • The sales account manager creates a new promotional plan in a TPM tool…what happens? The combination of base volume and incremental volume is captured in a common tool and format that helps drive the demand and production plan.
  • When the system calculates the planned spending and that planned spending gets assigned to a fund, the finance people suddenly have visibility to future promotional liabilities and the ability to real-time actualization.
  • The Marketing departments now have a repository to view customer plans, planned promotional activity, new distribution, and brand-specific spending. All of which are critical for profitably managing and building a brand!
  • Sales leadership now has a common view into their business by channel, customer and by brand, and they can easily identify gaps and proactively course-correct as necessary.

All of the above information is coming from the person who is closest to the account and should know more than others in the organization. However, because of increased visibility and change away from the ease of a spreadsheet; sales people may find the new TPM tool too invasive of their day to day activities.

The Demand Planning and Supply Chain group sees a tool that will give them a much more definable look at volume causality to help them know when and why volume will spike on each SKU (and at which account) well in advance of the order. They have a single source of information they can review prior to locking down their forecast. They will see a TPM tool as a significant benefit over spreadsheet hell, the lack of any visibility…or the “just trust me” approach.

Finance sees a solution to the question of ‘when’ and ‘how much’ money should I accrue to an SKU or brand for a given period or month rather than a “peanut butter” spread approach of spending to the GL. In the spreadsheet world, some SKU’s get too much spending accrued to them and other SKU’s don’t get enough funds accrual assigned. Insight into this sort of real time information will provide finance with a much better appraisal of the profit and loss situation for each SKU, brand, customer and channel, and they will surely find the new TPM system to be a benefit over the static spreadsheet approach.

Many companies manage their trade investment fund balances, based on variable rates, in spreadsheets; so the ability to see accumulated trade funds for all 150 spreadsheets is huge. Not to mention seeing what has been planned against those funds all prior to the events happening, or what has been spent against those funds as a result of the settlement process. Sales management has a difficult time trying to synthesize all of the trade investment accrual funds, the commitments and spending against those funds in a static spreadsheet environment. Therefore, sales management will see great benefit from a dynamic TPM system that provides them drill-down functionality and real-time insights into their volume and spending.

Of all groups, IT may have the most reservations when implementing a new TPM simulation tool. If the TPM installation is an on premise tool, then IT has a major stake in the maintenance of hardware, software, infrastructure and data. However, with a cloud-based solution such as CPGToolBox Trade Planner, most of that responsibility is shifted into the cloud, and IT is responsible for moving data into and out of their ERP systems to interface seamlessly with the tool. Certainly a cloud-based solution is less invasive and burdensome on the internal IT staff than an on premise solution, and generally the initial investment in resources, training and implementation are far less for a cloud-based tool.

So if the Sales Team and account managers are the critical lynchpins for accurate, timely, reliable customer shipment and planning data; how does the organization gain their acceptance and endorsement of the new TPM tool?

The following are a few considerations that might address the issue with your organization:

