By: Andy Buteux, Don Baker, and John Wildman
PROMOTIONAL ANALYTICS can be a particularly complicated subject. Because of its intricacy, we try to focus organizations on only two core concepts when we teach Promotion Analysis and Analytics.
Trade Events go badly because of (1) poor trade investment design or (2) lack of incremental volume. Yep, its that simple.
Part 7 (of 8):
Nail Down Your Promotion
Analysis and Analytics
Let’s tackle the investment portion first. Given our experience in the business, we would have expected things to change. But not much has. Companies still:
- Provide a longer deal window than necessary for the promotion
- Spend lump sums unwisely
- Develop very poor habits in deal maintenance in the interest of simplifying deal entry and contract maintenance.
We could write a series of articles just on these poor practices. They are common mistakes, but they can be met and resolved. Investment side issues are typically the easiest to see. So the first order of business is to put new practices in place to raise them up for correction.
For incremental side analytics, we still see organizational infighting over the baseline. This is understandable, considering that baseline science is suspect in certain situations. Our advice for promotion analysis overall:
- Limit the meddling with the baseline. Where there are too many hands set to deviating the baseline it will leave too many unknowns as to the derivation of incremental volume and cause issues with ROI
- Measure from all angles. Use Gross Margin (internal), ROI and Cost Per Incremental – all three – to measure trade effectiveness
- Evaluate lift. As with everyday price at EDLC retailers, find a way to measure ROI for any incremental volume. Even with the long roll back windows.
- Use consistent methods. Stick to a common measure of the KPIs. In other words, don’t tailor them to each account. One common definition explained by qualitative differences is superior to different ways of calculating measures based on the account.
As with base price, we can define a set of capabilities that are self evident and becoming more accessible. Chief among these are:
- Build an ability to simulate
- Develop the acumen for post-event analysis. Don’t let the lack of integrity in the promotion window deter you. You can align the promo window after the fact.
- Teach your sales force to use numbers to handle issues at the buying interface.
Here are some of the most common challenges where your account pros may need to supply quantitative answers:
- Sell against penny-for-penny mark up.
- Position the team to sell absolute dollars vs pennies/percents
- Understand the retailer’s markdown budget – if Cost per incremental is bad for you it is bad for them as well
- Retailer wins on profit, but CPG company loses
- Get quality performance – write detailed contracts and hold Customer accountable
Analytics can be improved. But it will take focus on event entry, quality master data maintenance and people who know how to generate and sell analytic insights.
In our next blog we will wrap up this series with a discussion about setting up an organization to win across the board on Trade Spend Management.
Author’s Note: This article is the seventh of a TPG series on Trade Management Excellence. Find the previous post here: Use Analytics to Help Solve the Everyday Price Dilemma. Next up – The final installment of this series, Organizational Effectiveness.
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