CHANGING YOUR TRADE PROMOTION TRAJECTORY · 2019-05-29 · changing your trade promotion trajectory...
Transcript of CHANGING YOUR TRADE PROMOTION TRAJECTORY · 2019-05-29 · changing your trade promotion trajectory...
CHANGING YOUR TRADE PROMOTION TRAJECTORY HOW TO BECOME PART OF THE ELITE TIER OF COMPANIES
THAT ARE REVERSING THE PROMOTION TREND
Doug Bennett February 26, 2015
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
2
@Nielsen
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
3
MEET YOUR PRESENTER
Doug Bennett SVP, Sales Effectiveness Nielsen
CHANGING YOUR TRADE PROMOTION TRAJECTORY HOW TO BECOME PART OF THE ELITE TIER OF COMPANIES
THAT ARE REVERSING THE PROMOTION TREND
Doug Bennett February 26, 2015
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
5
PROMOTION INEFFICIENCY IS GETTING WORSE Frequency vs. Return – chicken or the egg?
Source: Nielsen Trade Promotion Benchmark Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
6
67% DON’T BREAK EVEN
33% MAKE MONEY
ELIMINATING OF PROMOTIONS WOULD INCREASE SALES REVENUE 22%
THE MAJORITY OF TRADE EVENTS DON’T BREAK EVEN Over the last two years only 1/3 drove positive return
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
7
DAIRY 75%
MEAT 62%
FRO
ZEN
FO
ODS
66
%
GEN
ERAL
MER
CHAN
DISE
60
%
HOU
SEHO
LD C
ARE
56%
GROCERY 73%
PERS
ON
AL
50%
BAKERY 73%
PET CARE 66%
HEALTH 59%
BEAUTY CARE 50%
PRODUCE 74%
DELI 72%
% OF WEEKS THAT DON’T BREAK EVEN
OPPORTUNITIES EXIST ACROSS THE ENTIRE STORE Trade promotion effectiveness varies from 25% to 50% across departments
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3 70-75% 65-69% 60-64% 55-59% 50-54%
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
8
CATEGORY VARIANCE IS SIGNIFICANT Understanding where your business falls is valuable context
Most Efficient Least Efficient
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Trade Efficiency < 0
Trade Efficiency >= 100
% O
F CA
TEGO
RY E
VEN
TS
LEAST EFFICIENT MOST EFFICIENT
0 < Trade Efficiency < 100
~200 CPG CATEGORIES
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
9
CATEGORY SIZE DOESN'T DICTATE PERFORMANCE
20%
30%
40%
50%
60%
70%
80%
90%
100%
$-
$2
$4
$6
$8
$10
$12
CATE
GORY
SIZ
E ($
BIL
LIO
NS)
% O
F CATEGORY EVEN
TS THAT DON
’T BREAK EVEN
~200 CPG CATEGORIES
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
10
CATEGORY HEALTH IS NOT DISCRIMINATING Growing and declining categories alike have tremendous variance in efficiency
Frozen Toaster Pastries
Yogurt
Powdered Instant Drinks
Fresh Poultry
Frozen Juice
Sugar Frozen Fruit
Adult Incontinence
Fresh Meat
Pet Medicine
$(1.00)
$(0.50)
$-
$0.50
$1.00
$1.50
$2.00
-20% -10% 0% 10% 20% 30% 40%
% CHANGE IN CATEGORY SALES
CATEGORY TRADE EFFICIENCY
INCREASING SALES DECREASING SALES
LEAST EFFICIENT
MOST EFFICIENT
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
11
OVER-PROMOTING DILUTES EFFICIENCY Scrutinize purchase frequency, expandable consumption, and storability
51% 45%
36% 30% 29% 28%
% O
F EV
ENTS
THA
T BR
EAK
EVEN
% OF WEEKS ON PROMOTION
0%
10%
20%
30%
40%
50%
60%
70%
2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
12
SELECTIVELY UTILIZE DEEP DISCOUNTS More than 25% of promotions on deep discount significantly degrades ROI