  1. Are you doing any trade planning at all? If you are not doing trade planning today, or if it is not happening on the back of a cocktail napkin, then any new software solution for Trade Promotion Management would require a change in organizational process and Sales behavior. A TPM tool is a terrific facilitator to help your organization review, change and perfect your promotion planning process, but senior management must clearly define the process, expectations and hold to those expectations throughout the whole change management process. While change and enhancement is a given, senior management cannot relent on the journey through the process of changing the organization.
  2. Is your current trade planning process too complex? Spreadsheets can accommodate all sorts of exceptions to the rule and different twists to the rule, but a software tool may not be able to accommodate all of those possible exceptions to the rule without being heavily customized; but that costs money and takes much more time to implement than a relatively out-of-the-box solution. Get the basic process grooved in before you start layering on all of the exceptions and accommodations for promotional contract variances. You may find out that all of those complex exceptions were not really needed in the first place.
  3. Find a champion for the TPM tool in the ranks of the sales team. That sales champion will be the best person to explain how the job can be made easier using the new TPM tool, and his/her peers will sit up and listen. Your sales champion will show the rest of the sales team how to use the TPM tool to shorten the planning process by cloning or copying previous promotional plans into the new planning period, how to use in joint business planning sessions with their customers, and other uses and short cuts they can learn.
  4. Plan many incremental training events and follow up training approaches. Don’t rely on just one massive training session to instill the new process and software tool into the sales organization. Utilize your first set of training efforts to insure the key steps in the process are fully learned i.e. deal with promotion planning first and then come back and deal with settlement training. Training should be considered an ‘evolution’ and not a ‘revolution’, with many iterative opportunities to enhance and improve the planning process both internally and externally. Use technology such as web meetings and “lunch & learn” sessions to cover areas that may require remedial training. Plan a brief training session at all sales meetings for the first year or so to insure cross pollination of ideas from power users to struggling users. Use videos of training sessions and actual point & click videos that are 3-5 minutes induration to provide for training on demand.
  5. Hold the course and don’t relent! Too often, sales management will not hold their ground on a well thought out process when the sales team chafes at the requirement to move off of spreadsheets and into a TPM tool. You must make the TPM tool become oxygen to the sales team, in other words, sales cannot do its job without using the TPM tool. There can be no exceptions or work around options to the TPM tool, and your organization’s success depends upon its successful implementation and ongoing management.

With commitment, preparedness, and a little ‘luck’ you WILL change the culture at your organization. Experience has shown that a TPM tool that provides process, visibility and accountability can drop as much as 10 points off your trade spending budget. This is money that can be reinvested to build brands, or dropped directly to the bottom line! Inefficient trade planning is costly, and getting the process under control can pay for the TPM tool in a matter of months.

CPGToolBox.com is a trade promotion management company that has built a cloud-base full function Trade Promotion Management solution on the Salesforce.com platform. CPGToolBox Trade Planner will help your sales team manage fund allocation, accrual funds, trade promotion planning with predictive modeling, settlements and reporting. Please contact Rick Pensa at rpensa@cpgtoolbox.com or call at 678-503-5001 Ext 301 or check out our website at www.cpgtoolbox.com .

TPM In The Cloud

Trade Promotion Management (TPM) in the cloud! The holy grail of a trade promotion tool that is ubiquitous, easy to use and easy to afford is now here. Salesforce.com has been a driving force in the cloud computing wave that is sweeping through the computer world. Cloud computing removes the need for expensive hardware, network infrastructure, data management and software maintenance because these issues are all handled through Salesforce.com in the cloud. Clear Task has been in business for six years building applications that fit on top of the Force.com platform to extend the Salesforce.com rich functionality and capabilities.

Now Clear Task has built a Trade Promotion Management application that fits on top of the Force.com platform. Clear Task set out to develop a full function TPM tool with the easiest to use planning interface in the business. They knew that consumer package goods account planners don’t have time to learn how to navigate complex menu and user interface screens to plan a simple promotion, and they set out to develop a one screen planning screen and it looks like they got it right.

The Clear Task TPM tool’s functional capabilities include:

