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
+1%
2014
• Understand and optimising trade ROI – Critical component to success
2011 20132012
-30%
2014
And Promotional uplifts are significantly down…..
So lets start with the simple maths…
Turnover Trade Spend@ 25%
ROI Improvement@ 1%
£500m
£100m
£125m
£25m £250k
£1.25m
However…
What do you want to measure?
KPIs
• 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
Enablers
Information, data, and analytics Tools and IT enablement
Skilled, empowered organizationEnabling processes
Exceedra Maturity Model
Revenue Management
Pre and Post EvaluationPromotional ScenariosCustomer Price ManagementConsumer Price Management
Promotion Optimization Consumer Optimization Customer OptimizationGuidelines
Econometric Modelling
IntegratedBusiness Planning
Demand Planning Sales Planning Inventory Planning Supply Planning
Promotion Management Customer Business Planning
Joint Business PlanningRisk and OpportunitiesScenarios
Integrated Insights
Role Based ReportingAd-hoc AnalyticsPlan 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
Benefits
Core Advanced Differentiating
What drivesPromotions Success
or failure?
Mechanic
What drivesPromotions Success
or failure?
Mechanic
Availability
Frequency
Compliance
Merchandising
Stores
SupportRelationship
DisplayFeature
Weather
Length
Competitors
Replenishment
What drivesPromotions Success
or failure?
Sku
Level of difficulty to influence
Mechanic
Frequency
Time
Feature
Length Availability
Compliance
Merchandising
Stores
CustomerRelationship
Display
Weather
Competitors
Replenishment
Easiest Harder Hardest
Sku
#1. Run the Right Promotion(Mechanic)
Frequency Weight of PurchasePenetration Sales
Volume
i.e., £2.69 to £2 Price Reduction• Encourage
shoppers to buy more often
• Generally reduction between20%-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 GondolaEnds, 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 beon 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/Multi Buys
• Good initial uplifts
• Wears out over a longer period of time before leveling out
• Little or no recovery
• Little impact to other products
0100020003000
Do Nothing Actuals
02000400060008000
Do Nothing Actuals
0100020003000
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 usingmultiple 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
pressure
Other considerations…Price
Response toshelf price
Response to promoted price
HI-LO promotionCash generator
Be competitiveOptimize shelf price
Pricing quadrants
Framework – The Goal
Have Clear Promotional Objectives!
Develop “Guidelines” – a full Promotional Playbook based on delivering business objectives
• Right Promotion• Right Place• Right Time• Right Length• Right Frequency
Sticking to the Framework
Enablers
Information, data, and analytics Tools and IT enablement
Skilled, empowered organizationEnabling processes
So how does Exceedra support the Framework….
Pre and Post Evaluation of Promotions
Dashboard / Header function to give you top line overview in a single grid format screen
Understand the impact of the promotion on both the Manufacturer and Retailer P&L feeding the Account Plan P&L
JBP showing Manufacturer & Retailer P&L.
After all the variables of the JBP have been entered, the ability to see the impact of the plans are visible in the Manufacturer & retailer P&Ls
Promotion Gantt and Visualization
The different colors represent different status of the promotions
Right click to fast edit
One click to edit and drill down
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