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DemandTec eBook: Optimize Trade Promotions


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Trade Promotion Optimization (TPO) can sharpen CPG promotion plans, pinpoint the new pricing sweet spots that maximize event lift and brand share and help retailers build bigger baskets and profits, stimulate categories, and retain more of the targeted shopper segments they value most.

How do you know if your company is ready to optimize trade promotions? First, consult our CPG Checklist: 5 critical points of self-assessment that show your readiness to gain competitive advantage through more intelligent trade.

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DemandTec eBook: Optimize Trade Promotions

  1. 1. OptimizeTradePromotions:The Time is Right5 Key Factors toKnow Your Company is Ready a DemandTec eBook
  3. 3. 5 Key Factors toKnow Your Company is Ready Chapter Title Here 3
  4. 4. WHY NOW? INFLATION IS BACK. Food-at-home prices could rise about 4% in 2010, after a mere 0.5% gain in 2009, the lowest annual rise since 1967, says USDA. Shoppers will respond differently to trade promo- tions as food costs heat up again. Trade Promotion Optimiza- tion (TPO) can sharpen CPG promotion plans, pinpoint the new pricing sweet spots that maximize event lift and brand share—and help retailers build bigger baskets and profits, stimulate categories, and retain more of the targeted shopper segments they value most. Trade event planning is more refined—the ability to simulate events and forecast results accurately creates the truest win- ners in trade promotions. Best practice is no longer a direct build off of the prior year—because alternate brand and private label competition is fiercer, and retailer performance demands are greater. For example: Costco expects store brands will generate 37% of dollar sales by August 2012, up ten percentage points from 2010; at Kroger, store brands were 35% of unit sales and about 26% of dollar sales in the lat- est fiscal quarter. To help fend off SKU rationalization, brands need to excel in trade promotion performance measures.4 Optimize Trade Promotions
  5. 5. CPG leaders already use TPO to collaborate more closely with retailers. This capability (also known as predictive trade analyt- ics) enables CPG to simulate ‘what if’ scenarios to optimize event plans and align with retailers’ strategic objectives and go-to-market strategies. This shifts the partnering focus to how the CPG brand/item portfolio can improve retailer cat- egory performance.“ WANT THE SAME PRISTINE, PROVEN, TRANSPARENT AND FLEXIBLE PROCESS TO ELEVATE YOUR COMPANY AND EN- ” ABLE YOU TO COMPETE AT THEIR LEVEL? First, consult our CPG Checklist: 5 critical points of self- assessment that show your readiness to gain competitive advantage through more intelligent trade. 5
  6. 6. 5 KEY FACTORS TO KNOW YOUR COMPANY IS READY6 Optimize Trade Promotions
  7. 7. 1. CONSUMER- AND SHOPPER-CENTRICITYThe chief household shopper goes to the store with needs andwants of multiple family members in mind—and a necessities-only budget. How central are your brands and trade events topurchase triggers? Do your event plans tailor your nationalplatform (based on your brands’ consumer insights) to retailerobjectives to grow specific shopper segments important totheir stores?How crisply do your messaging, promotion pricing and pur-chase incentives at the shelf resonate with targeted shoppers? Do key chains share frequent cardholder trend data for detailed shopper-centric simulations, which in turn show events lifting categories and satisfying shoppers? Using TPO to simulate events in the planning stage abates risk, aligns with demand, lessens risk and grows compliance. Consumers are settling into a new frugality. Find the right promotional pricing for your brands, market-by-market, by also asking: Has their purchase hierarchy (market struc- ture) changed in order to save money? What is their receptivity to value brands or private label in your categories? Do they perceive your brands within the competitive set of national leaders, or vs. private label? 7
  8. 8. 2. TACTICS Are you like most CPG companies lacking processes and sys- tems to track causal data such as in-store display compliance and ad features? Is that a big blind spot that hinders analysis of item-level price elasticity—and the event tactics that would work best? Are trading partners accountable for execution in your tactical processes? Does your company regularly secure and docu- ment event compliance? How often do you get the endcaps, feature displays, signage and circular space you pay retail- ers for in good faith? Is your company simplifying tactics to reduce unnecessary complexity and enhance the likelihood of compliance?8 Optimize Trade Promotions
