Achieving Profitable Growth

Transcription

1 Collaborative Promotion Optimization & Cont inuous I mprovement Summit TPM-TPO- Collaborat ive Marketing Achieving Profitable Growth by integrating TPM and Predictive Analytics Promotion Optimization I nstitute Fall Summit 2014 Dallas, TX Chuck Scott Ainsworth Pet Nutrition 11/10/2014 Promotion Optimization Institute - Fall Summit Dallas, TX 1

2 How we realized $1 million in incremental profit what would it mean for you Promotion Optimization Institute - Fall Summit Dallas, TX 2

3 What are we going to talk about? Our real world results! Where we came from? How did we do it? What did we learn? Where are we headed? Promotion Optimization Institute - Fall Summit Dallas, TX 3

4 Our results In just one year, Ainsworth Pet Nutrition realized tremendous improvement in ROI Real-world profit improvement $1 million Promotion Optimization Institute - Fall Summit Dallas, TX 4

5 Where did APN come from? Post promotion analysis was done once, maybe twice per year, but mostly just a presentation of good/bad highlights on a macro level. No documentation of improved promotion performance or ROI Never really held accountable for improvement, although we all wanted it. Very Manual and arduous process Promotion Optimization Institute - Fall Summit Dallas, TX 5

6 One other consideration All the How about integrating TPM and Predictive Analytics to Achieve Profitable Growth sounds pretty straight up, but another question you will need to answer is where do you do it? Excel didn t work for us! Promotion Optimization Institute - Fall Summit Dallas, TX 6

7 We needed a way to do the following: Bring together the key financial analysis data sources Promotional Spend and COGS Customer activity In an automated way Repeat the process in a continuous way What-if scenario planning Multiple scenarios Syndicated/ POS Invoice/ Shipping Accurately predict future results for us and the retailer Impact for APN Scalable, with a future vision for the total category and customer collaboration. Trade Spending Marketing COGS/ Financial Networks are great in these situations Promotion Optimization Institute - Fall Summit Dallas, TX 7

8 This is where networking pays A colleague of mine and I decided we could solve this puzzle and decided to work together and build a solution: T-Pro I sent him my massive promotion analysis spreadsheet, outlined the required outputs, and together we began hammering out a success story. Note: Internally there was also a corporate Renaissance initiative going on parallel with T-Pro, which provided the ideal framework to plug into. Promotion Optimization Institute - Fall Summit Dallas, TX 8

9 Renaissance - Full Team Support Sales Planning Objectives Monitor promotions and meet with Salespeople monthly. Public Scorecards on Sales performance Cultural focus on improving ROI, with T-Pro being the enabling tool. By partnering in the development of, as well as implementing and using the T-Pro Analytics tool, APN discovered the following Promotion Optimization Institute - Fall Summit Dallas, TX 9

10 The Not- so-good things Our promotions were costing way too much money and had an average ROI that was negative double digits. Our MAPS document, which was to provide Trade Promotion guidelines to Sales, was not always a good directive for successful trade promotions. There were many s containing statements like, Contrary to MAPS, we need to or Contrary to what you would expect, we found that T-Pro was shining the light on our closet Promotion Optimization Institute - Fall Summit Dallas, TX 10

11 The Good Things Understand what was good vs what was bad: Performance KPI s (CPI, RPI, ROI, VEI, PEI) Take the guesswork out of Post Promotion Analysis and MAPS: We found our baselines and knew what worked and what didn t. Plan future events assumptions based on past market performance, along with financial impact: Scenario Planning that APN could do to change Promotion Optimization Institute - Fall Summit Dallas, TX 11

12 How did we do it? Our steps to Integrate TPM and Predictive Analytics to Achieve Profitable Growth Enforce discipline in TPM data (Salespeople) Alignment of TPM and POS data Baseline management is critical Post Promotion Analysis Scenario Plan w/ predictive capabilities Where did we choose to do this? T-Pro Promotion Optimization Institute - Fall Summit Dallas, TX 12

13 Enforcing Discipline in TPM Data Once we made the decision to invest resources in building a Promotion Analysis and Predictive Modeling tool, we immediately began to enforce strict promotion planning protocol. Promotion Optimization Institute - Fall Summit Dallas, TX 13

14 Enforcing Discipline in TPM Data Timing of Planning: New Item plans must be in System with-in two weeks of new item acceptance/confirmation from the account must be up to date by the 2 nd Tuesday of each month. Lead Team is the 3rd Tuesday. Planned Performance Dates in System must be in close proximity to actual market execution + accurate coding We are mapping Trade Marketing spends to corresponding POS promo volume data in TPro. Example from our Sales Mtg presentation NO actual promotional spending of only a couple bucks. Apply small spends to another plan, it won t change anything Promotion Optimization Institute - Fall Summit Dallas, TX 14

