Consumer Goods Technology - October 2018 - 18

CONSUMER GOODS TECHNOLOGY

TRADE

PROMOTION
MANAGEMENT

REPORT 2018

the top metric. Most sales reps will agree that it's their number one
objective, and compensation programs clearly reflect that. The
same thought applied to sell-in revenue. However, it was not the
second highest metric.
What is surprising was the selection of "predicted incremental
POS" as the second highest selection (Figure 8). More CPGs are
adding POS to the compensation matrix for sales reps. This is
an excellent sign that more serious attention is being paid to the
ultimate results of the promotion at the cash register, moving away
from the historical practice of pushing product volume into the
channel without regard to the end sale.
Additional evidence of this trend is that "incremental POS
sales" was cited as the most important metric for post-promotion
performance analysis (Figure 9). This indicates that trade planners
are paying more attention to the end goal of reaching consumers
and driving them into stores. Cannibalization/halo effect and
in-store execution compliance were both also high; however,
as companies expand and acquire, promotions that avoid
cannibalizing other products will become tougher to plan and
execute without higher quality data.
Retail profitability was not a key metric, but the future of
collaborative trade promotion planning will depend on increased
attention and focus for trade promotion systems in the future. We
see a higher level of promotion success when the analytics enable
a sales rep or account manager to prove reliable retail profitability
during planning efforts.

Assessing Baseline Management
Baseline management is beginning to play a far more critical role in
promotion planning than ever before. Development and maintenance
has traditionally been the responsibility of demand planning, where
baselines are calculated and passed to the promotion planners who
determine incremental volumes to be achieved.
Only 17% of respondents believe that baseline accuracy is a
reliable metric for post-promotion measurement (Figure 9). We

Post-Program Measurement Priorities
What are the most important metrics to measure after
a promotion has been executed (select two)?
FIGUR E 9 :

Incremental POS sales

66%
66%

Cannibalization and/or
halo effect of promotion

46%
46%

Promotion execution compliance

46%
46%

Retailer gross profit
Baseline accuracy

18

26%
17%

CGT | OCTOBER 2018 | CONSUMERGOODS.COM

continue to see evidence that baseline updates are not occurring
frequently enough, causing inaccurate values and calculations
as the basis for determining the incremental targets required for
promotion planning.
Most respondents do consider the frequency of baseline updates
to be satisfactory. But many respondents are not confident in
the accuracy of their baselines - specifically because they don't
reflect realistic non-promoted volume (the amount of product sold
without any incentive).
The majority of Capgemini's TPx clients are concerned about
baseline accuracy, and we are seeing efforts to improve things.
More sophisticated technology and practices will reveal more
issues, and will therefore require additional adjustments to the
approach that companies use.

Optimizing the Planning Process
Nearly all respondents report having some form of optimization
tool to assist in trade planning (Figure 3). This indicates the critical
importance of precision and trust in predicting promotion ROI.
But very few respondents claim to enjoy highly sophisticated
TPO solutions that leverage advanced technology in AI, machine
learning or other forms of cognitive computing.
The adage, "Garbage in, garbage out" is highly applicable to
promotion optimization. For starters, we know that on average, as
much as one-third of promotions fail to produce positive ROI. OOS
conditions are to blame for a significant portion of those failures.
But it's important to consider the source of the data used to
feed the optimization engine. Historically it has originated from
one of two sources: historical results and/or the combination
of syndicated and POS data. To confirm this, we asked survey
respondents to pick the top two data sources used for promotion
optimization, scenario modeling and projected ROI of new
promotions (Figure 4).
POS and historical performance data were both selected most
often. That's not unexpected, because those two sources are the

Confidence in Performance Metrics
How well do you measure the basic metrics of promotion
performance?
F I G U R E 10:

3%
Don't measure
promotion ROI
9%
Very well
(multiple
metrics)
24%
Poorly
(no ongoing
analysis)

64%
Satisfactorily
(a few reports)



Consumer Goods Technology - October 2018

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Consumer Goods Technology - October 2018 - Cover4
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