  9. 9. “ DO YOU TEST DIFFERENT TACTICAL EXECUTIONS TO HELP PLANNED EVENTS ” REACH FULL POTENTIAL?Anything less than excellent tactical execution compromisesevent results, often without being tagged as the reason; this inturn can incorrectly skew future plans.Do you test different tactical executions to help plannedevents reach full potential? Do you leverage all availableresources such as mobile technology in the field, sales andmarketing agencies, better-trained DSD teams or store-basedworkers?Is your company preparing for the coming era of more ‘pay onscan,’ which will allow CPG teams greater field presence instores because they will still own the goods on the shelves? Chapter Title Here 9
  10. 10. 3. MEASURING SUCCESS How often do you establish quantifiable success measures from the outset with retailers? Key Performance Indicators (KPIs) push partners to work cohesively towards goals, which go beyond dollars to posi- tion stores as motivated to deliver savings and healthy eating options. Do your KPIs address this: ‘Are we doing enough to escalate the performance of our retailers’ categories? Are we improving faster than our competitors to satisfy consumers and shoppers?’ “ ARE WE IMPROVING FASTER THAN OUR COMPETITORS TO SATISFY CONSUMERS AND ” SHOPPERS? Should events stay on your calendar or not? Trade Promotion Optimization, or predictive trade analytics, gives the critical insights to these important questions: Are we gaining or los- ing market share? Are we running more or fewer trade events this year than last? Is event lift better or worse? Are sales/ profits/profit margins rising for every dollar we spend on trade events? Are we selling more cases for every dollar we spend on trade events?10 Optimize Trade Promotions
  11. 11. Also: Is shelf space increasing or decreasing? Are more dis-counts being passed through to shoppers? Are events involv-ing more of our branded items, or others cross-merchandised(PL or other brands that go with the concepts)? Are our eventsengaging more or fewer shoppers at the chains we collaboratewith? Is our brand equity rising among targeted consumers?Are we hearing more positive or negative feedback from ourretail partners? Trends in category/brand/item performance,trip frequency, basket size, companion purchases at keychains we collaborate with? 11
  12. 12. 4. CULTURE Don’t underestimate the human side of adopting predic- tive trade analytics and effecting organizational change. The process begins when a CPG company assesses readiness, and then deepens as business processes are realigned, new capabilities are acquired, and users fully adopt the software solution. This ‘human track’ unfolds over months in tandem with the TPO ramp-up. Best: Senior leadership communicates their vision of the future state throughout the adoption process, and relies on a cross- functional team of power users (Trade Strategy, Brands, Sales Management and more) to tell early success stories that excite the CPG organization. How ready is your CPG company to get underway with predic- tive trade analytics? Answer bluntly: Do our senior executives know how retailers require event gains year over year? Are we willing to invest in the technology to achieve this? Do we have the vision to embrace positive change across multiple disci- plines – marketing, finance, sales, brands, and logistics? Also: Do we know who our power users would be? Would we empower team members to serve retail accounts better? Do we have goals/timelines in place for customer teams and headquarters adoption? Do we know how to leverage these new capabilities to launch new products and other initiatives?12 Optimize Trade Promotions
  13. 13. 5. ROIRetailers were early adopters of Software-as-a-Service modelsto manage price, promotion and assortment activities, so CPGneeds to master these same elements, using TPO to shapedemand. They’ll be seen as more credible, customer-centricpartners.The ROI on such a solution will grow with repeated use. Closerretail collaborations will lead to better-targeted event plans,and cross-functional views into better results. As event perfor-mance rises, CPG will better shield its brands’ everyday shelfspace from SKU rationalization.These gains will cycle faster if a CPG company chooses theright technology provider. When evaluating a potential source,ask: Is the solution complete? Does it include the ability tomanage data? Do we believe in its scientific modeling? Is itdelivered as Software-as-a-Service, or does it require use ofour servers and IT involvement? What is the provider’s recordon delivery excellence? Are there meaningful benefits mea-surements? Are user-support processes robust enough forour needs? Are there enough persuasive customer testimoni-als? Can we structure an agreement/commitment to suit ourcompany’s growth plans, objectives and scalability? 13
  14. 14. ABOUT DEMANDTEC DemandTec (NASDAQ: DMAN) enables retailers and consumer products companies to optimize merchandising and marketing 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.14 Optimize Trade Promotions
  15. 15. CONTACT USDemandTecOne Franklin ParkwayBuilding 910San Mateo, CA 94403USAINQUIRIESPhone: +1.650.645.7100Please visit Chapter Title Here 15