It’s easy to see how a promotion impacts your business when you have your own data, but the value chain is complex. That’s why the focus should be on what drives a retailer’s sales optimisation strategy: what the shopper does in-store. The question then becomes how you can gain a stronger understanding of shopper behaviour to make better promotional decisions.
Retailers have no interest in a promotion that merely improves your product’s performance. They care about how a promotion impacts them and the total category. Yet getting a holistic view into a promotion’s impact is not easy. In fact, retailers get many different views of the same story, so how can they plan for next year?
Joint business planning has many moving parts that can affect the outcome. That’s why trade promotion management solutions must incorporate a view into not just your P&L, but the retailer’s as well. Capturing the retailer’s historical in-store price and the future recommended shelf price (even though pricing is, of course, at the retailer’s discretion) gets you to your first view of the retailer’s full-year P&L. However, this view must be available for promotional as well as non-promotional periods. Having this view lets you speak the right language during negotiations with retailers and, in theory, improve the joint business planning process.
Using the right language is one thing. Another is showcasing the plans in the retailer periods. When an in-store promotion runs midweek to midweek for a specific period, the only way to become a trusted partner is to “talk” in those dates with the retailer.
But what about the impact on the total category? You need to show what the promotion will do for the retailer overall. The right data (whether point of sale or shopper) lets you see how past promotions impacted the category and shoppers. This historical view can then help inform future decisions and sell in those promotions to your retailers.
Another area to consider is cannibalization and dip (forward buying). How often does a trade promotion really add incremental sales to the total category, rather than just stealing share from other products in your portfolio? Also, in categories where 70%-80% of volume is bought on deal, shoppers wait for promotions to stock up. That means only one metric really matters: true ROI, the impact of the promotion including lost sales. Showing the absolute impact of any promotion is the only way to become a valuable partner to your retailers.
By bringing this information together through scenario planning, your key account managers can play with these levers to have the right conversations with customers and get to that much-desired joint business plan.