promotioncollaborationFive StepS to SucceSS                  Chapter Title Here   1                   a DemandTec eBook
the game changes...           ...when trading partners truly               collaborate on promotions    RetaileRS and manu...
promotion       collaboration                              taBle oF contentS                              what we have lea...
what we have    learned    manuFactuReRS and RetaileRS who engage    moRe oF theiR paRtneRS in collaBoRative              ...
When RetaileRS rate importance and effectiveness of                   When manuFactuReRS rate the importance and          ...
tRuSt RemainS a key FactoR in     collaBoRation eFFectiveneSS, But     Relatively leSS impoRtant than     otheR BaRRieRS. ...
collaboration benefits retailer and     manufacturer partners in a variety of ways.12                                     ...
five steps                                      3   step three:                                          define key       ...
1     step one: plan     collaboration holistically     it haS to Begin with the Big pictuRe.                            w...
holiStic planning RequiReS people,                                                                         pRoceSSeS, data...
2     step two: set rules of                                                  RuleS oF engagement will vaRy and aRe       ...
3                                                                                    key conSideRationS FoR RetaileRS:    ...
4     step four: establish     collaboration tools     make SucceSS poSSiBle.     Even more than that – make breakthrough ...
common data, Science, and toolS enSuRe                                                                        “appleS to a...
5     step five: continuously     measure and adjust                                                    a continuouS and c...
this is not the     last word...     Collaboration is a big concept that is certainly not limited     to trade promotion. ...
about     demandtec                                                    contact uS                                         ...
promotioncollaborationFive StepS to SucceSS                        a DemandTec eBook
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DemandTec eBook: Retail Promotion Collaboration

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Benefits accrue for both parties, as fact-based promotion collaboration becomes their embedded, everyday mode of interaction and a way of doing business and not just this month's slogan.

Leading retail and consumer product companies are already collaborating to win. They are learning to work together for mutual, sustainable promotion and category management success. The game changes when trading partners truly collaborate on promotions.

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DemandTec eBook: Retail Promotion Collaboration