37.0% 40.8%
53.2%
60.6%
74.3% 69.0%
100%50-100%25-50%5-25%0-5%0
Average Category Trade Efficiency
% OF TOTAL EVENTS PROMOTING DEEPER THAN 25% DEPTH OF DISCOUNT %
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
13
YOUR FATE IS NOT SEALED Categories improved their performance by applying optimal strategies
Baby Formula
Coffee
Hair Coloring Cat Litter
Fabric Softener
Shampoo and Conditioner
Frozen Pizza
Fresh Sausage
Pie Filling
Ice Cream
Soft Drinks
Frozen Toaster Pastries
Breading & Stuffing
Hot Cereal
Facial Tissue
Prepared Beans
Cream Cheese
Yogurt
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
20%30%40%50%60%70%80%90%100%
Seizing Opportunity: High Efficiency and Improving
Becoming Winners: Inefficient but Improving
Off Course: Efficient but Getting Worse
Missing Opportunity: Inefficient and Getting Worse
POIN
T CH
ANG
E IN
BRE
AK E
VEN
WEE
KS
% OF WEEKS THAT DON’T BREAK EVEN
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
14
4 FUNDAMENTAL EXECUTION OPPORTUNITIES
STRATEGIC PLANNING VS. TACTICAL PLANNING Setting guardrails @ HQ and executing at retail consistent with the strategy
PROMOTION PLAN MANAGEMENT AND EXECUTION Tools don’t “talk” to each other
MANAGEMENT PROCESS Break the cycle of ad-hoc execution and siloed management
MEASUREMENT CHALLENGES Disparate data sources/measures/dates, must do events vs. discretionary
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
15
4 FUNDAMENTAL EXECUTION OPPORTUNITIES
STRATEGIC PLANNING VS. TACTICAL PLANNING Setting guardrails @ HQ and executing at retail consistent with the strategy
PROMOTION PLAN MANAGEMENT AND EXECUTION These tools don’t “talk” to each other
MANAGEMENT PROCESS Break the cycle of ad-hoc execution and siloed management
MEASUREMENT CHALLENGES Disparate data sources/measures/dates, must do events vs. discretionary
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
16
6/5/
2013
7/5/
2013
8/5/
2013
9/5/
2013
10/5
/201
3
11/5
/201
3
12/5
/201
3
1/5/
2014
2/5/
2014
3/5/
2014
4/5/
2014
5/5/
2014
Planned Promotion Detected Promotion
Identify parameters to maximize matches
EVENT MATCH ACCELERATES EVENT LIBRARY CREATION Captured 96% of plan spend 61% required time alignment
DETECTION PARAMETERS BENCHMARK CLIENT
1. Promo ACV 10% 30% 2. Discount 5% 5%
3. Incremental Lift 10% 0%
A B
C D
Scan weekly RMS data
Calculate ROI per event Categorize event into match category
Mfr ROI = Incr Volume Per Event * (List Price – COGS)
Direct Event Spend
CLEANSE PROMOTION EVENT DATA
ROI >1 Value Creating
ROI <0.7 Value Diluting
19%
47%
8%
26%
Match
Shift
Remaining Plan
DetectedROI 0.7-1 Value Neutral
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
17
FOCUS RESOURCES ON SYNTHESIS AND ACTIVATION 31% of events were profitable. 96% of profitable events were executed fully
-0.22 -0.11 0.21
0.51 0.80
1.04
-0.5
0
0.5
1
1.5
0
20
40
60
80
0% 1 to 20 % 21 to 40% 41 to 60% 61 to 80% 81 to 100 %
Promo ACV Range
PromoCount
Mfr ROI
DIAGNOSE PROMOTION PERFORMANCE DRIVERS
How does sub-optimal execution impact ROI?
0%
20%
40%
60%
80%
100%
0
0.5
1
1.5
2
2.5
Promotion Event
MfrROI
PromoACV %
What % of my promotions are value creating?
How many events are being fully executed?
