How to best optimise trade promotions in the face of rising prices

Changing consumer expectations

Many consumers are tightening their purse strings in response to the rising cost of living. 82%?of consumers globally feeling less confident to spend due to inflation, 74% of consumers trading down in either adjusted the quantity or pack size or postponing purchase of nonessential items. ?Also in the past 2 years, 25 to 40% of consumers across markets have also tried different brands, highlighting the importance of promotions for attracting brand switchers.

Consumers have also driven an accelerated shift towards discounters and private labels. Private labels are no longer just the cheap alternatives. Retailers now address changing consumer expectations with distinctive, high-quality products offered at lower prices, driving their sales up majorly across key categories such as grocery.?

Lastly, omnichannel shopping means consumers now have access to compare prices in multiple places online, before making a decision and potentially switch to more cost-effective brands

To respond to these changes, consumer goods (CG) organisations would need pay close attention to multiple levers of effective trade spend, including category, pricing, brand, perfect assortments and perfect displays.

Closer alignment between promotion planning and execution?

Trade promotions make up one of the largest items on the P&L for CG orgs, where they invest up to?20% of their gross revenues?on promotions funding, which in turn generates?28–50% ?of sales volume?across CG categories in. Given the current financial climate and considering that CG is generally a low-margin industry, maximizing trade and ensuring that every penny is delivering a clear ROI is critical.

What’s interesting is that when we talk about maximizing trade spend effectiveness, we often tend to put greater focus on the upstream part of trade promotion management, which is planning. Whilst promotion planning is a key success factor, promotion?execution and measurement?are equally as important.

I often see is a disconnect between trade promotion?planning?and?execution,?where end-to-end measurement is often missing. Despite the fact that the availability of near real-time syndicated point-of-sale and retail execution data has significantly increased in recent years, not many CG organisations feed that insight back to their trade promotion planning or optimisation cycles in a meaningful way.

For instance, when we look at the success of a promotion, we tend to largely focus on whether or not the promotion generated volume uplift, and we don’t consider execution factors such as product availability, price compliance and consumer demands during promotion execution.

Measure macro factors in promotion success

When it comes to planning, we often look at what was successful last year and set out to repeat that without adequately measuring all the macro factors that contribute to a trade promotion’s overall success.

The huge funding invested in trade promotions usually covers a mix of the retailer’s gate fee, production and distribution for promotional point-of-sale materials and content and subsidizing the shopper price discount. Therefore, we need to make sure that each one of these stages is executed with precision.

When it comes to measuring the success of a promotion, we need to look beyond just the generated uplift. We need to look at other factors that could contribute to the success or failure of a promotion.

Identify the right data points to measure macro factors

Using data points related to macro factors allows CG orgs to develop fact-based measurements and arguments into where best to allocate promotional investment.

Considering that the management of promotions is often siloed internally across finance, sales, shopper insight and operational teams. Here are Some of the questions organisations can ask themselves to consider the broader picture

• What were the long-term implications of promotions?
• Did consumers continue to buy the promoted products when the promotion was over?
• Did we give more discounts to retailers and were they buying more?
• How did recent changes in consumer behaviour impact the promotion’s success?

Changing consumer behaviour is a key success factor organisations should pay close attention to. Ask why consumers are leaning towards your brand or that of your competitor and consider that it may not always be a direct result of running a promotion.

?Adapt a holistic approach in measuring promotion effectiveness

There is going to be a revelation in trade promotion management, where organisations would need to look at promotions holistically, beyond point-of-sale data from recent years and conduct more holistic scenario planning by taking a more comprehensive set of execution factors into consideration.

• Was the product available on shelf when you ran the promotion? Were stocks being replenished quickly enough?
• Were the promoted products correctly priced?
• Were the products present in the right store?
• What was the planogram perspective? Is it possible that the promotion seemed successful because your competitor wasn’t present or that they didn’t run a promotion simultaneously?
• Did the retailer set up the promotion correctly? Did they utilise your retail execution data? Can you confirm that displays were set up correctly?
• Did the promotion start on time and did it run until the end? Or was it finished early?

Considering these questions when evaluating your promotion will re-emphasize the importance of connecting trade promotion execution and planning.

Recommendations

Here are some of my top recommendations for optimising the execution and measurement of trade promotion spend effectiveness:

Segmentation analytics

• Determine which products, brands and demographic groups have created significant change to your demand and build those factors into your promotional guidelines.
• Leverage micro segmentations to differentiate promotional guidelines for customers.
• Build a 360 view of your customer, channel preference and segmentations into a unified view.
• Ingest the segmentation and channel preferences into your planning to enable a more channel and/or retailer-specific approach.

Integrated real-time data

• Utilise point-of-sale data to measure which promotions are actually linked to sell-out success. This adds a granular level of analysis on top of just measuring additional volume uplift.
• Ingest your retail execution data with your key account and trade promotion management systems, so that your key account managers and promo planners can measure the product availability, price, and display compliance when the promotion is in-flight and have a more realistic measure the success of a promotion.
• Integrate point-of-sale data into trade promotion planning and measurement to identify issues, spot changes in sales in near real time, and alert your field sales reps.

Proactive course correction

• Use?advanced analytics?to identify trends across your integrated data and uncover root causes of promotional performance.
• Create a more dynamic field sales team that is equipped to respond in real time to changes in consumer and outlet behaviour.
• Use score cards and real-time insights to monitor promotion results in a unified and comparable way across different outlets and geographies. This enables everyone to identify the outlets with execution issues and prioritise them for sales rep intervention.
• Adapt a more data driven retail execution solution to create a notion of sense and respond. This will allow you to proactively schedule visits to course correct stock availability, price or compliance issues that might be affecting the success of your promotions.

Personalised promotion

• Retailers such as M&S, Sainsburys, Johnlewis that have been leading the way in consolidating consumer data to personalise promotions. There is a huge opportunity for CG orgs to partner with these retailors and share consumer first party used to personalise promotions
• Combine point of sales data, retailor data and contextual data, to drive promotion that are in line with the pulse of the customer.
• Combine promotion efforts with the with relevant and tailored content and point-of-sale materials so that you can the right experience to the right customer on the right online or offline check out
• Give yourself the ability to gauge your customer’s feedback and sentiments when they engage with your content. Feed that insight?back to your marketers, allowing them to continuously improve the quality of your promotional content.

Last thoughts

The consumer behaviour is changing faster than ever and consumer goods businesses must adapt to these changes in order to stay relevant. Given the rise of living cost, what was already a competitive and cut-throat environment has become even more so as it’s now even easier for consumers to switch brands whenever they wish.

What companies need is a unified, data-driven approach to planning, executing and measuring promotions, where the full cycle is integrated.

It’s important to continuously refine your approach and build on changing consumer behaviours, learnings, and streamlining technology and data is the easiest way to do this and help build a future-proof offering.

When promotions are driven by real and actionable insights, they can create the triple win for consumer against a backdrop of cost volatility.