Framework for Promotional sure the investment is passed on to the shopper Impacts on forecasting and

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  • Framework for Promotional Excellence

    Michael Creasey – Senior Business Consultant, Exceedra

  • Who am I…

  • Why is Trade Promotional Spend important?

    Trade Promotional Spend c.20% - 30% of Sales Revenue and growing

    For many CG companies it is one of the single largest budgets on the P&L (generally behind COGs)

    Very few promotions are profitable (less than 40%) and broadly breakeven in general

    Conditionality is becoming increasing difficult – Making sure the investment is passed on to the shopper

    Impacts on forecasting and planning (S&OP/IBP process)

    There is a huge risk to getting it wrong but a huge reward if you get it right.

  • Trade rates have seen slight increase over time…

    However, promotional lifts are significantly down

    Trade Spend % of Sales Revenue % uplift

    2011 20132012



    • Understand and optimising trade ROI – Critical component to success

    2011 20132012



    And Promotional uplifts are significantly down…..

  • So lets start with the simple maths…

    Turnover Trade Spend@ 25% ROI Improvement @ 1%




    £25m £250k


  • However…

  • What do you want to measure?


    • Incremental Volume

    • Incremental Net Revenue

    • Incremental Spend

    • Incremental Net Contribution

    • Margins

    ROI Efficiency & ROI Effectiveness

    • ROI Efficiency % = Incremental Net Contribution/Incremental Spend

    • ROI Effectiveness % = Incremental Net Revenue/ Incremental Spend

    Consistency is key!

  • Best-in-class Promotional Strategies need Pre-Planning considerations…

    Promotional Objective Shoppers Customers Competition

    Measure- ment

    Brand/ Customer?

    Do you understand them?

    What is their strategy

    What are they doing? Consistency


    Information, data, and analytics Tools and IT enablement

    Skilled, empowered organizationEnabling processes

  • Exceedra Maturity Model

    Revenue Management

    Pre and Post Evaluation Promotional Scenarios Customer Price Management Consumer Price Management

    Promotion Optimization Consumer Optimization Customer Optimization Guidelines

    Econometric Modelling

    Integrated Business Planning

    Demand Planning Sales Planning Inventory Planning Supply Planning

    Promotion Management Customer Business Planning

    Joint Business Planning Risk and Opportunities Scenarios

    Integrated Insights

    Role Based Reporting Ad-hoc Analytics Plan Actualization

    Integrated Syndicated Data & POS Category Analytics

    Mobile Analytics Advanced TPO Analytics

    Improved trade promotion ROI, revenue & margins

    Improved quality, alignment and visibility of strategic, financial & operational plans

    Ability to identify and react to gaps, risks/opportunities and quickly revise plans

    Do more with less, simply planning, insight & execution processes


    Core Advanced Differentiating

  • What drives Promotions Success

    or failure?

  • Mechanic

    What drives Promotions Success

    or failure?

  • Mechanic






    Support Relationship

    Display Feature





    What drives Promotions Success

    or failure?


  • Level of difficulty to influence





    Length Availability




    Customer Relationship





    Easiest Harder Hardest


  • #1. Run the Right Promotion (Mechanic)

    Frequency Weight of PurchasePenetration Sales


    i.e., £2.69 to £2 Price Reduction • Encourage

    shoppers to buy more often

    • Generally reduction between 20%-33%

    i.e., 3 for 2, 2 for £3, Extra Free • Incentivise the

    shopper to purchase larger quantities

    i.e., Half Price, BOGOF • Bringing in new

    shoppers • Generally trial

    prices, deep reductions greater than 33%

    • Particularly useful when launching new products

    Keep it simple!

  • #2. Run the Promotion in the Right Place (Feature)

    Will the investment in space drive enough additional incremental volume to give an ROI !

    Penetration – i.e., High Gondola Ends, FOS

    • Generally most successful with a deep mechanic

    • Prime locations to grab peoples attention. Encouraging to try your product

    Frequency – i.e., Low Gondola Ends, Ladder Rack, Side Stack

    • Secondary locations • Increasing visibility to give the shopper

    multiple opportunities to purchase

    Weight of Purchase – Extra free on displays but multi- buys may just be on shelf

    • Extra Free packs – 25% extra free, 50% extra free

    • Consumer specific driving Activities • Encouraging someone who typically buys or

    buys often enough to buy more in their purchase occasions to fill cupboards and encourage increased consumption

  • #3. Run the Promotion at the Right Time

    Be aware of your customers big initiatives and events

    Category events, Customer initiatives, etc

    Consider holidays and national events

    Xmas, Easter, World cup, Olympics

    Understand seasonality

    200% uplift in season yields more profit than 200% uplift out of season.

    Align your promotions with your business calendar

    What marketing is happening? TV, etc?

    Timing is Everything!

  • #4. Run the Promotion for the Right Length

    All deals have less impact over Length of time!

    Short – Generally Deep Deals – e.g. Half Price, BOGOF

    • Huge initial uplifts

    • Wears out quick

    • Deep and longer recovery

    • Greater impact to other products (cannibalisation)

    Medium - All Deals – e.g. Price, Multi buy, Extra Free

    • Strong initial uplifts

    • Wears out over a longer period of time

    • Some recovery

    • Some impact to other products

    Long- Rollbacks – £X Price Reduction/Mul ti Buys

    • Good initial uplifts

    • Wears out over a longer period of time before leveling out

    • Little or no recovery

    • Little impact to other products

    0 1000 2000 3000

    Do Nothing Actuals

    0 2000 4000 6000 8000

    Do Nothing Actuals

    0 1000 2000 3000

    Do Nothing Actuals

  • #4. Run the Promotion for the Right Length

  • #5. Finding the Right Promotion Balance (Frequency) How often should you Promote?

    Not enough Promotions • Impact to Rate of Sale – Leads

    to distribution losses • Shoppers forget about the

    product • Avoid encouraging your

    customers to buy something else

    Promoting too much • Becomes the price • Shopper only buys on deal • Shoppers are reluctant to spend

    more if they think they are being over charged

    • Avoid promoting back to back • Particularly after a deep deal • Cupboards are full • Especially if the consumption isn’t expandable

    Watch out!

  • Other considerations…Competitors

    Be aware of what is going on around you

    Impact of switching Depth of deals

    Pricing Index Innovation Volume on Deal

  • Other considerations…Shopper

    Right products in the right place Price transparency across Channel

    Price is still keyMake sure promotions areeasy to understand

    • Shoppers are using multiple channels

    • Don’t want to be ripped off • Accept a premium for

    convenience at a limit

    • Avoid complex/calculator deals • Shoppers don’t have time to

    work them out

    • Don’t want to be ripped off – 51% shop around for price and 49% for promotions (Source: Shopper centric)

    • Confidence, disposable income, etc is improving but still not back to where is has been historically

    Loyalty remains but is under


  • Other considerations…Price

    Response to shelf price

    Response to promoted price

    HI-LO promotionCash generator

    Be competitiveOptimize shelf price

    Pricing quadrants

  • Framework – The Goal

    Have Clear Promotional Objectives!