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
18
TAKE SPECIFIC ACTION ACROSS THE PORTFOLIO Hi-Lo retailers are driving volume while hybrid EDLP yields superior ROIs
Mfr ROI>1 Value Creating
Mfr ROI<0.7 Value Diluting Mfr ROI 0.7-1 Value Neutral
Incr Value % > 10% High Revenue Driver
Incr Value % < 7% Low Revenue Driver Incr Value % 7-10% Medium Revenue Driver
RE-EVALUATE SPECIFIC CUSTOMER TACTICS
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
19
4 FUNDAMENTAL EXECUTION OPPORTUNITIES
STRATEGIC PLANNING VS. TACTICAL PLANNING Setting guardrails @ HQ and executing at retail consistent with the strategy
PROMOTION PLAN MANAGEMENT AND EXECUTION These tools don’t “talk” to each other
MANAGEMENT PROCESS Break the cycle of ad-hoc execution and siloed management
MEASUREMENT CHALLENGES Disparate data sources/measures/dates, must do events vs. discretionary
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
20
PPG 1 PPG 3
PPG 5
PPG 6
PPG 7
PPG 8
PPG 9 PPG 10
PPG 11
PPG 12 PPG 13
PPG 14
PPG 15
PPG 16
PPG 17 -20%
0%
20%
40%
60%
80%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Manufacturer A PPGs: U.S. Food
% RETAILER ROI
% M
ANU
FACT
URE
R RO
I BALANCE SPENDING FOR BRAND AND CATEGORY OUTCOMES
Note: Size of the Bubble Represents Total Trade Spend
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
21
PRIORITIZE MERCHANDISING TO THE RIGHT PPGs
0%
20%
40%
60%
80%
-20%
0%
20%
40%
60%
80%
100%
Man
ufac
ture
r A A
vera
ge
PPG
8
PPG
13
PPG
12
PPG
9
PPG
15
PPG
7
PPG
16
PPG
10
PPG
3
PPG
1
PPG
11
PPG
5
PPG
17
PPG
4
TPR Feature Feature Lift %
Prom
otio
n RO
I % Volum
e Lift
Priority to Feature
Copy
right
©20
12 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
22
LEVERAGE THE RIGHT WEEKS AND PROMOTION DURATION TO MAXIMIZE LIFTS
0.80
0.82
0.84
0.86
0.88
0.90
0.92
0.94
0.96
0.98
1.00
0%
10%
20%
30%
40%
50%
60%
1 2 3 4 5 6 7
Rel
ativ
e Lo
ss v
s. 1
st W
eek
of
Prom
otio
n
% F
requ
ency
of E
vent
Typ
e
# of Weeks Into Promotion Sequence PPG 16 PPG 5 PPG 7 PPG 12
MANUFACTURER A PRODUCT HIGHEST DEMAND WEEKS OPTIMAL PROMOTION LENGTH
PPG 16 4, 11, 12, 43, 51 3 weeks or less
PPG 5 2, 3, 6, 8, 11 5 weeks or less
PPG 12 2-4, 8, 10 1 week
PPG 7 17, 47, 48, 51, 52 2 weeks or less
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
23
SIMPLIFY GUARDRAILS INTO SPECIFIC PLAYBOOK FOR CUSTOMER TEAMS
PPG Strategy Timing & Duration Thresholds Offer
Communication Tactics
PPG 16 Limit depths below 40% 3 weeks or less with focus on Weeks 3, 10, 11, 42 and 50
$1.99 REGULAR PRICE
None Maintain current Feature vs. TPR balance
PPG 12 INCREASE SPEND BY HITTING KEY DEEP THRESHOLDS
1 week without detriment. Focus on weeks 1-3, 7, 9
$1.49 PROMOTED PRICE
None
Increase to 30% of weeks, Focus on TPR with limited Feature support
PPG 8 Increase spend with events <30% depth
No detriment, focus on weeks 2, 45, 47, 48, 52
None None Increase spend with focus on TPR
PPG 7 HIT KEY PROMO MULTIPLES
Focus in summer weeks
$1.49 Regular Price 10 FOR $10 Priority for
Feature support
Copy
right
©20
12 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
24 7
ACCOUNT ACTIVATION DRIVES SUPERIOR PLANS Tactical simulation tool with collaborative work sessions is a proven model
• Guidelines & Event Library • Predictive Models
HQ TEAM INPUT ACCOUNT TEAMS
• Live Simulations • Create Selling Stories
COLLABORATION
OPTIMIZED JOINT BUSINESS PLAN
• Customer Boundaries • Initial Event Sequencing
ACTIVATION ACCELERATOR WITH RETAIL TEAMS
