Chapter Title Here 1
a DemandTec eBook
retailers and manufacturers share common insights consumer-centricity is galvanizing our industry.
and use data to drive superior promotion and merchandising Retailer and branded manufacturer alike are working to better
decisions based on reliable forecasts and expectation of understand and get closer to shoppers. These initiatives are
mutual success. driving opportunities to collaborate throughout the demand
chain, serving as the foundation for joint business value
trust emerges based on common understanding, creation.
transparency and shared success.
the game changes...
...when trading partners truly collaborate on promotions
Benefits accrue for Both parties, as fact-based The shopper insights and enabling technology for demand
promotion collaboration becomes their embedded, everyday data-empowered collaboration are available today. Before you
mode of interaction – a way of doing business – not just this plan another promotion, set another price, refine another as-
month’s slogan. sortment, or negotiate another deal with your trading partner,
review this little book and discover the sustainable advantage
Leading retail and consumer product companies are already collaboration can build for your business.
collaborating to win. They are learning to work together for
mutual, sustainable promotion and category management
2 Chapter Title Here 3
taBle of contents
what we have learned 6
five steps to start collaBorating today 14
this is not the last word 30
4 Chapter Title Here 5
what we have
manufacturers and retailers who engage more most retailers and manufacturers believe
of their partners in collaborative activities report collaboration is important to their future success.
better success from their promotion efforts. • 92% of retail grocers report collaboration as “very important”
For retailers, “collaborative engagement” means improved • to future success and 8% consider it “important.”
interactions on demand analytics and win-win planning. For • Manufacturers rated collaboration as “very important” 56% •
manufacturers, “collaborative engagement” means more • of the time, and “important” 39% of the time.
freedom for the field sales force and new tools to more
effectively manage and measure promotions. It’s no secret. While retailers tend to be most interested in
shopper dynamics and category health, manufacturers have
DemandTec and Booz Allen Hamilton, in partnership with historically maintained focus on consumer events and brand
Trade Promotion Management Associates, jointly sponsored profitability. Bridging this “disconnect” will help promotions
research on this issue because we observe trading partners perform better.
striving to gain greater collaboration and mutual benefit.
The 2007 Promotion Collaboration Survey is the first known Retailers and manufacturers share related concerns about
to address trade promotion optimization and collaboration. demand forecasting and differing objectives (e.g. category
growth versus trade spend ROI).
The resultant insights imply ways that the industry can best
work together to improve retail-focused merchandising and
marketing. The big ideas:
• Manufacturers and retailers are becoming increasingly
• Trade promotion optimization is a key opportunity and the •
• next frontier in collaborative activities.
• Increased collaboration can drive more effective business •
6 What We Have Learned 7
When retailers rate importance and effectiveness of When manufacturers rate the importance and
vendor capabilities, three gaps stand out [below]. effectiveness of their customers’ capabilities, the largest
gaps differ. However, both share concerns about demand
aBility to accurately forecast consumer and understand the return on investment in a
warehouse demand proposed event
evaluate the effectiveness of a completed event aBility to accurately forecast consumer and
plan a promotion event considering the overall relate promotion events to the goals of your
impact on the category partners
Survey question: Please rate the importance and Survey question: Please rate the importance and
effectiveness of your vendor partners in the following skills effectiveness of your retail partners at the following skills
that support collaboration. that support collaboration.
Source: The 2007 Promotion Collaboration Survey Source: The 2007 Promotion Collaboration Survey
8 What We Have Learned 9
trust remains a key factor in collaboration
effectiveness, but relatively less important than
Data inconsistency, inappropriate tools, misaligned or lack of
defined objectives, and lack of a process are all considered Survey question: Which of the following do you consider to
to be greater barriers to collaboration than a lack of trust. It be barriers to using analytics and insights to collaborate with
is also highly likely that any efforts to eliminate these other vendors in the future?
barriers would also have the secondary benefit of building and
ensuring trust within the relationship and the collaboration
data in formats that are non-standard (hierarchies, formats, data attriButes, etc.)
data that is not timely
lack of joint key performance indicators
lack of standardization in how data is analyzed Between trading partners
inadequate tools to work with data
resources to utilize growing sources of data
lack of formal Business process touchpoints
lack of agreement on what should Be measured
systems that can’t talk with one another so the data can’t Be shared
lack of trust with your partners
Source: The 2007 Promotion Collaboration Survey
collaboration benefits retailer and
manufacturer partners in a variety of ways.
