Changing of the Guard: Is Traditional Trade Planning Obsolete?

Every year, consumer goods companies spend months creating their price and promotion plans in hopes of driving better results. However, intensifying pressure from today’s increasingly competitive marketplace is causing systemic shifts in the effectiveness of the current planning process. For many, the best-laid plans are often outdated by the time they hit the trade desk.

Has the traditional planning process become obsolete? Many signs within the industry point to “Yes.”

A recent Nielsen survey of price and promotion decision-makers found that:

• 72% frequently adjust plans throughout the year.
• 33% are reactive to the market, with 64% seeing increased competition in their categories.

To succeed in this new reality, companies must go one step beyond traditional, annual strategic planning to a new form of adaptive planning that is responsive to continuous market change. This requires a mindset shift, from being solely focused on planning, to also introducing an ethos of enablement.

On the ground, account teams should be empowered to make smarter, on-the-fly adjustments and maneuver more nimbly to better address the challenges they face locally, in the trenches, every day.

In fact, if companies don’t make this change, they risk continuing a cycle of sub-optimal results — where today, only one of three pricing decisions yield the best price and 72% of promotions fail to break even.

So, how can a company begin to make this shift? Here are three ways to start:

1. Provide teams with the right level of analytics. Every retail location faces its own price dynamics. So applying the same national strategies uniformly across all retailers is risky.

Without access to store-level data, it’s hard for account teams to really know if national strategies are right for their specific goals and plans. It also makes influencing retailers that much harder. Manufacturers may not be able to include local-level insights into every strategic plan, but they should at least enable account teams to access these insights on their own to make plans more relevant and valuable to their needs.

Manufacturers that use store-level insights outperform competitors by 2.2 times, according to a Nielsen/McKinsey study. For example, one large manufacturer's national headquarters team wanted to initiate a universal price increase across a top-selling product. Nationally based models suggested this would be an acceptable change for most shoppers, with minimal impact to volume. But when scenarios were run at the local level, data showed that the price increases would have reduced volume by 5% to 10% — an unacceptable tradeoff.

2. Make informed decisions a no-brainer. Even if you give account teams access to the best analytics, there’s no guarantee they will use them. A recent study found that adoption of self-service analytics tools is down by 20% versus two years ago, largely because users find them too complex and difficult.

To improve visibility, manufacturers roll out trade promotion management systems or other tools. However, account teams often find these tools to be overly complicated and time-consuming. The best way to get them on board is to make pricing and promotions decisions easy and fast.

What's needed are tools designed with guides and prompts that help account teams through the process, to explain the meaning and interpretation of data as they move through scenarios and simulations. This helps account managers choose better tactics and saves time so they can focus on getting in front of customers.

3. Enable teams to lead with insights. Many manufacturers have invested in TPM systems to mitigate losses and improve strategic plans, but they put optimization at risk by doing so. As a result, sales teams default to what “worked” in the past or follow through with retailer requests, not realizing those very promotions might do more harm than good.

By combining TPM systems with predictive optimization tools, account teams are enabled to respond proactively by simulating “what-if” scenarios and comparing various options. This makes them more valuable partners to retailers and more capable of driving an agenda that’s best for their brands and the category.

Recently, a large manufacturer was being challenged by a retail partner to lower everyday prices across its top brands to drive category volume. The retailer had data to back up its case and, normally, the manufacturer might comply with this request. But insights from predictive simulations revealed how offering incentives by pack size would get consumers to trade up to bigger unit sizes, delivering the volume goals without jeopardizing brand perception. In the end, the retailer gained a 37% lift in volume over the year-ago period.

Connecting the dots between your annual plan and the daily decisions your account teams are facing may seem impossible, but with the right analytics and easier-to-deploy tools and integrations, it’s no longer a pipe dream.

About the Author:
Lana Busignani is executive vice president of U.S. marketing effectiveness at Nielsen.