  • A robust sales target and promotional funds allocation tool to allow for the input of one sales target and one promotional spending target and then allocate those sales targets and funds down to the account level. All sales targets and funds are allocated to account business plans at the business unit or product group and for a planning period.The allocation module provides a way for marketing or headquarter planning to distribute sales targets and promotional funds quickly and effectively in advance of the planning effort. Those funds are then tracked within the Clear Task TPM tool funds management module to insure clear visibility to allocated, planned, spent and remaining fund balances.
  • The Clear Task TPM planning tool is built on the basis of containers that hold information starting with an account business plan down to each individual promotional tactic:
    • Account Business Plan – Built for an account, planning period and business unit holds the weekly level metrics such as base units, planned units, actual units, planned spending and actual spending. All promotions and tactics for a planning period are contained in the Account Business Plan.
    • Promotions – Information containers that set the beginning and ending ship dates for a given promotion and contain all of the tactics for those dates.
    • Tactics – These are the basic building blocks for the planning effort as tactics contain data such as the type of promotional execution (Feature, Display, TPR etc.), the level of price discount and promotional lifts calculated from these elements.
  • Funds Management – Each tactic is associated with one or more authorized funds for that account planning period and the Clear Task TPM tool allows for an easy assignment of funds to each tactic. The settlement process depends of these funds assignments in order clear and open deduction or submit for a check request.
  • Clear Task TPM makes use of the Salesforce.com workflow engine to manage the trade plan & deduction approval process and the assignment of tasks within the tool based on business rules that control each workflow process.
  • Deduction Management – The Clear Task TPM deduction management approach is for a simple drag and drop approach to clearing an open deduction by dragging one or more open tactics on top of an open deduction which appends certain pieces of information to the deduction record and send that record back to the accounts receivable group to clear the invoice dispute.
  • Payment Request – A payment request is initiated by opening a check request form the then user drags and drops any open tactic on to the check request. Certain pieces of information are appended to the check request record and sent to the accounts payable department to send a check to the recipient.
  • Reporting – An advantage of building a TPM application on top of Salesforce.com is the ability to leverage the rich reporting functionality native to Salesforce.com. Clear Task has leveraged these capabilities to produce a suite of promotional analyses reports as well as dashboard reports to keep the user up to date on the impact and affects of their accounts’ business plans.

Perhaps the most interesting and exciting thing about the Clear Task TPM tool is the price. You don’t have to buy Salesforce.com to purchase the Clear Task TPM app because it has a runtime version of Salesforce.com called Force.com embedded in the TPM application. You don’t have to buy hosting space or bandwidth and you don’t have to buy hardware and increased network infrastructure to use the Clear Task TPM app. The costs associated with the implementation of the Clear Task TPM tool are pretty straight forward:

  • The TPM app costs $99 per user per month
  • There is a $15,000 to $30,000 consulting fee for the upfront TPM process consulting, setup and training effort to get the Clear Task TPM app up and running within your organization…By The Way the implementation timing is within 4-6 months depending on the scope and complexity of the implementation …BUT THAT’S IT!

If you organization has 30 account planners that on-going cost is $35,640/year versus costs of $200,000 + and 20% annual maintenance fees.  See a quick 5 minute YouTube video demo of “TPM in the Cloud”…YouTube Preview Image

If your organization is doing trade promotion planning with Excel spreadsheets, on cocktail napkins or with nothing at all; you need to see the Clear Task TPM application.

 

Insights From Malaysia

I was fortunate to be invited to conduct a two day seminar in Kuala Lumpur, Malaysia on Trade Marketing In An Economic Downturn. The group of delegates consisted of 32 consumer goods professionals from a variety of CPG companies. We discussed the relationship of the consumer to the Trade Promotion Management (TPM) process. In many Asian countries and even here in the US, the consumer is not considered in the trade promotion planning process. We explored ways to bring the consumer into the equation when planning events, as a means to gain strategic advantage over competition. Many Asian countries do not have the rich panel data that we in the US can boast, but there are still ways to engage the consumer using custom surveys, Consumer Relations Management (CRM) interaction on the brand's own website and other creative means designed to understand the who, what, and where of the consumer's experience with a brand.

Penetration x Purchase Frequency x Buying Rate = Sales Volume

Let's look at a simple equation for sales volume. Consumer Penetration (new consumers through trial) x Purchase Frequency (how often purchased) x Buying Rate (amount purchase/occasion) = Sales Volume. Impact any one of these measures and volume grows or contracts. Trade promotions that cannot be tied to one of these measures are wasted effort. If a category or brand has a very low consumer penetration index does a Temporary Price Reduction (TPR) or an Every Day Low Price (EDLP) strategy really make sense? Could those promotional funds be better leveraged by funding promotional tactics that bring new users into the brand franchise or category segment? When promotional tactics are designed to drive one of these purchase dynamic measures a clear marketing strategy emerges. Let's look at our three sales drivers and how to impact them with trade marketing promotions.