3 step three:
1 step one: plan
2 step two:
set rules of
14 adjust 15
Meets Assortment Optimization
step one: plan
it has to Begin with the Big picture. where
Collaboration is more than a joint planning meeting and more What must take place in person versus by phone, email, or
than simply sharing data. It’s a way of doing business that in a shared, web-based workspace? Does the work take
defines how retailers and manufacturers go to market, day place on your premises? At your trading partner’s?
in and day out. It requires data and tools but it also depends
on people and processes. As with any enduring change when
initiative, it behooves companies to consider how it will Establish a timetable for collaboration that considers joint
impact their businesses across several dimensions: goals, availability of solutions, and sets milestones
for key tasks.
Define who is involved in your organization and who why
they will be interacting with in your trading partner’s The reason to collaborate may seem self-evident. However,
organization. Be certain your people are empowered with the clearly stating the primary objectives can help shape the rest
authority to get the job done. of the plan and also help both parties modify or expand the
initiative as new opportunities emerge. Also, your trading
what partner’s stated reasons to collaborate may be slightly different
Define the processes and roles clearly. Know exactly what than you expect.
you are trying to accomplish and what has to happen. Be
ready to state it clearly.
16 Five Steps 17
holistic planning requires people,
processes, data and tools
key considerations for retailers:
• Is promotion collaboration centered around the category
management team? Who else should be involved?
• Who will interact with counterparts on the supplier side
and what tools will they use?
• Are you ready to implement programs developed
with your partners?
• In addition to planning for your own improvements, are you
identifying ways to enable your supplier community to lower
its cost to serve you?
key considerations for manufacturers:
• Have you empowered your field-based account
teams to take action?
• Are you engaged in a dialog with retail customers around
collaborative promotion planning?
• Are you ready to leverage transaction log data in your
promotion strategies and tactical recommendations?
• Have you identified ways to lower your cost to serve your
most important retail customers?
18 Five Steps 19
step two: set rules of rules of engagement will vary and are
dependent on the relationship and level of trust
engagement Between the partners.
collaBoration can never Be a
“no holds Barred” proposition.
Trust is built in part by setting limits and defining rules. For
some in the industry, collaboration is simply synonymous
with “sharing data,” but there are ways to collaborate that
need not involve any disclosure. Also, levels of collaboration
may vary, and some capabilities may be enabled without
sharing sensitive data.
Overall, retail leaders are opening up more of their
businesses to collaboration with suppliers in order to
achieve the benefits of joint planning and execution. In all
cases, limits do apply. It’s important to recognize that the
retailer sets the rules of engagement.
key considerations for retailers:
• Based on what you want to achieve, determine what
information your vendor needs.
• Analyze the different types of vendors you do business
with and define how collaboration might differ between
• Authorize vendors to use software, access reports, or even
use specific data sources based on their roles.
key considerations for manufacturers:
• Build your capabilities around retailers’ rules.
• Share best practices and marketing know how.
• Leverage your consumer knowledge.
20 Five Steps 21
3 key considerations for retailers:
• Establish KPIs for promoted item sales, but
also overall category sales and profits.
step three: define key • Also consider analyzing cannibalization of private label
performance indicators or other brands as you evaluate deals or offers from
and goals • Using KPIs, request that all promotional offers from your
suppliers meet agreed-upon thresholds.
• Finally, consider customer segmentation strategies. Request
promotional offers that are not only good for the category
how do you measure success? but are better targeted to your key customer segments.
Successful trading partners jointly establish key performance
indicators (KPIs) from the outset of a collaborative relationship.
There is no substitute for candor in this discussion, because
both sides must recognize that what is optimal for one may be
unacceptable for the other.
It’s well understood that a promotion that drives one brand’s
short term sales at the expense of overall category objectives
is not sustainable. Previously, many of these promotions have
been executed at retail because neither party had a better
alternative, and perhaps experimenting with something new
(versus repeating what was done last year) was too risky.
In this day and age, this should not be considered “good key considerations for manufacturers:
enough.” • Recognize retailers’ interests and how they
evaluate competing deals.
For successful collaboration, it is essential to define what you • Also, for win-win collaboration, make sure your customer
will measure. This will enable both parties to raise the bar from understands your goals for volume, cost-per-incremental
what you’ve done in the past. volume, and trade spend ROI.
• Explain how lowering the cost-to-serve a given customer
would benefit the customer.
• Bring deep consumer insights and research to the table,
and align with the retailer’s loyalty insights and other
shopper insights to plan targeted promotions together.
22 Five Steps 23
step four: establish
make success possiBle.
