Consumer product goods companies should analyze promotional events throughout the year because it helps them understand the effectiveness of their investments. CPGs can then take that knowledge, bring it to the retailer, and adjust sales plans.
But, wait! I can’t modify my sales plan – the retailer already locked the events into place – so, what’s the point?
- Welch’s told us that TPO data is able to visually explain changes that the retailer should make, and “the retailer is definitely engaging with it; it’s easy to read.“
- Ventura Foods explained that they’ve altered their trade investment strategy across two main retail customers after the revenue management team and sales team found low performing promotions. The team came up with optimal plans and shared those with the retailer. “We’re always reviewing and analyzing our trade plans and performance. We have been known to change our trade strategies and plans mid-year.“
And, they’re not alone. CPGs that use trade promotion optimization are able to leverage their data, talk with retail partners, and swap to the latest sales plan that will bring promotional effectiveness. [Read their stories here]
Win through Collaboration
Collaboration puts manufacturers and retailers in a position to reach the consumer in the most efficient and effective way. After all, a retailer doesn’t want to feel like you, the CPG, goes to all its customers with the same plan. Retailers want to activate a sales plan that drives value for both parties.
CPGs with optimized promotional data have the power to sell through insights. According to McKinsey, 75% of winning CPGs share data with key retailers weekly.
As a CPG, you have intimate knowledge of your products and core consumers. The top ten US retailers have an average of almost 70 big data analysts on board. The best CPG collaborators are the ones who take their information and marry it with the retailer’s information — who understand each retail customer’s business drivers — demographics, strategy, processes.
It’s critical to understand what what success means for the retailer. If you don’t know, then you may be offering product promotions that are fruitless. You should always go back to retailer and ask for feedback, find out what should or could change. The retail data analytics market, valued at just under $2 billion in 2014, is thriving and is expected to exceed $5 billion in revenues by 2020.
CPGs that outperform their peers are 2.6x more likely to dedicate resources exclusively to retailer collaboration.
Collaboration In Action
Cathy Shifflett, currently the director of retail sales at BelGioioso Cheese, explains her story of collaboration from when she was working at the retailer.
“The diaper category was doing poorly,” she remembers, “selling 30% less week after week.”
Shifflett talked to a her CPG rep, explaining how much she cares about that consumer. So, the CPG sent in a baby expert – who explained that a new mother shops at less retailers than the average shopper, and purchases diapers while they’re already out for other needs. So, Shifflett and her CPG partner decided together to set up a promotion that would work.
“If you spend $100 on diapers, you get a coupon. Essentially, you buy 5 boxes and get 1 free. It was automatic. The beauty was that I could track who redeems the coupon and continue to learn. We had gone from -30% to flat. Then, within 6 weeks, we increased 30%. When I tracked the coupons, most of those consumers hadn’t been shopping with us at all. 19% of those who did use the coupons, did shop with us, but not for diapers. The promotion was a total win.”
3 Misconceptions CPGs have about Retailers
CPG reps assume their retail customer looks at the data in the exact same way they are. Retailers and CPGs that pool data and analytical resources are improving the shopper experience, category management, and promotional tactics and forecasting.
- New Products
There are a lot of new products coming into the retailer. Your category manager probably sees 5-6 product reps with a similar product. It’s not always enough to have a great product; you need a lucrative sales plan for that product.
- Shelf Life
Some CPGs think once they’ve got the product on the shelf, they’re good. But, there’s a time limit – with a new item, you have to prove yourself, you have to show you’re generating sales.
Trade Promotion Applications
CPGs with a trade promotion management and trade promotion optimization solution have an advantage. The TPM or TPO shows a bigger picture; they allow you to systematically see what will (or will not) happen if you run a promotion. Trade promotion management and optimization tools are great for a logical framework. Many retailers would like to have a CPG come in with that data analysis to convince them that the promotion should be different than what was originally planned.
A CPG company must generate insights that aren’t based on instinct. CPG insights must be predictive and fact-based. CPGs should answer the questions, “What will happen?” and “What should we do to get the most benefit out of what will happen?” McKinsey notes that it’s no longer enough to generate insights at the national, channel, or customer level on a semi-regular basis. Retailers expect store-specific, real-time insights tailored to their strategic priorities. These insights will fuel successful collaboration.
Key Takeaways: Commit to Collaboration
- Communicate and follow up. Really listen to what’s important for that retailer – needs change every day.
- Talk to your retailer about critical things to work on.
- Always ask a lot of questions. Be willing to negotiate.
- Share the best practices, tell us what you saw that worked really well, tell us your ideas.