Penetration                                     

  • Feature Support
  • Displays
  • In-Ad Coupons
  • FSI Coupons
  • In-Store Product Demonstrations
  • Cross Ruff Couponing

Purchase Frequency

  • Feature Support
  • Displays
  • Secondary Locations
  • CRM interaction with the consumer delivering targeted marketing communication messages, recipes/usage advice, etc.

Buying Rate

  • Multiples Pricing
  • Temporary Price Reduction (TPR)
  • Feature larger sizes
  • CRM interaction with the consumer, delivering targeted marketing communication messages, recipes/usage advice, etc.

When trade marketers fit their promotional arsenal into the purchase dynamics equation, holes in their promotional strategy become clear and the right tactics can be developed to drive the right purchase dynamic metric. Low penetrated brands can develop promotional strategies that attract new users. Strategies aimed at increasing purchase occasions will drive purchase frequency, and specific measures aimed at giving the consumer incentives to buy more products for pantry load or other usage opportunities can drive buying rate.

In Malaysia, we dug into the development and use of a lift matrix to improve promotional planning. A lift matrix helps determine the optimal combination of tactic and price discount. We developed simple baseline calculations using data from retailer Point of Sale (POS), shipment, and syndicated data, when a pre-calculated baseline was not available. Here is an example of how to develop a baseline and lift matrix:

  1. Use at least 52 weeks of POS, shipment, or syndicated data at the UPC level, and take away the weeks with known promotional tactics.
  2. Use the remaining weeks of volume develop a forecast of what sales would have been in the absence of those promotional tactics. You can see our baseline volume is around 98 in this example.

  3. Once a baseline has been established, you can determine the lift over baseline for each promotional tactic, and express that lift as an index. The formula for a Lift Index is ((Total Sales-Base Sales)/Base Sales)*100. In week 11 (see below), Total Sales = 200, Base Volume = 98, so ((200-98)/98) *100 = 104 lift above base for that display.

  4. Lifts can be determined for each combination of tactic (Feature, Display, Feature with Display, and Temporary Price Reduction (TPR) and price discount levels, and the resulting lifts can then be used for future promotional planning exercises.

The benefits of a lift matrix are many, and here are just a few:

  • You can determine which tactics drive the most volume lifts. Does one week of feature support drive more sales volume than six weeks of TPR support?
  • You can determine which price discount levels drive the optimal volume lifts. For example, does a TPR at 15% discount drive the same volume as a 20% price discount? If the 15% price discount drives nearly the same volume as a 20% price discount then 5 point of discount savings can be saved and used to leverage another promotional event.
  • You can calculate the promotional cost per incremental unit using a baseline and lift matrix.
  • A credible lift matrix employed in a Trade Promotion Management tool will always deliver a fact based forecast of promotional lift and ultimately a more reliable sales forecast.

In Malaysia, it was interesting to learn that the companies represented at the conference did not use TPR as readily as we do in the States. If used at all, the deal levels were much lower. While we deal in levels of B1G1F, their promotional discounts were in the 15% range, and there was much less reliance on EDLP pricing action. They were more likely to spend for displays and in-store activities.

