You might think that we have nailed down the specific outcomes we all want from trade channel promotion, but have we?
How many times have you asked your parents this question? Or, if you are a parent, how many times have you heard this from your kids?
The answer is a lot.
In trade promotion and consumer engagement, the difficulty has always been settling on what “there” actually is. So when your CEO and board of directors asks the question, “Are we there yet,” we need to be able to define “there” before we can answer whether or not we are “there” yet, we need to know our destination.
For many in our industry, that destination is defined as a high ROI on trade spend. But is it?
Throughout my entire career, I have seen hundreds of presentations on “ROI” and the definitions thereof. All of them are good, I will have to say. But invariably, while I see someone presenting their view of ROI achievement, I see others in the crowd shaking their heads negatively. I can’t say that they disbelieve the presenter’s definition of ROI, but you and I both know that they will have their opinions of it, just as they are apt to have their opinions differ on the way to achieve it.
Testing this issue, I thought it wise to track and measure where we are in terms of the definition of perhaps the most critical of measures, ROI—specifically, ROI for trade channel promotions. I received over 300 responses to my little survey question: “What is the single most important metric in determining trade channel promotion ROI?” I was happy to see that the spread between sales, marketing and finance executives and stakeholders responding was almost one-third each, with sales slightly higher at 32% of the people responding. Marketing represented 29% and finance at 22%. The remaining respondents were an even mix of IT, supply chain and TPx vendors.
I was hoping to see something closer between sales and marketing than what I received. Looking at the above chart, you can see that there is a clear preference for the metrics around the sell-in process for sales executives, with 64% of the total responses pinning ROI on volume, revenue and profitability achievement on the initial sell-in deal with the channel partner.
Only 4% of the marketing respondents, on the other hand, saw the sell-in as having any real value in determining ROI. For them, the definition of trade promotion ROI was more aligned with the consumer response—to the actual product sales in-store during the promotion (23%), coupon redemption (8%), and of course, consumer experience (22%). 12% of the marketers actually saw the cost of the promotion as a higher measure of TPx ROI than sales, who never mentioned the cost of the promotion as a key ROI metric.
That one made me scratch my head.
If you are allocating
If you look at the Finance line on this chart, notice that their concerns are revenue (26%), profit (25%), compliance (14%) and cost of promotion (12%). That makes sense.
Notice that, aside from the marketing team, neither sales nor finance executives and stakeholders included the consumer in their priority metrics. If we believe that the entire value proposition for all this money is simply to generate more volume at the sell-in, that certainly is one of the values, but isn’t the entire ballgame about winning the consumer engagement?
Shouldn’t it be? Is that where “there” is?
There are several trade organizations which are addressing this infusion of the consumer engagement into analytics, most notably Consumer Goods Technology from EnsembleIQ (www.consumergoods.com), The Consumer Goods Forum (www.theconsumergoodsforum.com), and Promotion Optimization institute (www.poinstitute.com). There are now more sessions they have on their agendas which are focused on the consumer engagement aspect, including loyalty management and social media applications.
Many of the breakouts and panel discussions across consumer products today include both sales and marketing executives talking about how they should collaborate to build more effective promotions for both the trade channels and in the direct-to-consumer media activities.
We are all still far apart in our definitions of what constitutes the key metric of ROI for trade channel promotions. And that is not only sad but indicates we have a very difficult hurdle to overcome before true overall success is achieved. Are we so heads-down looking at the dashboard that we are taking our eyes off the real objective?
We have to be aligned across these three key lines of business so that we work together to put the puzzle pieces together and appropriately prioritize and enhance the analytics for everyone across the business landscape.
There is a lot of money being spent on managing trade promotion these days, and much of that is for advanced analytics—specifically AI-driven machine learning intended to produce a predictive outcome for promotions that everyone agrees with and trusts will materialize. But some might argue that this kind of thinking is like the old adage, “Ready, fire, aim,” where we are making assumptions that we know how to leverage external and internal promotion history, POS and consumption data to arrive at some realistic outcome.
So far, there are some very bright spots in the new systems being brought to market and there is a real path forward that may get us there. However, as an industry, we still struggle mightily with the quality and availability of data.
If we want to get “there,” we need the map. That map points us in the right direction and defines the route to the ultimate destination. The map also shows us multiple ways to get there, so there are decisions along the route we need to make to chart the right course and make mid-course corrections. Each of these metrics represented in the survey response chart above contribute to that, no doubt; but where do these get funneled into some overall key performance indicator, and what is that indicator?
What complicates matters of “there,” however, is that there are multiple destinations, aren’t there? Sure, incremental volume, revenue and profitability are all effective measures. But are they the destination, or are they simply different routes to an ultimate destination?
Very smart people responded to this survey in the chart we showed earlier, and every one of them are seasoned veterans of trade promotion, marketing, sales, supply chain, demand planning, finance and IT. Each group has their own array of analytics designed to improve their respective business operations and outcomes. Siloed databases and analytical tools sets have created some extremely powerful intelligence that has driven very smart insights to action.
But is there one or more of these metrics that are more critical in reaching an ultimate outcome than any others?
No, there are not, because each of them is necessary to build, plot, and lay in the course for the ultimate destination. Whether that destination is market share, stock value, consumer loyalty to the brand, or a combination of those types of corporate goals, the routes are going to be different and the metrics uniquely applicable to each.
As an industry, we are investing billions into advanced predictive analytics. From what I’ve seen, we have a lot of work to do to get to the right data, the right metrics and the right combination of historical performance detail. This is mission-critical work.
In the 1984 movie, “The Adventures of Buckaroo Bonsai Across the 8th Dimension,” Peter Weller’s character makes a profound statement: “No matter where you go, there you are.” In a lot of ways, that is what it seems we have as a legacy of trade promotion ROI. No matter which measurement you use and what outcomes result, we concentrate our focus around those results and try to improve each one.
But we often fail to connect these outcomes with the ultimate prize—whatever that prize is. That is the destination—where we have to arrive. And that is the question we have to answer.
Is it Revenue? Volume? Profit? Market Share? Promotion POS results? Customer experience?
Or is it an aggregation of all of these to an ultimate measure of consumer engagement?
Are we there yet?
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