The Retailer's Take on Trade Promotion Effectiveness
Cannondale Associates recently conducted research on the timely and important subject of trade promotion effectiveness. The findings are based on interviews with retail grocery executives, and discussions focused on how retailers incorporate trade analytics into their own planning processes, which consumer products manufacturers exhibit trade planning best practices, and where opportunity exists for both parties.
During a CGT Web seminar on May 21, 2009, John Carlson, managing director for Cannondale Associates, provided an overview of the research findings. He was joined by DemandTec's Armen Najarian, senior director, Consumer Products Industry Marketing, who offered industry perspective.
Here are some highlights from the event:
- When it comes to trade promotion spend, the U.S. consumer packaged goods industry spends about $125 to $175 billion a year. Therefore, a little bit of waste is a LOT of money. Trade promotion funding accounts for more than half of most manufacturers' marketing spending, so manufacturers are "really interested in making sure that they're getting the most of it and using it effectively," said Carlson. The big picture is that 35 percent to 60 percent of the marketing budget is spent on planning, soliciting/negotiating deals, execution, administration and reconciling payment issues, which leaves very little time for evaluation. As a result, "manufacturers are wasting funds; they're not getting as much out of it as they could," said Carlson. He also discussed related observations, including simple approaches to dominate planning, analytical approaches, retailer comments and barriers to advancement in planning analytics.
- Najarian suggested much can be learned from leaders in this space like General Mills, Procter & Gamble, Kraft, ConAgra and H.J. Heinz. This group of leaders has established a clear understanding of trade planning versus trade optimization. Najarian also shared guidance for manufacturers based on the research. For example, establish best practices; choose science-driven analytical tools with strong predictive planning capabilities; develop and simulate integrated base price and trade promotion plans; and unify national HQ trade planning with customer account team trade planning. Additional recommendations include: offer time-starved retailers your trade planning capability and know-how; improve the promotion planning process for the total category; and where possible, engage in collaborative planning pilots with retail customers. Najarian left the audience with some questions to think about: "How can you, as a manufacturer, distinguish yourself in front of your retail customer community? How can you get involved with/take advantage of opportunities that exist, and really just show your leadership even though you might not be a category captain in some cases?"
To listen to this Web seminar in its entirety, click here.
During a CGT Web seminar on May 21, 2009, John Carlson, managing director for Cannondale Associates, provided an overview of the research findings. He was joined by DemandTec's Armen Najarian, senior director, Consumer Products Industry Marketing, who offered industry perspective.
Here are some highlights from the event:
- When it comes to trade promotion spend, the U.S. consumer packaged goods industry spends about $125 to $175 billion a year. Therefore, a little bit of waste is a LOT of money. Trade promotion funding accounts for more than half of most manufacturers' marketing spending, so manufacturers are "really interested in making sure that they're getting the most of it and using it effectively," said Carlson. The big picture is that 35 percent to 60 percent of the marketing budget is spent on planning, soliciting/negotiating deals, execution, administration and reconciling payment issues, which leaves very little time for evaluation. As a result, "manufacturers are wasting funds; they're not getting as much out of it as they could," said Carlson. He also discussed related observations, including simple approaches to dominate planning, analytical approaches, retailer comments and barriers to advancement in planning analytics.
- Najarian suggested much can be learned from leaders in this space like General Mills, Procter & Gamble, Kraft, ConAgra and H.J. Heinz. This group of leaders has established a clear understanding of trade planning versus trade optimization. Najarian also shared guidance for manufacturers based on the research. For example, establish best practices; choose science-driven analytical tools with strong predictive planning capabilities; develop and simulate integrated base price and trade promotion plans; and unify national HQ trade planning with customer account team trade planning. Additional recommendations include: offer time-starved retailers your trade planning capability and know-how; improve the promotion planning process for the total category; and where possible, engage in collaborative planning pilots with retail customers. Najarian left the audience with some questions to think about: "How can you, as a manufacturer, distinguish yourself in front of your retail customer community? How can you get involved with/take advantage of opportunities that exist, and really just show your leadership even though you might not be a category captain in some cases?"
To listen to this Web seminar in its entirety, click here.