demandtec ebook: retail promotion collaboration

1Chapter Title Here

promotioncollaboration

a DemandTec eBook

Five StepS to SucceSS

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Promotion Collaboration

3Summary

RetaileRS and manuFactuReRS ShaRe common inSightS and use data to drive superior promotion and merchandising decisions based on reliable forecasts and expectation of mutual success.

tRuSt emeRgeS based on common understanding, transparency and shared success.

BeneFitS accRue FoR Both paRtieS, as fact-based promotion collaboration becomes their embedded, everyday mode of interaction – a way of doing business – not just this month’s slogan.

Leading retail and consumer product companies are already collaborating to win. They are learning to work together for mutual, sustainable promotion and category management success.

conSumeR-centRicity iS galvanizing ouR induStRy. Retailer and manufacturer 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. Before you plan another promotion, set another price, refine another as-sortment, or negotiate another deal with your trading partner, review this book and discover the sustainable advantage col-laboration can build for your business.

the game changes......when trading partners truly

collaborate on promotions

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taBle oF contentS

what we have leaRned

Five StepS to StaRt collaBoRating today

thiS iS not the laSt woRd

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7What We Have Learned

what we have learned

manuFactuReRS and RetaileRS who engage moRe oF theiR paRtneRS in collaBoRative activitieS RepoRt BetteR SucceSS FRom theiR pRomotionS. 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.

DemandTec and Booz Allen Hamilton, in partnership with Trade Promotion Management Associates, jointly sponsored research on this issue because we observe trading partners striving to gain greater collaboration and mutual benefit. The Promotion Collaboration Survey is the first known to address trade promotion optimization and collaboration.

The resultant insights imply ways that the industry can best work together to improve retail-focused merchandising and marketing. The big ideas: • Manufacturers and retailers are becoming increasingly • interdependent.• Trade promotion optimization is a key opportunity and the • • next frontier in collaborative activities.• Increased collaboration can drive more effective business • • results.

moSt RetaileRS and manuFactuReRS Believe collaBoRation iS impoRtant to theiR FutuRe SucceSS. • 92% of retail grocers report collaboration as “very important” • to future success and 8% consider it “important.”• Manufacturers rated collaboration as “very important” 56% • • of the time, and “important” 39% of the time.

It’s no secret. 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.

Retailers and manufacturers share related concerns about demand forecasting and differing objectives (e.g. category growth versus trade spend ROI).

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9What We Have Learned

When RetaileRS rate importance and effectiveness of vendor capabilities, three gaps stand out [below].

aBility to accuRately FoRecaSt conSumeR and waRehouSe demand

evaluate the eFFectiveneSS oF a completed event

plan a pRomotion event conSideRing the oveRallimpact on the categoRy

Survey question: Please rate the importance and effectiveness of your vendor partners in the following skills that support collaboration.

Source: The Promotion Collaboration Survey

When manuFactuReRS rate the importance and effectiveness of their customers’ capabilities, the largest gaps differ. However, both share concerns about demand forecasting [below].

Survey question: Please rate the importance and effectiveness of your retail partners in the following skills that support collaboration.

undeRStand the RetuRn on inveStment in a pRopoSed event

aBility to accuRately FoRecaSt conSumeR and waRehouSe demand

Relate pRomotion eventS to the goalS oF youR paRtneRS


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data in FoRmatS that aRe non-StandaRd (hieRaRchieS, FoRmatS, data attRiButeS, etc.)

data that iS not timely

lack oF joint key peRFoRmance indicatoRS

tRuSt RemainS a key FactoR in collaBoRation eFFectiveneSS, But Relatively leSS impoRtant than otheR BaRRieRS.Data inconsistency, inappropriate tools, misaligned or lack of defined objectives, and lack of a process are all considered to be greater barriers to collaboration than a lack of trust. It is also highly likely that any efforts to eliminate these other barriers would also have the secondary benefit of building and ensuring trust within the relationship and the collaboration activities.

lack oF StandaRdization in how data iS analyzed Between tRading paRtneRS

inadequate toolS to woRk with data

ReSouRceS to utilize gRowing SouRceS oF data

miSaligned oBjectiveS

lack oF FoRmal BuSineSS pRoceSS touchpointS

lack oF agReement on what Should Be meaSuRed

SyStemS that can’t talk with one anotheR So the data can’t Be ShaRed

lack oF tRuSt with youR paRtneRS

Survey question: Which of the following do you consider to be barriers to using analytics and insights to collaborate with vendors in the future?


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collaboration benefits retailer and manufacturer partners in a variety of ways.


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five steps

step one: plan collaboration holistically

step two: set rules of engagement

step three: define key performance indicators

step four: establish collaboration tools

step five: continually measure and adjust

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17Five Steps

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:

whoDefine 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.

whatDefine the processes and roles clearly. Know exactly what you are trying to accomplish and what has to happen. Be ready to state it clearly.

wheReWhat must take place in person versus by phone, email, or in a shared, web-based workspace? Does the work take place on your premises? At your trading partner’s?

whenEstablish 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 one: plan collaboration holistically

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19Five Steps

key conSideRationS FoR RetaileRS:• Is promotion collaboration centered around the category management team? Who else should be involved?• Who will interact with counterparts on the supplier side and what tools will they use?• Are you ready to implement programs developed with your partners?• In addition to planning for your own improvements, are you identifying ways to enable your supplier community to lower its cost to serve you?

key conSideRationS FoR manuFactuReRS:• Have you empowered your field-based account teams to take action?• Are you engaged in a dialog with retail customers around collaborative promotion planning?• Are you ready to leverage transaction log data in your promotion strategies and tactical recommendations?• Have you identified ways to lower your cost to serve your most important retail customers?

holiStic planning RequiReS people, pRoceSSeS, data, and toolS

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21Five Steps

step two: set rules of engagement

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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.

key conSideRationS FoR RetaileRS:• Based on what you want to achieve, determine what information your vendor needs.• Analyze the different types of vendors you do business with and define how collaboration might differ between them.• Authorize vendors to use software, access reports, or even use specific data sources based on their roles.

key conSideRationS FoR manuFactuReRS:• Build your capabilities around retailers’ rules.• Share best practices and marketing know how.• Leverage your consumer knowledge.