The above article is meant to give the reader a high level understanding of how a baseline calculation is developed and to help the reader understand the value of a lift matrix to forecast volume lift for any combination of tactic and price discount level. A much more sophisticated discussion of the development of predictive baselines such as cross-sectional baseline to account for seasonality, will be handled in a future Insights newsletter. If your company is seeking to reengineer your trade promotion process and you want to put the consumer at the center of your trade promotion strategy, call us at Insight, Information & Consulting Services, Inc. Perhaps you are a small to mid-size FMCG company and you don't want to fork out a million dollars to install a trade promotion planning and tracking tool. Call us at Insight, Information & Consulting Services, Inc. We can be reached at 770-425-4243 or visit our website at www.insightinformation.net . We look forward to speaking with you about your trade promotional needs.

In Search Of Better Baselines

Why search for better baselines? Brands promote their products — to deliver incremental sales and bring consumers to the brand's franchise. There is no way to understand the impact of a promotion if there is no reliable understanding of the volume we would've received in the absence of that promotion. Therefore a baseline, which is really nothing more than a forecast of the sales we would've received in the absence of a promotion, provides an estimate of sales we would have expected based on historical sales when no promotions were in effect.

For many years, we have relied on syndicated data services, such as Nielsen and IRI, to help us understand our promotion effectiveness. However, syndicated data suppliers do not collect 100% of scanner sales data from all stores in the channel or do they collect data from all channels. Data suppliers cannot provide data for retailers, channels, and product segments that they do not collect. Now there is a way to develop baselines and lift benchmarks for accounts that are not reported in syndicated data services.

A baseline is a benchmark of your expected sales volume in the absence of any promotions. Baseline sales are sales generated by your product with no in store promotional efforts. Baseline calculations are required to develop a lift matrix of promotional response for each tactic by price discount levels. A lift matrix is a measurement system to determine how much additional or incremental sales volume resulted from specific promotional tactic and price discount combinations. Fusion Point, a data measurement and modeling company, has built a set of models that build "custom" baseline volume estimates from shipment and/or retailer point of sale (POS) data sources.

Another reason that "custom" baseline volume estimates are important, is because syndicated data suppliers' baselines tend to be inadequate for today's promotional evaluation needs. These general baseline models do not handle seasonality, long term on shelf price reductions, or non-measured promotional tactics (Loyalty Cards, In-store TV/Radio) very well. Fusion Point is able to process syndicated, shipment and/or retailer POS data with its new baseline models to include many external variables such as weather, seasonality, etc. to generate a set of reliable baseline and lift matrixes; even for accounts that are not reported by the syndicated data services.

A reliable baseline is crucial to a fact-based approach to Trade Promotion Management (TPM). Without a reliable baseline, there is no way to develop lift matrixes which help account planners to determine the most productive and profitable promotional executions. Most CPG companies rely too heavily on flawed syndicated data suppliers' baselines to power their TPM systems and to perform promotional analyses.

The following chart is an analysis of the anatomy of an in-store trade promotion tactic (such as feature, display, feature with a display, on shelf price reduction):

Anatomy of an In-Store Promotion:

Without a reliable baseline, we don't know how much of our volume was incremental, how much we subsidized, and how much lift each combination of tactics & discounts generated. Look at the 4th week (5/10/2009) in the chart above and you will see that the lift over the baseline (narrow orange bar) is very small versus the week of 5/31/2009 when volume over baseline is nearly doubled the base volume projection.

The amount of promoted volume (red bar) under the baseline is "subsidized" volume (narrow yellow bar). Subsidized volume is the volume you would expect to have without any promotion. The volume generated below the baseline level receives promotion funding; and is a necessary expenditure in any promotion. However, the trick is to generate enough incremental volume to offset the cost of subsidized volume.

"Incremental" volume (narrow orange bar) is the volume sold over the baseline. Incremental volume usually is generated by a promotional tactic such as a print feature, an in-store display, a print feature with an in-store display, or an on-shelf reduced price. We gauge the sales over baseline as a "lift" over baseline. The lift calculation is as follows and is usually expressed as an index:

(Total Units – Base Units)/Base Units.

