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 .

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