Framework for Promotional Excellence. Michael Creasey Senior Business Consultant, Exceedra

Transcription

1 Framework for Promotional Excellence Michael Creasey Senior Business Consultant, Exceedra

2 Who am I

3 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.

4 And Promotional uplifts are significantly down.. Trade rates have seen slight increase over time Trade Spend % of Sales Revenue However, promotional lifts are significantly down % uplift -30% +1% Understand and optimising trade ROI Critical component to success

5 So lets start with the simple maths Turnover Trade 25% ROI 1% 500m 125m 1.25m 100m 25m 250k

6 However

7 What do you want to measure? KPIs Incremental Volume Incremental Net Revenue Incremental Spend Incremental Net Contribution ROI Efficiency & ROI Effectiveness ROI Efficiency % = Incremental Net Contribution/Incremental Spend ROI Effectiveness % = Incremental Net Revenue/ Incremental Spend Margins Consistency is key!

8 Best-in-class Promotional Strategies need Pre-Planning considerations Brand/ Customer? Do you understand them? What is their strategy What are they doing? Consistency Promotional Objective Shoppers Customers Competition Measurement Enablers Information, data, and analytics Tools and IT enablement Enabling processes Skilled, empowered organization

9 Exceedra Maturity Model Core Advanced Differentiating 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 Benefits 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

10 What drives Promotions Success or failure?

11 What drives Promotions Success or failure? Mechanic

12 Support Feature Display Relationship Weather Sku What drives Promotions Success or failure? Stores Replenishment Availability Compliance Frequency Merchandising Mechanic Length Competitors

13 Level of difficulty to influence Easiest Harder Hardest Mechanic Display Competitors Feature Stores Compliance Time Customer Relationship Weather Length Availability Merchandising Frequency Sku Replenishment

14 #1. Run the Right Promotion (Mechanic) Penetration Frequency Weight of Purchase Sales Volume i.e., Half Price, BOGOF Bringing in new shoppers Generally trial prices, deep reductions greater than 33% Particularly useful when launching new products i.e., 2.69 to 2 Price Reduction Encourage shoppers to buy more often Generally reduction between 20%-33% Keep it simple! i.e., 3 for 2, 2 for 3, Extra Free Incentivise the shopper to purchase larger quantities

15 #2. Run the Promotion in the Right Place (Feature) 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 multibuys 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 Will the investment in space drive enough additional incremental volume to give an ROI!

16 #3. Run the Promotion at the Right Time Align your promotions with your business calendar What marketing is happening? TV, etc? Be aware of your customers big initiatives and events Consider holidays and national events Category events, Customer initiatives, etc Xmas, Easter, World cup, Olympics 200% uplift in season yields more profit than 200% uplift out of season. Understand seasonality Timing is Everything!

17 #4. Run the Promotion for the Right Length 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) Do Nothing Actuals 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 Do Nothing Actuals 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 Do Nothing Actuals All deals have less impact over Length of time!

18 #4. Run the Promotion for the Right Length

19 #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 Watch out! Avoid promoting back to back Particularly after a deep deal Cupboards are full Especially if the consumption isn t expandable

20 Other considerations Competitors Be aware of what is going on around you Impact of switching Depth of deals Pricing Index Innovation Volume on Deal

21 Other considerations Shopper Right products in the right place Shoppers are using multiple channels Price transparency across Channel Don t want to be ripped off Accept a premium for convenience at a limit Make sure promotions are easy to understand Avoid complex/calculator deals Shoppers don t have time to work them out Loyalty remains but is under pressure Price is still key 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

22 Other considerations Price Pricing quadrants Optimize shelf price Be competitive Response to shelf price Cash generator HI-LO promotion Response to promoted price

23 Framework The Goal Develop Guidelines a full Promotional Playbook based on delivering business objectives Have Clear Promotional Objectives!

24 Sticking to the Framework Right Promotion Right Place Right Time Right Length Right Frequency Enablers Information, data, and analytics Tools and IT enablement Enabling processes Skilled, empowered organization

25 So how does Exceedra support the Framework.

26 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

27 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

28 Promotion Gantt and Visualization One click to edit and drill down Right click to fast edit The different colors represent different status of the promotions