The way consumers shop has changed. According to McKinsey, 25–40% of consumers across markets have tried different brands since the start of the pandemic, highlighting the importance of promotions for attracting brand switchers.
New trends in consumer behavior
Firstly, increased global awareness about the importance of a healthy lifestyle has driven consumers to explore healthier brands that promote overall cognitive wellness.
Social and personal values have become equally as important. In the recent Hotwire survey, more than 47% of consumers stated they would switch products if a brand went against their personal, social and environmental values.
In the meantime, due to economic inflation, consumers have driven an accelerated shift towards discounters and private labels.
McKinsey has predicted a fourth wave for private labels where retailers will address changing consumer expectations with distinctive, high-quality products offered at lower prices.
Lastly, the omnichannel shopping experience means that consumers now have access to prices in multiple places online, so it’s easier to compare prices before making a decision and potentially switch to more cost-effective brands.
To respond to these changes, CG organizations should pay close attention to multiple levers of effective trade spend, including category, pricing, brand, perfect assortments and perfect displays.
Lack of alignment between promotion planning and execution
Trade promotions make up one of the largest items on the P&L for CG organizations, where they invest up to 20% of their gross revenues on promotions funding, which in turn generates 28–50% of sales volume across CG categories in Europe.
Considering that CG is a low-margin industry, maximizing trade spend has been a top priority.
What’s interesting is that when we talk about maximizing trade spend effectiveness, we tend to put greater focus on the upstream part of trade promotion management, which is planning. Whilst promotion planning is a key success factor, promotion execution and measurement are equally as important.
What we often see is a disconnect between trade promotion planning and execution, and end-to-end measurement is often missing.
Despite the fact that the availability of near real-time syndicated point-of-sale and retail execution data has significantly increased in recent years, not many CG organizations feed that insight back to their trade promotion planning or optimization cycles in a meaningful way.
For instance, when we look at the success of a promotion, we tend to focus mainly on whether or not the promotion generated volume uplift, and we don’t consider execution factors such as product availability, pricing compliance and consumer demands during promotion execution.
When it comes to planning, we often look at what was successful last year and set out to repeat that without adequately measuring all the macro factors that contribute to a trade promotion’s overall success.
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The need to measure macro factors in trade promotion success
The huge funding invested in trade promotions usually covers a mix of the retailer’s gate fee, production and distribution for promotional point-of-sale materials and content, and subsidizing the shopper price discount. Therefore, we need to make sure that each one of these stages is executed with precision.
When it comes to measuring the success of a promotion, we also need to look beyond just the generated uplift. We need to look at other factors that could contribute to the success or failure of a promotion.
Some of the questions organizations need to ask themselves:
- What were the long-term implications of promotions?
- Did consumers continue to buy the promoted products when the promotion was over?
- Did we give more discounts to retailers and were they buying more?
- How did recent changes in consumer behavior impact the promotion’s success?
As mentioned, changing consumer behavior is a success factor organizations should pay close attention to. Ask why consumers are leaning towards your brand or that of your competitor, and know that it may not always be a direct result of running a promotion.
Need for a holistic approach in measuring the effectiveness of promotions
There is going to be a revelation in trade promotion management, and that can be seen in the market. Organizations need to look at promotions holistically, beyond point-of-sale data from recent years, and conduct more holistic scenario planning by taking a more comprehensive set of execution factors into consideration.
- Was the product available on shelf when you ran the promotion? Were stocks being replenished quickly enough?
- Were the promoted products correctly priced?
- Were the products present in the right store?
- What was the planogram perspective? Is it possible that the promotion seemed successful because your competitor wasn’t present/didn’t run a promotion simultaneously?
- Did the retailer set up the promotion correctly? Did they utilize your retail execution data? Can you confirm that displays were set up correctly?
- Did the promotion start on time and did it run until the end? Or was it finished early?
Considering these questions when evaluating your promotion will re-emphasize the importance of connecting trade promotion execution and planning.
Here are some of our top recommendations for optimizing the execution and measurement of trade promotion spend effectiveness:
- Determine which products, brands and demographic groups have created significant change to your demand and build these factors into your promotional guidelines.
- Utilize customer segmentation to differentiate promotional guidelines for customers.
- Build a 360 view of your customer and segmentations into a unified view and linking your promotions into a single sales enablement platform (the Pitcher Super App, for example)
- Utilize point-of-sale data to measure which promotions are actually linked to sell-out success. This adds a granular level of analysis on top of just measuring additional volume uplift.
- A key part of launching, executing and amplifying a successful promotion is utilizing relevant, impactful and tailored content and point-of-sale materials.
- Consider adopting a unified content automation solution that allows you to tailor content to specific audiences and surface the right content to the right customer on the right check out.
- More importantly, give yourself the ability to gauge your customer’s feedback and sentiments when they engage with your content. An integrated content automation solution can feed that insight back to your marketers, allowing them to continuously improve the quality of your promotional content.
- Integrate your retail execution data with your key account management and trade promotion systems so that your KAMs and promo planners can measure the product availability, price and display compliance while the promotion is in-flight and really measure the success of a promotion.
- Integrate point-of-sale data into trade promotion planning and measurement to identify issues, spot changes in sales in near real time, and alert your field sales reps.
- Schedule visits to allow your reps to correct stock availability, price or compliance issues that might be affecting the success of your promotions.
- Adopting a data-driven sales enablement solution would help you to create a more dynamic field sales team that is equipped to respond in real time to changes in customer and outlet behavior.
- Use score cards and real-time insights to monitor promotion and execution results in a unified and comparable way across different outlets and geographies. This enables everyone to identify the outlets with execution issues and prioritize them for sales rep intervention.
- Use advanced analytics to identify trends and uncover root causes of promotional performance
The pandemic has clearly changed consumer behavior and consumer goods businesses must adapt to these changes in order to stay afloat. What was already a competitive and cut-throat environment has become even more so as it’s now even easier for consumers to switch brands whenever they wish.
What companies need is a unified, data-driven approach to planning, executing and measuring promotions, where the full cycle is integrated. It’s important to continuously refine your approach and build on learnings, and streamlining technology is the easiest way to do this and help build a future-proof offering.
Read more about the consumer goods industry, in Sally's blog: Multichannel retail execution – moving away from visits to contacts.