RuleS oF engagement will vaRy and aRe dependent on the RelationShip and level oF tRuSt

Between the paRtneRS.

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23Five Steps

step three: define key performance indicators and goals

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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 (versus 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.

key conSideRationS FoR RetaileRS:• Establish KPIs for promoted item sales, but also overall category sales and profits.• Analyze cannibalization of private label or other brands as you evaluate deals or offers from different vendors. • Using KPIs, request that all promotional offers from your suppliers meet agreed-upon thresholds.• Finally, consider customer segmentation strategies. Request promotional offers that are not only good for the category but are better targeted to your key customer segments.

key conSideRationS FoR manuFactuReRS:• Recognize retailers’ interests and how they evaluate competing deals.• For win-win collaboration, make sure your customer understands your goals for volume, cost-per-incremental volume, and trade spend ROI.• Explain how lowering the cost-to-serve a given customer would benefit the customer.• Bring deep consumer insights and research to the table, and align with the retailer’s loyalty insights and other shopper insights to plan targeted promotions together.

Retailer Important Metrics● Private label impact● Best customer alignment● Cannibalization of category competitors

Manufacturer Important Metrics● Promoted brand volume● Category profitability● Cost per incremental unit● Trade spend ROI

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25Five Steps

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.

key conSideRationS FoR RetaileRS:• Use advanced promotion planning tools to compare vendor offers against each other and with regard to the agreed- upon KPIs and thresholds in Step Three.• Create additional “what-if” scenarios to forecast what different deal terms or different uses of ads and displays would generate.• For the most collaborative retailers, consider enabling your suppliers to receive metrics (e.g. volume forecasts) from your modeled environment (subject of course to the rules of engagement defined in Step Two).

step four: establish collaboration tools

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common data, Science, and toolS enSuRe “appleS to appleS” analyticS and moRe

eFFective collaBoRation.

key conSideRationS FoR manuFactuReRS:• Choose the right “metric” system. Your plans will be more easily sold in if the analytics used to prove their value are consistent with what your customer uses.• Use the same promotion planning system as your customer with your syndicated data. This ensures that both parties are not only comfortable with the modeling and forecasting approach, but process efficiencies can be gained as well when data is not entered multiple times.• Encourage your customers to open up their analytical platforms to give you the key metrics you would need to help drive their business and meet the established KPIs and thresholds. But recognize that your customer sets the rules of engagement.

Five Steps

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29Five Steps

step five: continuously measure and adjust

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Retailer Performance Target Actual Status

On-time reports 100% 90%

On-time payments 100% 85%

Manufacturer Performance Target Actual Status

On-time reports 100% 87%

On-time billing 100% 92%

Collaboration KPIs Target Ac-tual

Status

Promoted brand volume + 8% + 5%

Category profitability + 4% + 5%

Cost per incremental unit - 3% - 2%

Category cannibalization - 2% - 3%

Private label volume loss - 10% - 6%

Best customer alignment 75% 81%

Trade spend ROI + 4% + 6%

a continuouS and collaBoRative cycle to meaSuRe and adjuSt enSuReS oBjectiveS

aRe Being met.

Sample ScoRecaRd

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.

key conSideRationS FoR Both RetaileRS and manuFactuReRS:• Based on the KPIs defined in Step Three, are promotion plans achieving the goals each party set?• Don’t forget to scorecard the process itself. Even if all KPIs are in the green, is the process working as efficiently as it can be?• Re-assess Steps One through Four. Should others be involved in the process? Are you measuring the right KPIs and using the best tools?

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31This is Not the Last Word

Collaboration is a big concept that is certainly not limited to trade promotion. It is fundamental to driving innovation and yields great advantages in assortment and new item planning, shelf planning and other category management activities. For many retailers and consumer product manufacturers, most collaboration to date has been taking place in some of these other areas with fewer initiatives centered on improving promotions. Given new technology and changing attitudes towards win-win promotion planning, trade promotion collaboration is now a key initiative for more and more leading innovators in our industry.

www.demandtec.com

this is not the last word...

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33Chapter Title Here

DemandTec (NASDAQ:DMAN) connects more than 400 retailers and consumer products companies, providing common solutions to transact, interact, and collaborate on core merchandising and marketing activities. DemandTec’s services enable customers to achieve their sales volume, revenue, shopper loyalty, and profitability objectives. DemandTec customers have collaborated on nearly four million trade deals. DemandTec software and analytical services utilize a science-based platform to model and understand consumer behavior. DemandTec customers include leading retailers and consumer products companies such as Ahold USA, Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target, Walmart, and WH Smith.

aboutdemandtec contact uS

DemandTecOne Franklin ParkwayBuilding 910San Mateo, CA 94403USA

inquiRieSPhone: +1.650.645.7100Please visit www.demandtec.com


a DemandTec eBook

Five StepS to SucceSS

demandtec ebook: retail promotion collaboration

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