How do I maximise the value for each promotion?

Promotions generate best value for grocery suppliers when they are planned and executed as part of a long-term promotional strategy; the strategy defines the goals and metrics for promotions in terms of brand building and value generation. Promotions are, however, an inevitable collaboration between retailer and supplier, and not every retailer will be willing to participate in every part of your promotional strategy, so you need to define promotional plans with your retailer customers to meet their needs too.

Ideally, this will be in the form of a long-term ‘joint business plan’ agreed between you and your retailer customer over a 12-36 month period. If so, you can plan a programme of promotions that meet joint needs and execute each to the outline below. If not, and you are only able to plan a short-term programme of events, you should still run promotions that contribute to your own promotional strategy and it’s equally important to follow best practice.

Best practice follows 7 key steps across the 3 stages of the promotion process:

Before

Every promotion justifies careful planning; you are making a judgement on where to invest your company’s money to achieve the best return in the long-term. Working within a well-defined promotional strategy, with clear objectives and key results (metrics), you can plan promotions that contribute to one specific objective or many.

Plan

Every promotional activity should drive volume in the promoted products – regardless of your planned impact on revenue and margin – and so it’s important to start with a realistic understanding of underlying sales volumes as a marker for ‘baseline demand’. Baseline demand is not your average weekly achieved sales from the previous year; this is a crude and weak representation of ‘typical demand’. You should invest time and effort to analyse previous sales patterns – or use appropriate demand intelligence products – so that you have a robust and realistic model of the sales volume you should expect in the absence of any promotional activity.

From here, you can explore the impact of previous promotions (or price variations, if you haven’t run promotions previously) on the products you plan to promote, in order to determine probable uplifts for different promotional mechanisms (offer, price, distribution, media etc.). Once you have a clear understanding of baseline and probable uplift(s), you can propose, negotiate and define the details of your promotion(s) with your retailer customer(s) – this is an interactive process, and you will need to compromise on your ideal scenario to meet your customer’s needs.

Stock

With an agreed promotion(s) in place, you and your customer must plan, execute, and monitor the flow of stock into stores in the build-up to the promotion start date. Depending on the shelf life of your products and capacity in customer depot(s), this may mean promotional orders land a week or two before the promotion starts or just a few days before.

More than 20% of promotions start with too little product in stores to achieve 90%+ store compliance on day one; this throttles supply and can reduce your planned uplift by as much as 50% over the (typically three-week) life of the promotion. Best practice means a daily review of these key metrics in the build-up to the first day of the promotion. You should observe the following pattern for every SKU/ depot/ store involved in the promotion:

At every stage, you have an opportunity to intervene if the stock build/ release/ build cycle doesn’t meet your expectations. Do not wait for your retailer customer to notice gaps in the order pattern, or a failure to build/release at one depot; it is your responsibility to identify, communicate and resolve supply issues so do not rely on your retailer customers to address this!

Your initial stock-build plan should cover 40%- 80% of anticipated demand. You want fresh, appealing products in stores and the ability to replenish stores throughout the promotion as you receive daily feedback on promotional engagement from shoppers through analysis of store/SKU performance. You and your retailer customer should plan provisional replenishment orders for each week of the promotion, with an agreement to review and revise these as the promotion unfolds.

During

If you plan your promotion carefully, monitor stock movements – and intervene where necessary – in the build up to “Day 1” of the promotion, and communicate clearly and concisely with your retailer customer counterparts then you enter every promotion with the very best chance of success. You should continue to monitor and react to changes in demand throughout the promotion, here’s how:

Monitor

From launch it’s critical to maintain daily monitoring to compare achieved performance against your expectations and adjust the plan accordingly:

Where sales fail to meet expectations, you need to determine whether this truly represents lower shopper demand or, instead, failure to execute the promotion on the part of your retailer customer. For example, if sales meet or exceed expectations in some stores but fail in others it could be a sign that poor-performing stores have failed to implement the promotion in some way: price signage, free standing displays, dual-sited stock etc. Best-practice promotional execution often involves sending field sales representatives (in-house or agency) to poor-performing stores on the second and third days of promotions to identify and correct deployment issues; this attracts additional cost but early fixes can mean the difference between promotion success and failure and always help to reduce shopper frustration.

