Demandtec provides a framework called Total Trade Optimization to help companies optimize trade promotions. It has 5 core components: 1) Drive trade strategy and account-level planning by linking strategic planning to customer-level plans. 2) Support predictive and post-event analytics. 3) Incorporate shopper insights. 4) Integrate with existing systems. 5) Enable retail collaboration. Total Trade Optimization addresses the roots of trade promotion optimization, where it is currently, and its future, using these 5 components to create better trade plans and sales forecasts while lowering costs and improving retailer collaboration and execution.

1. total of Merchandising & Marketing
trade Customer Insights
optiMization
at the Point of Decision
one plan. many perspectives.

2. total
trade
optiMization
one plan. many perspectives. table of contents
introduction 2
the size of the prize is compelling 4
demandtec total trade optimization 6
the challenge 16
about demandtec 18

3. introduction
“
Who knew three little letters could mean so much? TPO
can stand for Third Party Origination, Technical Planning
Objective, and even Thermo Plastic Olefin. However, most much has changed
involved with trade in the consumer packaged goods industry
know it as Trade Promotion Optimization. The clarity of what
in the world of tPo
during the Past
”
constitutes Trade Promotion Optimization begins to lose
focus shortly after the acronym is spelled out.
several years...
Trade Promotion Optimization, or TPO, was born of trade
planning management system gaps. The industry has
recognized a short list of innovative consumer products
leaders that have invested in trade optimization with
demonstrated success as advanced econometric modeling
techniques allow consumer products manufacturers to
simulate the impact of proposed plans against volumetric
and profit targets. But much has changed in the world of
TPO during the past several years as it has evolved beyond
promotions to include pricing and can even be inclusive of
shopper insights. Due to expanding needs, the analytics that
are inclusive of TPO have not been entirely clear until now.
3
2 Total Trade Optimization
Introduction 3

4. the size of the Prize
is comPelling Even small improvements can deliver big returns. For a $5B
manufacturer that annually invests $750M or more into trade
programs, a 3% improvement in return can yield $15M or
more in incremental margin – profit that can be dropped to
the bottom line, or reinvested into additional trade programs.
These numbers make it nearly impossible for management
The stakes of understanding TPO are high. In 2009, The to ignore the opportunity to plan trade programs with a new
Nielsen Company reported that almost 43% of grocery items approach.
in the United States were sold on promotion. That is up from
about 41% in 2008.i To put it simply, trade promotions are big With this much at stake, a specialized system is required to
business! Each year, consumer products manufacturers invest help you make the best decisions in creating better trade
roughly $125B to $175B in trade-based pricing, promotion, events and plans – but how do you know if your existing
and merchandising programs. According to industry system is maximizing your return?
estimates, this massive pool of spending accounts for roughly
14% to 22% of manufacturer sales – historically with little to enter total trade optimization.
no return to the brands.ii
$15M
$5B $750M Trade
Manufacturer Investment Programs 3% Improvement
Incremental
Margin Increase
i
The Nielsen Company, “Almost Half of U.S. Supermarket Purchases are Sold on Promotion”, October 5, 2009
ii
Cannondale Associates, “Trade Promotion Planning & Analysis: A Game that Needs Changing”, 2009
4 Total Trade Optimization
The Size of the Prize Is Compelling 5

5. demandtec total
trade oPtimization™
demandtec total trade optimization™
Total Trade Optimization is the framework used to measure
how comprehensive your existing TPO approach may be while
identifying areas that need improvement. It consists of five
core components that enable better plans and sales forecasts,
lower process inefficiencies and costs, and improve retailer
collaboration and execution. The Total Trade Optimization
framework addresses TPO’s roots, where it is currently, and
what the future holds, using the five components detailed
below:
• Drive Trade Strategy + Account-Level Planning
• Support Predictive + Post-Event Analytics First, though, we will lay the company dynamic groundwork
that makes success much more likely. Step one is identifying
• Incorporate Shopper Insights
if the organization has the necessary skill set. The right
• Integrate with Existing Systems talent, skill set, training, and ongoing support are critical.
• Enable Retail Collaboration Step two is ensuring the company is focused on improving
trade effectiveness. That includes who owns and sponsors
the solution as well as the metrics for success. Trade
decisions can reside across finance, marketing, customer
teams, and sales, so depending on the organization, multiple
champions may be required. These dynamics enable ongoing
success after opportunities are identified with the Total Trade
Optimization framework.
6 Total Trade Optimization DemandTec Total Trade Optimization 7

