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Aligning eCommerce, Trade and Corporate Marketing

Posted By RCVF Admin, Thursday, November 29, 2018

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Aligning eCommerce, Trade and Corporate Marketing

by Rob Hand, Lead, Trade Promotion, Capgemini

To win the battle for consumer engagement in the age of digital transformation, it takes a unified strategy across a multi-front campaign.  CPG companies traditionally fail in this effort, wasting billions of dollars in promotion funds, advertising and sales opportunities.  How to overcome this failure is a growing question asked by sales, marketing and financial executives throughout the world.

Over the last decade, we have seen so many retail companies close stores or shutter completely.  On the one hand, it is sad to see great retail institutions like Toys R Us, The Limited, Radio Shack and A&P Stores drop completely off the marketplace.  Retailers that have recently announced huge numbers of store closures like Mattress Firm, Best Buy, JC Penney and even venerable old Macy’s are pulling out all the stops to keep relevant against the onslaught of online ecommerce.  

So, what is the cause of this hockey stick curve graphic showing the number of stores that are going away?  Amazon?  Alibaba?  E-Bay?

No.  Those are some seriously effective companies that figured out how to offer something unique and different, and please the consumer through the execution of their own strategy and operations.

The answer?

It’s the consumer. 

Today’s consumers, and especially the millennial or generation Z, are power players. They know what they want and are more knowledgeable about a product than most of their Baby Boomer parents and grandparents because they research.  In the blink of an eye, they have their mobile phones up, a search conducted, a site selected and BANG – they’re already seeing a world of knowledge that gives them the insights about the product. They can see deals, compare, and make their minds up in a heartbeat – all while listening to their favorite anime or tune.

Online, ecommerce players like Amazon and Alibaba came up with great ideas.  They figured out how to do one simple thing – please the consumer by knowing what they want and delivering it to them quickly and inexpensively.  Retailers grew complacent, expanded quickly, traded good old customer service for high turnover, minimum training and an expansion program that taxed every resource they had.  Moreover, they began to realize that the decades of pressure put on their manufacturer suppliers for higher trade funds had virtually ended the annual 1 – 3% increases they came to expect in their trade promotion spending.  The margins were as low as they could go, and there was no room for negotiation or collaboration.

For the manufacturer, the tightrope walk across Niagara Falls was well underway.  While the true revenue generation allegiance was still to the retailer, they had to play the ecommerce side of the channel themselves to cover their own revenue and profit growth.  The marketing organizations began to grow their competence in consumer engagement, generating huge data lakes of consumer profile data and integrating sophisticated marketing response analyses, campaign testing intelligence and building a powerful pool of insights about consumer demand, shopping, and purchasing.

In addition, also under the banner of corporate marketing, customer service organizations have flourished, capturing important information about price impact, how their products were used, how recipes are created and a daily deluge of social sentiment data about every aspect of the product, company, and strategy. This data is used to drive product assortment, category management, advertising content, coupon and discount effectiveness, and demographics.

Marketing is a virtual and actual storehouse of consumer intelligence.

Trade promotion?  Not so much.

Trade promotion planning is still being done in a total vacuum of all this intense consumer data. Key account managers and sales reps who are responsible for generating promotion plans have basically two types of data they can call on to help them understand the best timing, tactics (activities), products, markets and retailers to select for the promotion plans.  Those two data elements include historical trade promotion performance data (if it is maintained) and, in most cases, some downstream data including point-of-sale (POS) and syndicated (IRI/Nielsen) consumption data.    

Even the tier one CPG companies were slow to recognize the true power of trade promotion, and even slower to understand the critical advantage of sophisticated promotion optimization technology.  As a percentage of gross revenues, global CPG companies spend an average of 27% on trade promotion compared to literally half that amount in direct-to-consumer marketing; and it has been this way since the early 1970’s. 

Historically, trade promotion “success” metrics have been, and continue to be measured by the volume, revenue and profit margin achieved at the sell-in.  Very little attention has been paid to the actual results of the promotion at the cash register. 

By most analysts’ measurements, trade promotion spending fails to achieve a positive ROI more than one-third of the time.  Most CPG executives blame two primary causal factors – poor promotion planning and out-of-stock conditions at the retail shelf.  These are key reasons for failure; but as we begin to see the results from the massive investments into “big data” initiatives, two other glaring problems come into focus.

The first problem is bad data. “Garbage in, garbage out” has been a phrase referring to the impact inaccurate or missing data has on any computation, and it especially applies when you consider that, for most of promotion planning, the primary basis for performing “what-if” or even sophisticated promotion optimization scenario models is historical trade promotion performance, which we know is more than a third failure.  How, then, is using that mix of data to base projected performance going to work for you?  Data problems also arise in retailer point-of-sale data, syndicated data and inaccurate baselines derived from so-called “demand planning” tools found in supply chain management solutions.

The second problem is a lack of collaborative planning and sharing of data between internal marketing and sales organizations. All the data mentioned above that is available to the marketing organization could not only positively impact the quality of the trade promotion planning, but it can also help to align both the trade promotions and the array of direct-to-consumer promotions done in ecommerce, national advertising, coupons and preprinted inserts to daily newspapers.  It is nothing more than a shame that these two organizations have had that “Chinese wall” between them that has been solidified both politically and culturally over the years. What is needed is a major market-shaping force that brings these two groups together.

And, that would be the consumer.

We are now seeing a movement – albeit ever so slowly – in the direction of consolidating and aligning trade promotion and consumer marketing data.  Promotions are continuing to be planned independently by each group; however, technology is beginning to make this happen.  Will it overcome the political hurdles of decades of non-collaboration?  We’ll see.

The problem is not only political but systemic.  What we have in most CPG companies is an end-to-end system of functional applications that are neither integrated nor aligned. This might be due to the years of application changes, business unit-driven solution acquisitions and so on; but if you notice the dotted red lines tell the story – failure to integrate key functions including trade promotion planning, retail execution and marketing with virtually no real cross-functional integration to a single data source.

This is the real problem. 

In today’s digital environment, the consumer demand signals are more plentiful and available than ever before. Being the second largest line item in a CPG company financials, trade promotion naturally commands a level of respect and focus to generate the highest return possible.  But without the combined intelligence and insights this data provides, it is far more difficult to not only create precise and trustworthy promotion plans, but to increase the real ROI achievement from them. Too much money has been wasted in promotions that have been executed out of synch or worse, in direct conflict. 

For example, last year in a key week leading into the Independence Day promotion, a major salty snack company ran a trade promotion featuring a deal where if you bought three bags of chips, you got a discount to $1.89 per bag.  At the same time, the ecommerce marketing team ran a coupon that required only TWO bags purchased to get a discounted per bag rate of $1.49 each!  Today, when consumers become confused, they move on – they don’t buy, and they remember.  That is far too much to lose given the huge spending levels of trade promotion and consumer marketing today. 

The answer is not simple, but it is attainable. The data identified above must be integrated across the entire functional landscape.  This will ensure everyone is working with a consistent data set that is clean, harmonized, and aligned.

Unification and alignment of trade promotion and consumer marketing begins and ends with a consolidated visibility (represented by the light blue areas above) to all data from which the right insights needed to drive the consumer engagement and revenue generation.

It is time to knock down the walls that exist between sales, responsible for trade spend performance, and corporate marketing, responsible for driving consumer engagement.  We have the technology and the marketplace mandates to get it done now.  Think of the benefit of reducing that 37% failure rate and adding another 10% of sales crossing the checkout scanners.

 

Tags:  corporate marketing  ecommerce  trade 

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