Sweating Promotions This BlackFriday

With consumers more price-conscious than ever, much investment in promotions fails to deliver over the long term and sometimes not even over the short. But a holistic approach to promotion planning, execution and measurement enables companies to boost sales and build long-term brand loyalty.

We’re in a cost-of-living crisis and consumers have tightened their belts, are trading down, buying fewer non-essentials, turning to discounters and checking prices before they buy. Such behaviour can hit consumer product goods companies(CPGs) hard. As a result, promotions such as Black Friday deals today must do more of the heavy lifting than before.

Given the stakes, no wonder the sums spent each year on promoting brands are eyewatering – some $1 trillion making them the second-biggest spend after the cost of manufacturing. But it’s important to remember that price is just one of the promotional investments available to CPGs. They can also turn to trade terms, rationalise assortments and beef up displays.

Unilever, for example, has cut 17% , nearly one-in-five?of its SKUs (stock keeping units) to improve retail performance and protect shelf space and pricing. This allows for greater focus on fewer lines and it seems to have helped. This summer, it reported better than expected sales growth (though price inflation played a part), but interestingly volumes were flat i.e. consumers were sticking with it during this tricky time.

But this sort of promotional investment doesn’t always deliver returns. Often, sales uplifts are not sustained – or worse, don’t hit targets – as consumers revert to prior behaviour. Research from?Salesforce?suggests that four out of five consumer-goods executives are unhappy with the results. For example, 72% of promotions won’t break even – i.e provide a return on the investment and nearly half of those are executed poorly.

So what’s going wrong?

Essentially, calculating and calibrating when and how far to pull the different levers within a promotion is hard. Planning promotions across multiple categories, brands, channels and routes to market is complex and brand managers must identify the right drivers without cannibalising non-promoted sales or adversely affecting the brand itself.

Key to overcoming these challenges is data and the proof of this is demonstrated by new brands such as Kylie Jenner, halo e.l.f. Beauty – companies that assiduously collect and analyse customer data to read the market. As a result, they have become billion-dollar brands and are wiping the floor with any established brand that continues to rely on spreadsheets, disconnected systems and siloed teams.

Common errors

A common error made by many brands is focusing on the upstream planning of trade promotion management separately from the execution. This can be seen in the failure to fully leverage point-of-sale and store-level data to feed back into promotion planning and optimisation cycles. The end result then becomes hard to measure, with an over-reliance on volume uplift during the promotion to quantify success when in fact planners don’t really know what bit worked and just as importantly what didn’t.

When data including product availability, pricing compliance and consumer demands (affected by the weather, local and national events etc), as well as sales performance post-promotion, competitor pricing/positioning and changing consumer behaviour, are taken into account, planners gain a much more nuanced picture. This way, they can avoid grandfathering promotions year after year and instead adapt strategy to what is happening today.

Adding to this problem is how to capture cause/effect data in the promotional process. Of no help is the fact that teams are traditionally siloed, so they don’t collaborate and learn from each other even if one has data useful to others. US consumer goods giant Kraft addressed this with cross-functional pods whose job it was to evaluate the entire promotion value chain and look at where efforts could be improved.

This should be basic stuff. Yet it’s amazing that so few CPGs are using data effectively to plan scenarios, identify trends and uncover the root drivers of promotional performance.

Data and AI-based approach to promotion management

Things are about to get harder for those with their heads stuck in the sand. Generative AI will be a promotions game-changer. It really accelerates the creativity that goes into promotional graphics and building messages for videos – you can even clone your own voice in just 10 minutes.

Developing ?a unified, data-driven and AI-based approaches to planning, executing and measuring promotions is a key success. ?Having worked with CPG clients to continuously evaluate the full promotions cycle , I saw the results of how they were able refine it based on what is actually happening/has happened. These are micro insights that unlock the ability to plan all promotional levers holistically, taking into account real-life forces. The companies can then identify trends and monitor promotion results in a unified way.

This type of data monitoring and analysis allows for comparisons across different channels and geographies, for example, helping to identify any points of sale with execution issues so remedial action can be swiftly taken.

Unilever is using a People Data Centre , for example, to listen to consumers in real time. This allows it to identify emerging behaviours and attitudes so it can promote its brands in a way that fully capitalises on the opportunities, tailoring its sell-in strategy and omni-channel engagement approach accordingly.

Data also allows CPGs to segment customers so they can develop different, highly targeted promotions. Working with a large beverage company, we developed segmented pricing by increasing prices on multi-serves and premium packs helped them develop agile pricing strategies using simulations to measure the effect of price changes on profits and net elasticities.

I’ve seen CPG adapting AI-based program that calculates the risk of products going to waste and models the various course-correction choices such as stock transfer, trade promotion, online auction or foodbank donation, delivering significant savings.

When these sorts of solutions are applied across logistics, supply planning and category management, with all their feedback fed into AI models, refinement is constant and returns are maximised.

If you want to make more return on your trade promotion investments, take a structured approach and see how real-time data will help you plan more effectively and allow you to course-correct for any unforeseen factors. You’ll then make your promotion investments sweat so they reinforce your brand and expand sales – even during this cost-of-living crisis.