Replenish

As the promotion unfolds, you need to ensure availability across the promotional store estate; this means monitoring total stock – at store and depot – as well as identifying stock risks in individual stores. This may appear daunting, but the data required is available from most UK grocery retailers, and you can analyse the data in anything from a spreadsheet to a dedicated demand intelligence platform.

Your goal is to build a comprehensive understanding of demand across promotional stores and ensure that you and your retailer customer agree on how to meet this demand. You will have planned an order profile before the promotion launched – and executed the first phase of this before launch with the initial ‘stock build’ – so now it’s time to revise the plan as your picture of demand improves each day. You are striving for an optimal balance between:

In the worst case, you risk both over- and under-stock conditions with some stores receiving more than they can sell and others running out. You can support your retailer customers by analysing store-level performance and advising on stock allocations particularly during the second half of each promotional period.

With close attention, effective analysis, and strong communication, you can optimise your stock allocation to maximise availability and minimise waste. Suppliers who consistently achieve this will find their retailer customers receptive to additional promotions, new product launches, and improved long-term relationships.

After

Reconcile

After your promotion ends, your retailer customer will invoice you for all of the agreed promotional components and you need to ensure that you pay for what you agreed and for what was executed. You should reconcile the retailer’s account of stock ordered, and units sold during the promotion, with your records and adjust for any non-compliance – for example, stores which failed to execute as agreed, in terms of signage, position, siting etc. This can be seen as an adversarial process so it is important to use data, and appropriate analysis, to support your arguments and to focus attention on facts not feelings.

If you have monitored execution throughout the promotional period then you will have a body of evidence that support your commentary on compliance. It’s normal to make some allowances – perfect execution is all but impossible – but it’s also reasonable to expect 95%+ compliance. Ideally, you will have defined your compliance expectations in the plan agreed with your retailer customer so it’s a matter of discussing your compliance records with those of your customer and agreeing on the facts.

Analyse

Post-event analysis is fundamental to continuous improvement across your promotional programme. You should conclude every promotional event with a formal analysis which compares achieved performance to your plan and provides an explanation(s) of the differences observed. You should be addressing questions such as:

Ultimately, you are looking to answer the key question:

“How did the promotion perform against its objectives?”

If it broadly met your objective(s) by achieving the key results you defined, then you have confidence in both your planning and your execution. If you experience material under- or over-performance then you need to understand what drove the variation so that you can use the lessons learned to inform the planning and execution of your future promotional events.

Evaluate

Finally, as every promotional event should fit into a larger plan, it is important to review post-promotional analysis in the context of your overall promotional strategy. Every promotion should be contributing to overall goals; whether these are to increase awareness, encourage switching from competitors, drive volume or encourage ‘trading up’ into premium alternatives.

Best-practice promotional strategies will span a mix of objectives over a 12-36 month period, so every promotion will contribute to one or more objectives. Every promotional event provides an opportunity to shape shopper demand for your products; even failure to achieve planned results informs your plans and helps you to adapt, if you truly understand the reasons for failure.

When a promotion meets, or exceeds, its planned performance you have an opportunity to increase planned returns and persuade your retailer customers to repeat promotional mechanisms, extend coverage and allocate more store space to your products. When a promotion fails to meet planned performance your analysis may help you identify ways to improve execution with your retailer customer but it may illustrate that your product/ offer doesn’t appeal to shoppers in the way that you thought, or that you want to reduce investment with the retailer customer in favour of others.

In every case, effective post-promotion analysis ensures that you learn from every event and improve long-term performance through continuous improvement.