Lifts can then be combined with the level of price discounts for each tactic to generate promotional lifts thereby creating a lift matrix. A lift matrix might look like the following example:

Example Lift Matrix

In the example above, a feature ad with a 30% price discount below normal pricing generates twice as much lift or incremental volume as a 30% on shelf price reduction only (TPR=temporary price reduction). This information might guide the account manager to try to sell more feature ads than on shelf price reduction events at a discount level of 30%.

This type of analysis cannot be performed without a baseline calculation, and most trade promotion management tools require a lift matrix to forecast promotional sales. Armed with the new Fusion Point baseline model, any CPG manufacturer that can supply retailer POS or internal shipment data can develop a base volume estimate that will fuel a lift matrix which can be an effective trade promotion planning tool.

Check out our blog and our website at www.insightinformation.net

Trade Vs. Shopper Marketing…Which One Drives Brand Strength?

The buzz word of the day is Shopper Marketing and today's discussion is whether Shopper Marketing is replacing Trade Marketing.  Do you know how to optimize both disciplines to drive your brand's strength?   A.G. Lafely's (CEO of Proctor & Gamble) latest philosophy is to move away from traditional trade spending in favor of shopper marketing as the best approach to a higher trade spending ROI. P&G has taken the approach to reduce or do away with trade spending over the past 30 years.

Several years ago, P&G made a bold industry announcement that they would suspend or greatly reduce trade spending in favor of a lower FOB price only to have to reinstate trade spending against their lower delivered price – within the same year.

From my observation the human nature is to act on a purchase decision when certain basic factors (or some combination) are met. For example:

1. I am sick and I need flu medicine.
2. We are out of OJ and I need to get some (or will there be some interchangeable alternative?).
3. Hey there is a new and different item I just tripped over in that display – let me try some.
4. My favorite yogurt is on sale I think I will buy 10 instead of 1.

How does a Fast Moving Consumer Package Goods (FMCPG) Company communicate its solution to basic purchase demand signals? In most cases brands rely on trade spending in the retail store to attract the consumer, and far too often those funds only buy down the price at the shelf. But does a temporary price reduction at the shelf really attract new consumers to your brand? How does a brand capitalize on consumers' demand signals apart from a high media budget?

  • It could increase reliance on couponing.
  • It could leverage In-Store marketing tools such as In-Store Radio/TV
  • It could increase In-Store product demonstrations to capture shopper attention
  • It could look for ways to differentiate their product in the eyes of the consumer by building a one on one relationship with the consumer using emerging e-marketing tools (Facebook, Twitter, your own CRM site, etc.).

I am seeing a marked movement away from quality performance vehicles such as feature and displays to short term on shelf price reduction (TPR) or basic price reduction tactics. From my research, it seems TPR tactics generate lower lifts versus higher quality executions such as a feature, display or some sort of In-Store Radio/TV blast that encourages the trial or pantry load decision.

Some are saying that Trade Promotion is not the optimal way to reach a consumer and grow your brand's position in the market place and Shopper Marketing is the new mantra on everyone's lips.  However, execution is the key missing ingredient.  Often, large companies cannot execute Shopper Marketing well because they have separate Trade Marketing and Shopper Marketing departments that rarely if ever collaborate on a holistic consumer/trade promotional strategy.

The best way to market to the shopper is to start small and build trust through frequent (but short) consumer relationship building interactions. Also, brands need to answer the trade Promotion questions such as, "Do more infrequent high quality Features capture more consumer attention and drive more trial and pantry loading events than long term reduced price events?"

A well integrated Shopper and Trade Marketing strategy combined with the proper measurement tools will provide the performance insight that these integrated programs have on purchase dynamics metrics such as penetration, purchase frequency and buying rate to build sustainable brand equity.

