The packaged goods industry, in the US, spends around $250 billion to $300 billion, annually, on Trade Promotions; amounting to about 10% – 20% of the topline for the industry. However, there are many inefficiencies plaguing trade promotions, primarily driven by increased fragmentation of the customer landscape, and new channels and choice for the new age consumer. Added to this is the availability of on the ground information at the moment of truth.
In a Nielsen webinar titled “Changing Your Trade Promotion Trajectory: How to Become Part of the Elite Tier of Companies That Are Reversing The Promotion Trend”, Doug Bennett, senior vice president of sales effectiveness at Nielsen, mentions the diminishing return curve for promotion frequency and the overuse of deep discounts. According to the available data, on an average, more than 25 percent of promotions that use deep discounting result in degenerated return on investment (ROI).
Finding a way out of these inefficiencies would require deeper understanding of existing and prospective customers, what they would want to buy and what they end up buying.
Using data to drive effective promotions
Imagine you are the trade promotion planner for a fast moving baby care product that expecting and new mothers purchase. To be able to plan a promotion, you would need to understand the characteristics of your target customers and segment them based on the relevant characteristics. As you understand the different segments in your target market, you could devise appropriate promotions, customized to position your product in each of those segments. If you have the data about your target market, you would be asking your data questions to understand the customer base, such as:
- What is the distribution of the target customer base by their household income
- What is the distribution of the target customer base by their educational qualification
- What are the top 10 models of cars your target customers own
- What age groups do your target customer fall into
- What are the top 10 professions of your target customers
- What are the neighborhoods where your target customers reside
Now, imagine sifting through all the data that you have about your target market in order to find answers to these questions. If you don’t have the right tool that can provide you answers in seconds, you are likely to experience decision fatigue. As you experience decision fatigue, you are more likely to make decisions based on incomplete analysis and inaccurate findings. To be effective, trade promotions, just like any other activity in the Marketing function, require data-driven decision making.
Finally, after you have run your promotions, you need the data from your promotions to measure their effectiveness. It is not sufficient to just look at the KPIs from the data, that will only tell you how well your promotion worked, but if you have to get better at it the next time, you need to understand the reasons behind the KPIs, you need to slice and dice the data along each of the characteristics of your customer segments to be able to conclude what worked and what didn’t and also to understand why something worked or didn’t.
Taking a measured data driven sales decision planning approach can help improve the ROI of trade promotions by up to 15%; helping consumer packaged industry improve their profits by up to 15% even while keeping the spend levels constant.
You can do all of this analysis yourself, without having to burden your IT or BI teams; all you need is a self-service BI tool, that requires no special skills or training to use. Vizard, Infruid Labs’ Business Intelligence and data visualization tool, is the right tool for trade promotion planners, it is a complete self-service BI tool that can help you get deep insights necessary to run your promotions successfully.
Infruid Labs is a Business Analytics and Data Visualization solutions company. Vizard is Infruid’s patent-pending and award-winning Big Data Visualization platform. Vizard helps business users ask questions in simple English and answers back with interactive charts. Ask for a demo to know more.