Optimize TradePromotions:The Time is Right

5 Key Factors to Know Your Company is Ready

a DemandTec eBook

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Optimize Trade Promotions

TABLE OF CONTENTS

WHY NOW?

5 KEY FACTORS TO KNOW YOUR COMPANY IS READY

ONE: CONSUMER AND SHOPPER-CENTRICITY

TWO: TACTICS

THREE: MEASURING SUCCESS

FOUR: CULTURE

FIVE: ROI

ABOUT DEMANDTEC

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5 Key Factors to Know Your Company is Ready

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Optimize Trade Promotions

WHY NOW?

INFLATION IS BACK. Food-at-home prices could rise about 4% in 2010, after a mere 0.5% gain in 2009, the lowest annual rise since 1967, says USDA. Shoppers will respond differently to trade promo-tions as food costs heat up again. Trade Promotion Optimiza-tion (TPO) can sharpen CPG promotion plans, pinpoint the new pricing sweet spots that maximize event lift and brand share—and help retailers build bigger baskets and profits, stimulate categories, and retain more of the targeted shopper segments they value most.

Trade event planning is more refined—the ability to simulate events and forecast results accurately creates the truest win-ners in trade promotions. Best practice is no longer a direct build off of the prior year—because alternate brand and private label competition is fiercer, and retailer performance demands are greater. For example: Costco expects store brands will generate 37% of dollar sales by August 2012, up ten percentage points from 2010; at Kroger, store brands were 35% of unit sales and about 26% of dollar sales in the lat-est fiscal quarter. To help fend off SKU rationalization, brands need to excel in trade promotion performance measures.

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CPG leaders already use TPO to collaborate more closely with retailers. This capability (also known as predictive trade analyt-ics) enables CPG to simulate ‘what if’ scenarios to optimize event plans and align with retailers’ strategic objectives and go-to-market strategies. This shifts the partnering focus to how the CPG brand/item portfolio can improve retailer cat-egory performance.

WANT THE SAME PRISTINE, PROVEN, TRANSPARENT AND FLEXIBLE PROCESS TO ELEVATE YOUR COMPANY AND EN-ABLE YOU TO COMPETE AT THEIR LEVEL?

First, consult our CPG Checklist: 5 critical points of self-assessment that show your readiness to gain competitive advantage through more intelligent trade.

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KEY FACTORS TO KNOW YOUR

COMPANY IS READY

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1. CONSUMER- AND SHOPPER-CENTRICITY

The chief household shopper goes to the store with needs and wants of multiple family members in mind—and a necessities-only budget. How central are your brands and trade events to purchase triggers? Do your event plans tailor your national platform (based on your brands’ consumer insights) to retailer objectives to grow specific shopper segments important to their stores?

How crisply do your messaging, promotion pricing and pur-chase incentives at the shelf resonate with targeted shoppers?

Do key chains share frequent cardholder trend data for detailed shopper-centric simulations, which in turn show events lifting categories and satisfying shoppers? Using TPO to simulate events in the planning stage abates risk, aligns with demand, lessens risk and grows compliance.

Consumers are settling into a new frugality. Find the right promotional pricing for your brands,

market-by-market, by also asking: Has their purchase hierarchy (market struc-

ture) changed in order to save money? What is their receptivity to value brands or private label in your categories? Do they perceive your brands within the competitive set of national leaders, or vs. private label?

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2. TACTICS

Are you like most CPG companies lacking processes and sys-tems to track causal data such as in-store display compliance and ad features? Is that a big blind spot that hinders analysis of item-level price elasticity—and the event tactics that would work best?

Are trading partners accountable for execution in your tactical processes? Does your company regularly secure and docu-ment event compliance? How often do you get the endcaps, feature displays, signage and circular space you pay retail-ers for in good faith? Is your company simplifying tactics to reduce unnecessary complexity and enhance the likelihood of compliance?

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Anything less than excellent tactical execution compromises event results, often without being tagged as the reason; this in turn can incorrectly skew future plans. Do you test different tactical executions to help planned events reach full potential? Do you leverage all available resources such as mobile technology in the field, sales and marketing agencies, better-trained DSD teams or store-based workers?

Is your company preparing for the coming era of more ‘pay on scan,’ which will allow CPG teams greater field presence in stores because they will still own the goods on the shelves?