Visit us on our website at www.insightinformation.net

Trade Promotion In An Economic Downturn

In the FMCG/CPG industry, one of the last bastions of efficiency is the trade promotion budget. Over the years, trade marketers have been spending more and getting less return on that spending investment. In an economic downturn, every penny counts. You have got to improve your bang for the buck on your marketing spending. The easiest way to get more efficient is to improve your trade promotion effectiveness. You can drive better ROI on your trade promotions, but it will require a paradigm shift to a consumer centric and fact based process.

In tough economic times, companies that hone their consumer segmentation and targeting skills will come out of the economic slowdown with an increased consumer base. The trick is to break down who your best consumers are; find out what motivates them to purchase, and measure the key purchase dynamics (penetration, frequency, and buying rate).

Promotion metrics need to be carefully planned and monitored as well. Do you know the "lift" or incremental volume your brand generates by tactic/discount/timing combination? Do your on-shelf price reductions generate the same lift at a 15% discount as at a 25% discount? Do features once per quarter on a payday week generate more incremental sales than 6 weeks of on-shelf price reductions?

When evaluating promotional lifts, are you calculating profit generated by incremental volume against the subsidized costs to get to base volume levels? Subsidized volume is volume with promotional dollars spent just to get to base volume.

For example, if your base volume is 750 units per week on a promoted SKU and you are spending 50¢/unit on all units in the ad or on TPR for that SKU, then $375.00 is a cost of achieving base volume; sales you would have generated without a promotion. If your promotional efforts deliver total sales of 900 units for that SKU, 150 incremental units were sold. What is your cost per incremental unit?

Your promotional costs are $375 base + $75 incremental, for a total of $450, to deliver 150 incremental units or a cost per incremental volume of $3.00 per unit. If your objective is 75¢/incremental unit sold you would need to sell 1,500 incremental units to offset the $375.00 of subsidized volume. In reality, you also need to include the fixed cost of the ad to obtain a true cost of the promotion.

Are you calculating the impact of cannibalization effects on the non-promoted SKU's in your brand or promoted group to determine a true incremental volume for the brand or category? Retailers that can grow their categories on the backs of well thought out and profitable brand promotional strategies and begin to look to those manufacturers for more profitable promotional strategies.

As the state of the newspaper industry begins to crumble and the traditional print media cease publication, how is your company's account sponsored print feature strategy changing? That strategy will need to include more in-store media and web advertising on your accounts' websites, and an increased reliance on web delivered coupons targeted for usage at a specific retailer. In addition, CPG manufacturers will need to forge a better and on-going relationship with their consumers through a Customer Relationship Management (CRM) approach from your company's website.

Developing and maintaining a database of consumer names and addresses and a record of on-going communication with these consumers will insure your brands are foremost in their minds and on their shopping lists. As you start and pursue a dialogue with your brands' consumers you begin to know where they live and shop, and you can easily find out where other consumers that look exactly like them live. A targeted approach allows you to leverage your company's marketing funds directly at the consumer. By utilizing Location Intelligence tools, pockets of consumer opportunities can be identified and strategies/tactics developed to deliver your brands' marketing messages directly to those consumers.

I will be conducting web seminars on the subject of Trade Promotion Management and will address these and other relevant TPM issues. These workshops will address a real world and hands on approach to the Trade Promotion process in an increasingly tougher economic environment. We will show you how to set up a process that will:

  • Help you organize your internal resources
  • Cause your company to change your thinking about the trade spending process
  • Show a cost effective tool to facilitate trade promotion planning/tracking/evaluation
  • Drive more efficiency into the trade spending process
  • Improve your trade spending bottom line

This workshop will help your organization drive more efficiency into your trade spending budget and this will equate to a higher bottom line. Our agenda will be one of real world practices and hands on application for Trade Marketers and account management teams to learn how they can take advantage of economic downturns drive market share and consumer penetration.

We will be conducting the above content in a series of 2 hour Webinars starting later this year. If your company would like this seminar presented at your site for your team please contact Insight, Information & Consulting Services, Inc. – Rick Pensa at 770-425-4243 or Visit our website at www.insightinformation.net .