  1. 1. promotioncollaborationFive StepS to SucceSS Chapter Title Here 1 a DemandTec eBook
  2. 2. the game changes... ...when trading partners truly collaborate on promotions RetaileRS and manuFactuReRS ShaRe common inSightS conSumeR-centRicity iS galvanizing ouR induStRy. and use data to drive superior promotion and merchandising Retailer and 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 shopper insights and enabling technology for demand BeneFitS accRue FoR Both paRtieS, as fact-based data-empowered collaboration are available today. Before you promotion collaboration becomes their embedded, everyday plan another promotion, set another price, refine another as- mode of interaction – a way of doing business – not just this sortment, or negotiate another deal with your trading partner, month’s slogan. review this book and discover the sustainable advantage col- laboration can build for your business. Leading retail and consumer product companies are already collaborating to win. They are learning to work together for mutual, sustainable promotion and category management success.2 Summary 3 Promotion Collaboration
  3. 3. promotion collaboration taBle oF contentS what we have leaRned 6 Five StepS to StaRt collaBoRating today 14 thiS iS not the laSt woRd 304 5 Promotion Collaboration
  4. 4. what we have learned manuFactuReRS and RetaileRS who engage moRe oF theiR paRtneRS in collaBoRative moSt RetaileRS and manuFactuReRS activitieS RepoRt BetteR SucceSS FRom Believe collaBoRation iS impoRtant to theiR pRomotionS. theiR FutuRe SucceSS. For retailers “collaborative engagement” means improved • 92% of retail grocers report collaboration as “very important” interactions on demand analytics and win-win planning. For • to future success and 8% consider it “important.” manufacturers “collaborative engagement” means more • Manufacturers rated collaboration as “very important” 56% • freedom for the field sales force and new tools to more • of the time, and “important” 39% of the time. effectively manage and measure promotions. It’s no secret. While retailers tend to be most interested in DemandTec and Booz Allen Hamilton, in partnership with shopper dynamics and category health, manufacturers have Trade Promotion Management Associates, jointly sponsored historically maintained focus on consumer events and brand research on this issue because we observe trading partners profitability. Bridging this “disconnect” will help promotions striving to gain greater collaboration and mutual benefit. perform better. The Promotion Collaboration Survey is the first known to address trade promotion optimization and collaboration. Retailers and manufacturers share related concerns about demand forecasting and differing objectives (e.g. category The resultant insights imply ways that the industry can best growth versus trade spend ROI). work together to improve retail-focused merchandising and marketing. The big ideas: • Manufacturers and retailers are becoming increasingly • interdependent. • Trade promotion optimization is a key opportunity and the • • next frontier in collaborative activities. • Increased collaboration can drive more effective business • • results.6 What We Have Learned 7 Promotion Collaboration
  5. 5. 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 forecasting [below]. aBility to accuRately FoRecaSt conSumeR and undeRStand the RetuRn on inveStment in a waRehouSe demand pRopoSed eventevaluate the eFFectiveneSS oF a completed event aBility to accuRately FoRecaSt conSumeR and waRehouSe demandplan 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 in the following skills that support collaboration. that support collaboration. Source: The Promotion Collaboration Survey Source: The Promotion Collaboration Survey8 What We Have Learned 9 Promotion Collaboration
  6. 6. tRuSt RemainS a key FactoR in collaBoRation eFFectiveneSS, But Relatively leSS impoRtant than otheR BaRRieRS. Data inconsistency, inappropriate tools, misaligned or lack of Survey question: Which of the following do you consider to defined objectives, and lack of a process are all considered to be barriers to using analytics and insights to collaborate with be greater barriers to collaboration than a lack of trust. It is also vendors in the future? highly likely that any efforts to eliminate these other barriers would also have the secondary benefit of building and ensuring trust within the relationship and the collaboration activities. 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 miSaligned oBjectiveS 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 paRtneRS10 11 Source: The Promotion Collaboration Survey Promotion Collaboration
  7. 7. collaboration benefits retailer and manufacturer partners in a variety of ways.12 13 Promotion Collaboration
  8. 8. five steps 3 step three: define key performance indicators 1 step one: plan 4 collaboration holistically step four: establish collaboration tools 2 step two: 5 set rules of engagement step five: continually measure and14 adjust 15 Promotion Collaboration
  9. 9. 1 step one: plan collaboration holistically 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. who 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 Promotion Collaboration
  10. 10. 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 Promotion Collaboration
  11. 11. 2 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 them. • 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 Promotion Collaboration
  12. 12. 3 key conSideRationS FoR RetaileRS: • Establish KPIs for promoted item sales, but also overall category sales and profits. step three: define key • Analyze cannibalization of private label or other brands performance indicators as you evaluate deals or offers from different vendors. • Using KPIs, request that all promotional offers from and goals your suppliers meet agreed-upon thresholds. • Finally, consider customer segmentation strategies. Request promotional offers that are not only good for the category but are better targeted to your key customer segments. how do you meaSuRe SucceSS? 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 Retailer Manufacturer Important Metrics Important Metrics both sides must recognize that what is optimal for one may be Private label impact Promoted brand volume unacceptable for the other. Best customer alignment Category profitability Cannibalization of Cost per incremental unit It’s well understood that a promotion that drives one brand’s category competitors Trade spend ROI 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. key conSideRationS FoR manuFactuReRS: In this day and age, this should not be considered “good • Recognize retailers’ interests and how they enough.” evaluate competing deals. • For win-win collaboration, make sure your customer For successful collaboration, it is essential to define what you understands your goals for volume, cost-per-incremental will measure. This will enable both parties to raise the bar from volume, and trade spend ROI. what you’ve done in the past. • 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 Promotion Collaboration
  13. 13. 4 step four: establish collaboration tools 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 Promotion Collaboration
  14. 14. common data, Science, and toolS enSuRe “appleS to appleS” analyticS and moRe eFFective collaBoRation. 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 Promotion Collaboration
  15. 15. 5 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 common understanding of mutual goals and gains. Sample ScoRecaRd Retailer Performance Target Actual Status The outcome is a virtuous collaboration cycle that engages both retailers and manufacturers in an upward spiral of On-time reports 100% 90% performance that yields mutual benefits. On-time payments 100% 85% Manufacturer Performance Target Actual Status Just as importantly, the iterative process influences trading partners to reduce sub-par or non-performing programs, On-time reports 100% 87% freeing scarce resources that may be reallocated to more On-time billing 100% 92% powerful and productive promotions. Ac- Collaboration KPIs Target Status tual key conSideRationS FoR Both RetaileRS and Promoted brand volume + 8% + 5% manuFactuReRS: • Based on the KPIs defined in Step Three, are promotion Category profitability + 4% + 5% plans achieving the goals each party set? Cost per incremental unit - 3% - 2% • Don’t forget to scorecard the process itself. Even if all Category cannibalization - 2% - 3% KPIs are in the green, is the process working as efficiently as it can be? Private label volume loss - 10% - 6% • Re-assess Steps One through Four. Should others be Best customer alignment 75% 81% involved in the process? Are you measuring the right KPIs Trade spend ROI + 4% + 6% and using the best tools?28 Five Steps 29 Promotion Collaboration
  16. 16. this is not the last word... 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. www.demandtec.com30 This is Not the Last Word 31 Promotion Collaboration
  17. 17. about demandtec contact uS DemandTec One Franklin Parkway Building 910 San Mateo, CA 94403 USA inquiRieS Phone: +1.650.645.7100 DemandTec (NASDAQ:DMAN) connects more than 400 Please visit www.demandtec.com retailers and consumer products companies, providing common solutions to transact, interact, and collaborate on core merchandising and marketing activities. DemandTec’s services enable customers to achieve their sales volume, revenue, shopper loyalty, and profitability objectives. DemandTec customers have collaborated on nearly four million trade deals. DemandTec software and analytical services utilize a science-based platform to model and understand consumer behavior. DemandTec customers include leading retailers and consumer products companies 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, Target, Walmart, and WH Smith.32 Chapter Title Here 33 Promotion Collaboration
  18. 18. promotioncollaborationFive StepS to SucceSS a DemandTec eBook

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