6. linking trade strategy and Ultimately the recommendations fuel predictions back to the
customer-level planning strategic planning level, which enables mid-year changes in
Should it be top down, or bottom up? The answer is yes. the event of additional funds, a widening gap, or a change in
A planning system should address the macro needs of direction. This also enables greater retail collaboration as the
brand marketing and trade finance in order to enable macro total category view and impact are measured. The tandem is
planning. This allows strategic teams to utilize science in their essential for Total Trade Optimization.
decisions on how price changes, display and ad coverage,
and adjustments in trade funds or accrual rates would affect
the annual sales and profitability. Strategically, teams must be
able to understand consumer demand and use this insight to
allocate funds across regions and accounts. However, it does HEADQUARTERS
not stop there. Need consistency and
on-strategy planning
An effective solution passes along the annual objectives and Science and
guidelines to field sales so they can create customer-level Guidelines
pricing and promotion plans. In this way, tactical promotions
may be coordinated with national campaigns, but more
importantly it involves starting from an optimized plan versus
reusing last year’s figures as an opening point. The customer- SOFTWARE
specific planning system then enables the customer teams to • Planning templates Improved
understand the best promotional tactics not individually, but • Common science Planning
• Work ow
within the larger category campaign.
Account-
Level Plans
CUSTOMER TEAMS
Need exibility
DemandTec Total Trade Optimization 9

7. support predictive & post-event analytics incorporate shopper insights
Predictive analytics is about distilling historical performance to A recent Nielsen study found that in 2009 Chicagoans bought
demand drivers and understanding their impact on the future. the most items on promotion, a whopping 55.9% versus the
Think of all of the elements that can affect a promotion, be it 43% nationwide grocery average. Are Chicago shoppers more
price, cannibalization, cross-category affinities, or competitive deal savvy? Are they exposed to more trade opportunities?
actions, and translate that to an overall measurement of Is it a combination of both? How do we capitalize on this
baseline and promotional lift. Predictive analytics enables you insight? Trade preferences can be noticeably identified at the
to estimate a $1.79 price point with 60% ad acv, 80% display market level, but the incorporation of Shopper Insights in the
acv for a single week in July even if it has never been tried Total Trade Optimization framework allows us to be even
individually or as a combination. more precise.
Unfortunately, the future does not always follow our plans.
There will be times when we do only 35K cases when
we expected to do 45K, and we are left wondering what
happened. Post-event analytics present a retrospective
“
on what was planned and what was executed, providing
clarification for trade optimization. This retrospective diagnosis
enables us to identify if we were expecting 60% and we only in 2009 chicagoans
received 40% or instead of 80% display compliance we only
received 50%. This understanding allows the identification bought the most
of operational gaps that can be addressed or accounted for items on Promotion,
in the future. It may also identify new causality which can be
used to improve the model.
a whoPPing 55.9%
versus the 43%
nationwide grocery
”
average.
10 Total Trade Optimization DemandTec Total Trade Optimization 11