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
25
RESULT IS CUSTOMER SPECIFIC JBP ACROSS PRODUCTS Centralized workshops can drive team efficiency
Customer Pack 1 Pack 2 Mfr Revenue
Mfr Profit
Retail Sales
Dollars
Hi Lo 1 2/$8 Everyday +3 Coupon Events - 3 Display weeks
Drive Trial via: Everyday @ $10.19 +3 display weeks
21% 18% 27%
Hybrid 1 $3.79 EDLP No Promo
EDLP @ $9.98 +2 display weeks 6% 6% 9%
Hi Lo 2 Hold $4.89 price +1 BOGO week (3) – align to holidays
Add 2 UPC 40% 25% 33%
Hybrid 2
$4.49 everyday Stop BOGO Add Gas Program Promo @ 2/$8
Add 1 UPC 40% 48% 31%
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
26
OVERALL IMPACT ACROSS CUSTOMERS IS MASSIVE
2014 Planning Sessions – Models based on data through 12/28/2013
Executing across the entire enterprise would yield even greater results
+$8.2 MILLION
Planned Increase in Retail Sales Dollars
+$6.1 MILLION
Planned Increase in Mfr Gross Revenue
+$1.4 MILLION
Planned Increase in Mfr Profit Dollars
20 bps
Planned Decrease in Trade Rate
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
27
4 FUNDAMENTAL EXECUTION OPPORTUNITIES
STRATEGIC PLANNING VS. TACTICAL PLANNING Setting guardrails @ HQ and executing at retail consistent with the strategy
PROMOTION PLAN MANAGEMENT AND EXECUTION Tools don’t “talk” to each other
MANAGEMENT PROCESS Break the cycle of ad-hoc execution and siloed management
MEASUREMENT CHALLENGES Disparate data sources/measures/dates, must do events vs. discretionary
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
28
4 FUNDAMENTAL EXECUTION OPPORTUNITIES
STRATEGIC PLANNING VS. TACTICAL PLANNING Setting guardrails @ HQ and executing at retail consistent with the strategy
PROMOTION PLAN MANAGEMENT AND EXECUTION These tools don’t “talk” to each other
MANAGEMENT PROCESS Break the cycle of ad-hoc execution and siloed management
MEASUREMENT CHALLENGES Disparate data sources/measures/dates, must do events vs. discretionary
Copy
right
©20
12 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
29
WINNERS USE AN INTEGRATED APPROACH TO PRICING AND TRADE INVESTMENT
Source: Adapting with Speed: How agile selling organizations win in a demanding environment, by McKinsey & Co., Nielsen and Grocery Manufacturers Assoc.
STRATEGY SETTING
Take integrated view of gross to net management Use innovations (product or packaging) to capture price increases and trade changes
EXECUTION AT RETAIL
Create customer P&Ls to understand full pricing and trade picture by retailer
Utilize menu pricing to optimize costs to serve
Anchor customer discussions around category growth and fully loaded retailer economics
ANALYTICS
Establish pricing and trade architecture across the category and portfolio
Use mix management via brand-region-channel-pack price architecture and assortment
Embrace product lifecycles for trade rate and price setting
Use granular, local level analytics when possible
ORGANIZATIONAL CAPABILITIES
Leverage integrated performance management metrics
House tools, data, and analytics centrally, but with close links in the business to ensure impact
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
30
WINNERS LEVERAGE TPM AND TPO TOOLS TO ENABLE EVENT-LEVEL ANALYTICS IN THE FIELD
Source: 2014 McKinsey CCM Survey
Which of the following best describes your organization’s technology investment in trade promotion management? Trade promotion optimization? Who leads the event-level post promotion analysis?