15 Enforcing Discipline in TPM Data Every Sales Meeting had a mini-review of the vision and goals: Importance of maintaining discipline in TPM data How the TPM data would be used in T-Pro Expected benefits: o Enhanced profits from Trade Promotion o Better collaboration with customers o Reduced desk time via What-If Scenario Planner o Increased chance of closing sales/spend gaps against MBO Key point in gaining acceptance of new software. Promotion Optimization Institute - Fall Summit Dallas, TX 15

16 Alignment of TPM and POS Data The Master Calendar brings together customer specific consumption data plus TPM spending and costs, enabling real-time/accurate KPI analysis The process of establishing true baselines, aligning promotions with actual market performance, and evaluating Lift, ROI, RPI, etc., returned about a million dollars of profit and resulted in a 16 point improvement in promotion ROI. Promotion Optimization Institute - Fall Summit Dallas, TX 16

17 Alignment of TPM and POS Data The Master Calendar provides just the right visual to quickly understand the following: Baseline accuracy (plus growth or decline of the same) Incremental volume from promotion activity Depth of discount impact on Lift Impact of consumer overlays Competitive interference Indication of percent of weeks on deal In-market execution of promotion contract Promotion Optimization Institute - Fall Summit Dallas, TX 17

18 Baseline Management is Critical Many systems allow baselines to be volatile. However, weekly fluctuations in baseline can significantly alter the analysis. Accurate baselines are critical for Lift, ROI, Pantry Loading, etc. We found an 8 week rolling average baseline works best for us. Anomaly functionality enables smoothing of baseline outliers. We have chosen to do promotion alignment and baseline review each time new market data is loaded, about every four weeks. Promotion Optimization Institute - Fall Summit Dallas, TX 18

19 Post Promotion Analysis (2 Years of Data) o Remember the bad things we learned? o Our promotions were costing way too much money and had an average ROI that was negative double digits. o Our MAPS document, which was to provide trade promotion guidelines to Sales, was not a good directive for successful trade promotions. o There were many s containing statements like, Contrary to MAPS, we need to or Contrary to what you would expect, we found that Post promotion analysis of the top 80% of our business, gave us a pretty good understanding of our promotion history. We immediately applied that knowledge to current promotion plans and the results were astounding Promotion Optimization Institute - Fall Summit Dallas, TX 19

20 Our Results again! We have made astronomical strides driving ROI improvement company-wide with $1MM profit swing. 0.00% -2.00% -0.60% -4.00% -6.00% -8.00% % % % % % % % % ROI by Year, Total APN Source: Event KPI Analysis File 2/18/14 Promotion Optimization Institute - Fall Summit Dallas, TX 20

21 Scenario Promotion Planning Once we had Enforced good discipline in our TPM data Aligned our TPM and POS data Established accurate baselines Post Promotion Analysis on two years of data We were now ready to implement the What-if Scenario Planner Promotion Optimization Institute - Fall Summit Dallas, TX 21

22 What-If Scenario Planner The beauty of the Scenario Planner is that you get to see the highly probable outcome of the promotion events, BEFORE you commit. Volume, Revenue, & Profit (total and incremental) Based on actual historical market performance Exports to TPM solution Promotion planning accuracy improved, by using the T-Pro Scenario Planner. Better results = Better inputs to Demand Planning improves order fill Better handle on future promotion liability Promotion Optimization Institute - Fall Summit Dallas, TX 22

23 Optimal Scenarios We needed to better understand the impact of individual promotional scenarios. For APN and our Retail partners Promotion Optimization Institute - Fall Summit Dallas, TX 23

24 Multiple Scenarios to choose from We now have the visibility into the true impact of scenario planning and what it means to our bottom line Promotion Optimization Institute - Fall Summit Dallas, TX 24

25 The Promotional Calendar Promotion Optimization Institute - Fall Summit Dallas, TX 25

26 What else is in the tool chest? Promotion Optimization Institute - Fall Summit Dallas, TX 26

27 Where are we headed from here? Corporate Optimization T-Pro Optimum Understand impact and role of our Trade promotion activity on total category Joint Business Planning (JBP) with retail partners Increase analytical capabilities on Marketing events, from just visual points of reference to actual KPI outputs. Stack Trade and Marketing analysis to understand synergies vs diminishing returns. Promotion Optimization Institute - Fall Summit Dallas, TX 27

28 How we realized $1 million in incremental profit what would it mean for you Promotion Optimization Institute - Fall Summit Dallas, TX 28

29 Appendix 11/10/2014 Promotion Optimization Institute - Fall Summit Dallas, TX 29

30 KPI Definitions CPI = Consumption to Purchase Index Shows market consumption vs shipments (diversion) RPI = Retail Performance Index Indicates customer s adherence to contract price ROI = Return On Investment Shows positive cash return or loss VEI = Volume Effectiveness Index Incremental volume with Pantry Load factored in PEI = Profit Effectiveness Index Incremental profit with Pantry Load factored in Promotion Optimization Institute - Fall Summit Dallas, TX 30