TRADE PROMOTION
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Five Steps to Successful Promotion Collaboration
Consumer-centricity is galvanizing the consumer goods industry. Retailers and branded manufacturers alike are working to better understand and get closer to shoppers. These initiatives are driving opportunities to collaborate throughout the demand chain, serving as the foundation for joint business value creation.
The shopper insights and enabling technology for demand data-empowered collaboration are available today. Manufacturers and retailers who engage more of their partners in collaborative activities report better success from their promotion efforts.
For retailers, “collaborative engagement” means improved interactions on demand analytics and win-win planning. For manufacturers, “collaborative engagement” means more freedom for the field sales force and new tools to more effectively manage and measure promotions.
While retailers tend to be most interested in shopper dynamics and category health, manufacturers have historically maintained focus on consumer events and brand profitability. Bridging this “disconnect” will help promotions perform better.
Here are five steps to successful promotion collaboration:
STEP ONE: Plan Collaboration Holistically
It has to begin with the big picture. Collaboration is more than a joint planning meeting and more than simply sharing data. It’s a way of doing business that defines how retailers and manufacturers go to market, day in and day out. It requires data and tools, but it also depends on people and processes. As with any enduring change initiative, it behooves companies to consider how it will impact their businesses across several dimensions:
Who - Define who is involved in your organization and who they will be interacting with in your trading partner’s organization. Be certain your people are empowered with the authority to get the job done.
What - Define the processes and roles clearly. Know exactly what you are trying to accomplish and what has to happen. Be ready to state it clearly.
Where - What must take place in person vs. by phone, email, or in a shared, web-based workspace? Does the work take place on your premises? At your trading partner’s?
When - Establish a timetable for collaboration that considers joint goals, availability of solutions, and sets milestones for key tasks.
Why - The reason to collaborate may seem self-evident. However, clearly stating the primary objectives can help shape the rest of the plan and also help both parties modify or expand the initiative as new opportunities emerge. Also, your trading partner’s stated
reasons to collaborate may be slightly different than you expect.
STEP TWO: Set Rules of Engagement
Collaboration can never be a “no holds barred” proposition. Trust is built in part by setting limits and defining rules. For some in the industry, collaboration is simply synonymous with “sharing data,” but there are ways to collaborate that need not involve
any disclosure. Also, levels of collaboration may vary, and some capabilities may be enabled without sharing sensitive data. Overall, retail leaders are opening up more of their businesses to collaboration with suppliers in order to achieve the benefits of joint planning and execution. In all cases, limits do apply. It’s important to recognize that the retailer sets the rules of engagement.
STEP THREE: Define Key Performance Indicators and Goals
How do you measure success? Successful trading partners jointly establish key performance indicators (KPIs) from the outset of a collaborative relationship. There is no substitute for candor in this discussion, because both sides must recognize that what is optimal for one may be unacceptable for the other.
It’s well understood that a promotion that drives one brand’s short term sales at the expense of overall category objectives is not sustainable. Previously, many of these promotions have been executed at retail because neither party had a better alternative, and perhaps experimenting with something new (vs. repeating what was done last year) was too risky. In this day and age, this should not be considered “good enough.”
For successful collaboration, it is essential to define what you will measure. This will enable both parties to raise the bar from what you’ve done in the past.
STEP FOUR: Establish Collaboration Tools
Make success possible. Even more than that - make breakthrough success the everyday norm. Empower sales and category management teams with tools that support quick, accurate, informed decision-making, reliable forecasts, and dependable, rapid monitoring of results.
Advanced promotion planning software applications today apply the science of consumer demand modeling and predictive simulation. These can be based on a modeled platform of either retailer POS/t-log data or syndicated market data. Retailers and manufacturers will benefit when comparing forecasts and other analytics in an “apples-to-apples” manner. Using the same methodology and science over different data sets is a significant opportunity. Using the same underlying data makes this even more powerful.
STEP FIVE: Continuously Measure and Adjust
Build a cycle of success. Empowered, informed collaborators continually measure, evaluate and adjust merchandising programs based on a common understanding of mutual goals and gains. The outcome is a virtuous collaboration cycle that engages both retailers and manufacturers in an upward spiral of performance that yields mutual benefits.
Just as importantly, the iterative process influences trading partners to reduce sub-par or non-performing programs, freeing scarce resources that may be reallocated to more powerful and productive promotions.
This report was adapted from “Secrets of Success: Promotion Collaboration,”a white paper form DemandTec (www.demandtec.com).
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