If you’re in FMCG manufacturing, then I’m sure you have experienced the problems that occur all too often in fulfilling ‘special promotion’ campaigns. Poor communication of shelf-level sales performance data and fuzzy visibility of shopper insights are the norm, and that leads to failings in execution and availability. But getting special promotion activity right is becoming increasingly important as consumers’ purse strings tighten. Under aggressive trading conditions the performance of the brand is now heavily dependent on special promotions.
According to findings of a recent Aberdeen Group report on Responsive Trade Promotion Management, ‘best in class’ respondents (top 20 per cent) achieved an average forecast accuracy of 75 per cent, an annual trade overspend of eight per cent and an average gross margin uplift of 17 per cent.
Collaborative planning plays a big part in achieving success, as demonstrated by 43 per cent of best in class companies. 35 per cent of best in class companies also manage trade promotion funds at the sku/unit and store level, with 33 per cent using performance management criteria for capturing effectiveness in trade promotion execution.
The problem seems to be that most companies are lacking the necessary collaborative tools and systems that would enable them to get the sort of visibility of trade marketing data and shopper behaviour required. Too many are using assumption-based forecasts and just repeating old practices. Linking forecast accuracy, promotion costs at the unit level and gross margin uplift would enable a far better understanding of the financial performance of the promotion.
The trick is to get working with the retailer on delivering data on a granular level and to ensure that the right metrics are in place to measure trade promotion cost effectiveness.
Some solid groundwork on closer collaboration may well pay dividends and, perhaps, take the headache out of special promotion activity.