Revenue Management: Trade Investment
13
27 38
47 63
13
EVENT-LEVEL PROMO ANALYSIS Percent of respondents
Other
Field / Customer Analyst
Others
Trade Marketing
Central Analyst
Winners
TPM / TPO TOOLS Percent of respondents with both TPM and TPO
Others Winners
70
50
Centralized revenue management teams typically maintain trade tools and set strategy, architecture, etc. . . .
. . . Field teams execute strategies and leverage central tools for customer specific insights and analytics
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
31
Client example of one step driving the bottom line FOCUS ON ONE STEP CAN DRIVE RESULTS
OPPORTUNITY:
Empower HQ and field sales to implement tactics at account level
HOW WE DID IT:
OUTCOMES:
• Recurring HQ and sales training • Transparency and consistency • Greater speed to insights • Flexibility for local activation
1 ENGAGEMENT, 1 CUSTOMER, 1 CATEGORY
• Increased collaboration between HQ, sales and retail customers
• Organization-wide tool adoption
8x ROI on performance improvement $12M
trade spending
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
32
CALL TO ACTION
Strategic Planning vs Tactical Planning
Promotion Plan Management and Execution
Management Process
Measurement Challenges
Understand context and focus on biggest problems in overall process
LEVERAGE TECHNOLOGY TO FOCUS ON ACTIVATION.
BE SPECIFIC TO BRAND AND CATEGORY OUTCOMES AMONG CUSTOMER TEAMS.
INTEGRATE SYSTEMS FOR IMPROVED EFFICIENCY.
SECURE COMMITMENT. BE TRANSPARENT. INVEST TO WIN.
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
33
THANKS FOR JOINING US!
Speaker Bio/ Contact Doug Contact Us Q&A
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
34
TWEETABLE TAKEAWAYS
• 67% of retail promotions don’t break even, and opportunity exists for categories big and small, growing and declining, according to @Nielsen
• Trade promotion effectiveness varies from 25%-50% across departments. Listen in to find out where your business falls http://bit.ly/1adv7lg
• Deep discounts should be used infrequently. Over 25% of promotions on deep discount significantly degrades incremental return – via @Nielsen
• Executing within a brand’s strategic guardrails with retail customers is the biggest promotional challenge to conquer. – via @Nielsen
• Trade promotion improvement is complex. Start with laser focus to get early wins that inform the journey - rewards are tremendous –@Nielsen
If you have follow-up questions or want more information, please contact your Nielsen Professional Services rep. If you are not a current Nielsen client, please contact us: Phone: 800.553.3727 Email: [email protected]
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
36
NORMATIVE FRAMEWORK TO MEASURE RETURN
1) ISOLATE EVENTS − Identify promotion weeks based depth of discount vs. everyday price
2) BUILD A VOLUME CALCULATION FRAMEWORK − Incremental Sales = Total Sales – Baseline − Incremental Cost = Direct Trade Expense + Incremental COGs − Trade Return = Incremental Sales – Incremental Cost
3) DERIVE PROMOTION COSTS BY APPLYING INDUSTRY STANDARDS
− Manufacturers pay 80% of Discount − Standard Cost for COGs, Feature & Display
4) CALCULATE KEY EFFICIENCY METRICS FOR ANALYSIS
− Trade Efficiency = Trade Return / Dollar Invested − Trade Responsiveness = Lift / Point of Discount − % Sales on Trade
Robust approach provides rich promotion benchmarks
Copy
right
©20
15 T
he N
ielse
n Co
mpa
ny. C
onfid
entia
l and
pro
prie
tary
.
37
DRILLING THE ANALYSIS TO ACTIONABLE INSIGHTS Narrowed the analysis to eliminate some of the extreme skews
211 CATEGORIES
13 DEPARTMENTS
811K UPCs
92MM EVENT WEEKS
213B US RETAIL SALES
This analysis: • includes categories with sales over $100MM and promotional frequency of at least 5% • excludes tobacco, alcohol, eggs, milk and bread • examines all promotional events discounted at least 10% across 75 banners from
Food, Drug and Mass (excluding Walmart)