8. Stores with more kids in their trade area sell more cookies. Not Shopper insights typically utilize transaction log (t-log) data
a very profound statement, yet traditional TPO encourages us or syndicated panel sources to identify desired behavior.
to promote all stores in the exact same way. The introduction The shoppers are then identified though loyalty cards or a
of shopper insights into trade decisions allows teams to not geodemographic targeting system in order to locate them on
only know but act on the differences through targeting. The the ground and cluster stores in which a specific action needs
net result is a more efficient trade spend as shoppers with to take place. A store cluster may include “Deal-Sensitive
a higher lift toward a particular vehicle such as a temporary Moms,” for which specific promotions may be customized,
price reduction are targeted, while those who are less and underperforming stores may be identified based on their
responsive are given another. It may even be extrapolated to sales to potential ratio. The Deal-Sensitive Mom clusters are
a higher level and allow us to determine the right promoted then brought into the TPO system and aligned to events to
product mix in a geography for the best results. create customized promotions and realize more effective
plans.
General Shopper Population
CHANGE IN
MANUFACTURER SHELF PRICE PER UNIT
A RESPONSE -$0.45
Competitive
Threat
B RESPONSE
-$0.25 Gross Margin
Preferred Shopper Segments

9. integrate with existing systems enable retail collaboration
Insights without action are overhead. The Total Trade The desire to be a strategic partner with a retailer is a common
Optimization framework recognizes that companies may have aspiration—and should be. Collaboration may be founded
a variety of Trade Promotion Management (TPM) systems as through joint insights, common modeling, or joint systems. In
well as an ERP system but if you pardon the analogy, it will the marketplace, superior insights and partnership provide the
need a bigger analytic engine without replacing the whole foundation for a more profitable business.
car. This enables TPM and ERP systems to excel at funds
tracking, checkbooks, settlements, and execution while That can take the form of comprehensive analytics. When
incorporating predictive trade planning. Key to full integration evaluating an event, the ability to measure the impact on the
is the alignment of analytic planning and execution systems to category and store brand down to a SKU level is not only
reconcile their respective consumer consumption and factory collaborative, but good business. The ability to understand the
shipments. impact of an event based on the retailer’s pricing strategy not
only leads to better forecasts, but a stronger partnership.
Integration comes in varying degrees that do not require full
exchange of information. The ability to pass promotion events Shopper insights also enable collaboration. Segmentation is
and plans to a trade planning management system with the a tool that has been used by retailers and manufacturers for
reciprocal results creates a repeatable cycle that greatly decades as a way to identify the 80/20 shoppers, or the 20%
improves efficiency. Interaction with a deal management of shoppers that make up 80% of your volume. Introducing
system simplifies the process of deal approval with the retailer segmentation into trade via shopper insights allows retailers
as the terms of the deal are imported directly. and manufacturers to identify where their respective segments
overlap. For example, a retailer may find their High Perimeter
Suburban segment highly overlaps with a manufacturer’s
Brand Loyal Families, which enables mutual activities toward a
common goal.
14 Total Trade Optimization DemandTec Total Trade Optimization 15

10. the challenge
the total trade optimization challenge
Redefining the three letters T-P-O for better plans and sales
forecasts, lowered process inefficiencies and costs, and
improved retailer collaboration and execution: those are the
goals of Total Trade Optimization. The stakes are high, but the
rewards are proportionally high as well.
demandtec total
“ the stakes are high, but the
rewards are ProPortionally
trade oPtimization™
”
high as well.
Are you ready to take the Total Trade Optimization challenge?
Will you find yourself one of the innovative trade leaders in
the CPG industry or in a position to greatly improve your
performance? How will you score across the five components
of the Total Trade Optimization framework?
contact your demandtec
representative to find out.
16 Total Trade Optimization 17

11. about contact us
demandtec DemandTec
One Franklin Parkway
Building 910
San Mateo, CA 94403
USA
DemandTec (NASDAQ: DMAN) connects more than 280
retailers and consumer products companies, providing inquiries
common tools to transact, interact, and collaborate on Phone: +1.650.645.7100
core merchandising and marketing activities. DemandTec’s Please visit www.demandtec.com
software services enable customers to achieve their sales
volume, revenue, shopper loyalty, and profitability objectives.
DemandTec customers have collaborated on more than 3.5
million trade deals. DemandTec software services utilize a
science-based software 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.
18 Total Trade Optimization About DemandTec 19