DO YOU TEST DIFFERENT TACTICAL EXECUTIONS TO HELP PLANNED EVENTS REACH FULL POTENTIAL?

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3. MEASURING SUCCESS

How often do you establish quantifiable success measures from the outset with retailers?

Key Performance Indicators (KPIs) push partners to work cohesively towards goals, which go beyond dollars to posi-tion stores as motivated to deliver savings and healthy eating options. Do your KPIs address this: ‘Are we doing enough to escalate the performance of our retailers’ categories? Are we improving faster than our competitors to satisfy consumers and shoppers?’

Should events stay on your calendar or not? Trade Promotion Optimization, or predictive trade analytics, gives the critical insights to these important questions: Are we gaining or los-ing market share? Are we running more or fewer trade events this year than last? Is event lift better or worse? Are sales/profits/profit margins rising for every dollar we spend on trade events? Are we selling more cases for every dollar we spend on trade events?

ARE WE IMPROVING FASTER THAN OUR COMPETITORS TO SATISFY CONSUMERS AND SHOPPERS?

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Also: Is shelf space increasing or decreasing? Are more dis-counts being passed through to shoppers? Are events involv-ing more of our branded items, or others cross-merchandised (PL or other brands that go with the concepts)? Are our events engaging more or fewer shoppers at the chains we collaborate with? Is our brand equity rising among targeted consumers? Are we hearing more positive or negative feedback from our retail partners? Trends in category/brand/item performance, trip frequency, basket size, companion purchases at key chains we collaborate with?

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4. CULTURE

Don’t underestimate the human side of adopting predic-tive trade analytics and effecting organizational change. The process begins when a CPG company assesses readiness, and then deepens as business processes are realigned, new capabilities are acquired, and users fully adopt the software solution. This ‘human track’ unfolds over months in tandem with the TPO ramp-up.

Best: Senior leadership communicates their vision of the future state throughout the adoption process, and relies on a cross-functional team of power users (Trade Strategy, Brands, Sales Management and more) to tell early success stories that excite the CPG organization.

How ready is your CPG company to get underway with predic-tive trade analytics? Answer bluntly: Do our senior executives know how retailers require event gains year over year? Are we willing to invest in the technology to achieve this? Do we have the vision to embrace positive change across multiple disci-plines – marketing, finance, sales, brands, and logistics?

Also: Do we know who our power users would be? Would we empower team members to serve retail accounts better? Do we have goals/timelines in place for customer teams and headquarters adoption? Do we know how to leverage these new capabilities to launch new products and other initiatives?

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5. ROI

Retailers were early adopters of Software-as-a-Service models to manage price, promotion and assortment activities, so CPG needs to master these same elements, using TPO to shape demand. They’ll be seen as more credible, customer-centric partners.

The ROI on such a solution will grow with repeated use. Closer retail collaborations will lead to better-targeted event plans, and cross-functional views into better results. As event perfor-mance rises, CPG will better shield its brands’ everyday shelf space from SKU rationalization.

These gains will cycle faster if a CPG company chooses the right technology provider. When evaluating a potential source, ask: Is the solution complete? Does it include the ability to manage data? Do we believe in its scientific modeling? Is it delivered as Software-as-a-Service, or does it require use of our servers and IT involvement? What is the provider’s record on delivery excellence? Are there meaningful benefits mea-surements? Are user-support processes robust enough for our needs? Are there enough persuasive customer testimoni-als? Can we structure an agreement/commitment to suit our company’s growth plans, objectives and scalability?

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Optimize Trade Promotions

DemandTec (NASDAQ: DMAN) enables retailers and consumer products companies to optimize merchandising and marketing decisions, individually or collaboratively, to achieve their sales volume, revenue and profitability objectives. DemandTec software services utilize DemandTec’s science-based software platform to model and understand consumer behavior. DemandTec customers include more than 195 leading retailers and consumer products manufacturers, such as Ahold USA, Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Walmart and WH Smith. Connected via the DemandTec TradePoint Network™, DemandTec customers have collaborated online with more than 3 million trade deals.

ABOUTDEMANDTEC

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CONTACT USDemandTecOne Franklin ParkwayBuilding 910San Mateo, CA 94403USA

INQUIRIESPhone: +1.650.645.7100Please visit www.demandtec.com