Even more than that – make breakthrough success the
everyday norm. Empower sales and category management
teams with tools that support quick, accurate, informed key considerations for retailers:
decision-making, reliable forecasts, and dependable, rapid • Use advanced promotion planning tools to compare vendor
monitoring of results. offers against each other and with regard to the agreed-
upon KPIs and thresholds in Step Three.
Advanced promotion planning software applications today • Create additional “what-if” scenarios to forecast what
apply the science of consumer demand modeling and different deal terms or different uses of ads and displays
predictive simulation. These can be based on a modeled would generate.
platform of either retailer POS/t-log data or syndicated market • For the most collaborative retailers, consider enabling your
data. Retailers and manufacturers will benefit when comparing suppliers to receive metrics (e.g. volume forecasts) from
forecasts and other analytics in an “apples-to-apples” manner. your modeled environment (subject of course to the rules
Using the same methodology and science over different data of engagement defined in Step Two).
sets is a significant opportunity. Using the same underlying
data makes this even more powerful.
24 Five Steps 25
common data, science, and tools ensure
“apples to apples” analytics and more
key considerations for manufacturers:
• Choose the right “metric” system. Your plans will be more
easily sold in if the analytics used to prove their value are
consistent with what your customer uses.
• Use the same promotion planning system as your customer
with your syndicated data. This ensures that both parties
are not only comfortable with the modeling and forecasting
approach, but process efficiencies can be gained as well
when data is not entered multiple times.
• Encourage your customers to open up their analytical
platforms to give you the key metrics you would need
to help drive their business and meet the established
KPIs and thresholds. But recognize that your customer
sets the rules of engagement.
26 Five Steps 27
step five: continuously
measure and adjust a continuous and collaBorative cycle to
measure and adjust ensures oBjectives
are Being met.
Build a cycle of success.
Empowered, informed collaborators continually measure,
evaluate and adjust merchandising programs based on a
Retailer Performance Target Actual Status
common understanding of mutual goals and gains.
On-time reports 100% 90%
The outcome is a virtuous collaboration cycle that engages On-time payments 100% 85%
both retailers and manufacturers in an upward spiral of
Manufacturer Performance Target Actual Status
performance that yields mutual benefits.
On-time reports 100% 87%
Just as importantly, the iterative process influences trading On-time billing 100% 92%
partners to reduce sub-par or non-performing programs,
freeing scarce resources that may be reallocated to more Collaboration KPIs Target Status
powerful and productive promotions.
Promoted brand volume + 8% + 5%
key considerations for Both retailers and Category profitability + 4% + 5%
manufacturers: Cost per incremental unit - 3% - 2%
• Based on the KPIs defined in Step Three, are promotion
Category cannibalization - 2% - 3%
plans achieving the goals each party set?
• Don’t forget to scorecard the process itself. Even if all Private label volume loss - 10% - 6%
KPIs are in the green, is the process working as efficiently Best customer alignment 75% 81%
as it can be?
Trade spend ROI + 4% + 6%
• Re-assess Steps One through Four. Should others be
involved in the process? Are you measuring the right KPIs
and using the best tools?
28 Five Steps 29
this is not the
Collaboration is a big concept that is certainly not limited
to trade promotion. It is fundamental to driving innovation
and yields great advantages in assortment and new item
planning, shelf planning and other category management
activities. For many retailers and consumer product
manufacturers, most collaboration to date has been taking
place in some of these other areas with fewer initiatives
centered on improving promotions. Given new technology
and changing attitudes towards win-win promotion planning,
trade promotion collaboration is now a key initiative for more
and more leading innovators in our industry.
This little book describes five basic steps that just begin
to outline key concepts for effective collaboration on trade
promotions. We’d be glad to share more detail from The 2007
Promotion Collaboration Survey, or provide more information
about collaborative promotion planning technology available to
retailers and manufacturers. Just ask. www.demandtec.com
30 This is Not the Last Word 31
demandtec contact us
1 Franklin Parkway
San Mateo, CA 94403
DemandTec (NASDAQ: DMAN) enables retailers and consumer Phone: +1.650.645.7100
products companies to optimize merchandising and marketing Please visit www.demandtec.com
decisions, individually or collaboratively, to achieve their sales
volume, revenue and profitability objectives. DemandTec
software services utilize DemandTec’s science-based software
platform to model and understand consumer behavior.
DemandTec customers include more than 195 leading retailers
and consumer products manufacturers, such as Ahold
USA, Best Buy, ConAgra Foods, Delhaize America, General
Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods,
Monoprix, PETCO, Safeway, Sara Lee, Walmart and WH
Smith. Connected via the DemandTec TradePoint Network™,
DemandTec customers have collaborated online with more
than 3 million trade deals.
32 Chapter Title Here 33