7. Work Better with Retailers
In the most recent Retail and Consumer Goods Analytics Study, 27% of CPGs identified trade promotion as a key area of focus for improving analytics capabilities. (The only areas considered more important were consumer insights, promotion effectiveness and demand forecasting.) Not surprisingly, only 8% of retailers said the same thing.
Zero-based budgets and from-scratch promotional plans can be a pretty tough sell for retailers, who have entire categories to worry about and who have, over the years, become almost dangerously reliant on CPG contributions: Kroger collected $8.5 billion in vendor allowances in fiscal 2017 — a figure representing nearly four times the company’s net earnings for the year.
Retailers are starting to come around. “They’re facing the same challenges as CPGs, so most are now willing to adapt and change, says Hall. “Working in partnership, retailers and CGs have the potential to build huge competitive advantage.”
“CPGs and retailers have traditionally taken an adversarial approach where each party plays their cards very close to their chests,” says Brussé. “New solutions providing a single version of the truth and actionable insights have turned this completely around. These solutions demand that CPGs and retailers are open and collaborative, with the shared goal of delivering benefits to the consumer.”
Improved performance transparency is also driving a greater understanding of traditional plans and anniversary promotions that have not paid out. With the analytics tools now available, both sides are far better equipped to collaborate effectively.
8. Embrace AI
With all the data that now needs to be synthesized and analyzed, often down to the granular level, artificial intelligence will play an increasingly important role in the transformation of trade promotion. For one, it will be immensely beneficial in pulling together all the disparate data sources that come into play for the outside-in purview discussed earlier.
“Whether they take small steps or immediately go for the big bang, everyone should be exploring AI,” which can “take away the need to make everyone in the organization a data scientist” by handling the heavy analytics lifting, Hall says. And that lets the humans in the room focus on the marketplace intelligence needed to activate AI-driven insights.
“It is critical for CPG companies to harness the full power of their data, which means they need to embrace applied AI and rely on the prediction models, which only improve over time. It’s time for CPGs to trust the machine,” adds Brussé.
9. Play to Win, Not Sustain
This new era of trade promotion will require consumer goods companies to get far better at demand planning through deeper, broader consumer understanding and a more open, collaborative relationship with retailers. The end goal is programming that drives real, sustainable growth rather than a series of short-term incremental lifts.
“The scale and pace of change can seem daunting, but it doesn’t have to be,” says Hall. “Technology has been largely seen as a back-office asset, but we view it as one of the greatest enablers of our time.”
“CPG leaders need to promote a clear vision of what it means for their company to be future-fit. They need to have a mindset that embraces change,” says Brussé. “Companies need to become flexible, resilient, learning organizations adept at changing roles and responsibilities to align with changing processes and market forces.”
It’s time to make this line item really pay off.
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