In this trade promotion blog, we take a look at channel tactics and address promotion effectiveness. We'll address issues related to measuring promotion effectivness so you can determine where to direct funds and avoid the pitfalls of blindly investing into ineffective promotional tactics.
We often see companies just continuing to invest in the same promotions year after year simply because they assume it’s working. They really don’t know the results of those promotions, they’re just acting on hunch. Over time, they just blindly continue to invest in the same promotions because it’s what they’ve always done.
In this chart from The Nielsen Company, we see three different retail channels; food, drug, and mass. The chart shows the quality of response from different promotions.
If you look at the drug channel you can see two different trade promotion tactics. One related to a feature ad and the other to an in-store display. Notice that the feature seems to be working out pretty well. The in-store display does not seem to work out as well for the drug channel.
The chart depicts the difference between how consumers react to the feature ad versus the in-store display by retail channel. In the drug channel, feature ads are considerably more effective than the in-store displays versus in the food channel. This brings up many questions. “How much is it costing us to keep running poor performing events?” “In which drug stores are displays effective?” They are obviously effective at some drug stores, but how do you pin point which ones? Many other questions come up in post promotion event analytics. Most of the time, trade promotion optimization solutions, TPO, don't offer promotion analysis.
We often see that analyzing the data is so cumbersome because to truly understand it, you need to pull in a variety of information. As a result, analysts simply don’t have time to do it all. The result is poor coverage. They get minimal, required, results for a small percentage of one or two of their top retailers. Then for the rest of the stores and retailers, they simply use whatever they did in the past. Only a small percentage of retail coverage is actually getting promotions based on facts. This is a huge problem and massive expense for CPG manufacturers and even for retailers.
Having an integrated system that brings together all the needed components on an automated basis, allows you to increase coverage. We’re not talking about looking at just a few accounts, and a few promoted product groups. With an automated system, you have the ability to look at all places where money is spent. The goal should be to increase the return on investment, ROI, across all retail accounts. Relational Solutions offers our Post Promotion Event Analytics solution to address these issues.
Optimally, we would also have the ability to align actual results to the plans. You want to be able to put your plans side by side in order to understand the accuracy of the plans.
To truly analyze promotions and measure promotion effectiveness, you have to understand the performance versus the expectations. You also have to understand the impact of shipments. Did your items arrive on time for the promotion's start? Did we ship too much? Did we ship too little? Product freshness is a concern for certain CPG manufacturers. You want to know what your turnover is on products? What is the competitive impact? We need to understand if a competitor is running promotions at the same time. If so, were our promotions still successful? Were theirs more successful? How does our product affect an entire category? What made that promotion a big win for us? You also want to know if it was a win for the retailer? It needs to be a "win" for both of you. Most importantly, you need to understnad if it was a "win" at all. You need to discover if you've been wasting your trade dollars. Perhaps the category dropped when our product went on sale. These are all examples of things we need to understand.
Stay tuned for our next blog on promotion analysis and learn how we can leverage POS and shipments to get you information on your promotion effectiveness every day. Click below to schedule a demo of Relational Solution's, Post Promotion Automation and Analytics solution.