If you are an entrepreneur or marketer, you know that making an impact in the market is not as easy as it sounds. Your business growth could slow down when your marketing budget fluctuates with cash flow or when you are extremely short on time.
A lot of factors significantly impact your marketing activities and thus, determining the most successful marketing efforts at the right time can maximize your revenue. It relates to –
Peter Drucker’s saying “The aim of marketing is to make selling superfluous.”
So, how can organizations make smart and informed decisions when determining marketing budgets? What strategic ways can an organization implement to avoid common pitfalls and achieve set business objectives?
Data analytics is the answer to these questions, it plays a great role in providing granular customer insights, effectively utilizing marketing budgets, and optimizing marketing spending.
Addressing Trade Promotion Issues with Analytics
Analytics has developed to the point where it can provide sufficient data to allow promotions to be specifically tailored to a company’s target audience.
CPG manufacturers have started leveraging data analytics services in recent years to optimize their trade promotions and a report shows that CPG firms spend 20% of their revenue annually on trade promotions. However, it is imperative for CPG leaders to build on technological momentum and analytics capabilities to drive trade promotions effectively.
Listed below are a few ways CPG companies can fix trade promotions with analytics:
CPGs must create an analysis framework with crucial KPIs to generate uniform evaluations for every promotion. Making a central repository for all promotions ought to be the first step in the planning process for promotions.
Companies must link the data on forecasts against actuals, integrate plan data with customer and category teams, and align the data with operational and financial planning in order to achieve best practices.
Today’s CPG companies frequently only receive sell-in information from retailers, lacking clear knowledge of customer response to promotions (sell-out information) or whether retailers are only employing those promotions for their own benefit (forward buying).
In order to build strong arguments for following negotiations, it is crucial to consider how retailers evaluate these promotions. The ideal situation is to organize promotions on a partnership basis that proves mutually beneficial to both parties. This is the only strategy that creates value for both retailers and CPG firms.
It is crucial for promotion management teams to break down organizational silos and create a virtual data-driven center that unifies all trade promotion-related operations because multiple departments are frequently involved (planning, tracking, execution).
They will be better able to define governance and accountability for this process and align incentive schemes if they build up effective processes, support profitability tracking and analysis, and involve all relevant stakeholders, including marketing, sales, and revenue management. This organizational structure should ultimately develop an end-to-end perspective on promotion management and assist in guiding strategic and tactical decisions on promotions.
The foundation will be laid for the analysis and optimization of trade promotion by aligning and standardizing master data structures. Companies can achieve a consistent and aggregated view of customers, product portfolios, and trade spending at the global level when steering structures are coordinated across regions, countries, and business units.
By using advanced analytics and making predictions about the future based on historical data, we can increase the effectiveness of trade promotions. Implementing predictive projections of baseline sales and promotional boosts resulting from the discount depth and promo features will automate your planning procedures.
Create projections with a variety of inputs by simulating promotion scenarios to identify the “best” promotions. Enable “what if” analysis by modeling multiple scenarios that combine various promotions. Determine the best promotion to pursue based on your strategy and goals, then optimize the design of promotional programs using data-driven insights.
Businesses require the appropriate tools and systems in addition to a robust analytics platform. They could continue to use spreadsheets, of course, but they won’t be able to scale or integrate trade promotion assessments and projections into their everyday business operations.
You can adapt to new technologies by creating a flexible plug-and-play network of applications. You can forecast and optimize each individual promotion by employing methodology and analytics capabilities.
These projections should account for the financial consequences of cannibalization and the net effect of promotions. Lastly, when you adopt cognitive learning and AI, innovations like algorithmic selling can boost the effectiveness of promotions.
Understanding Promotion Spend and ROI
With CPG firms spending more than 10% of their gross revenue on promotional activities, firms are finding ways to enhance their understanding of promotion spending effectiveness and use that understanding in predictive models during promotion planning and execution.
By combining advanced analytics modeling and data visualization techniques, business users can get:
- Valuable insights into cost, profitability, and ROI of promotional programs
- Customer/retailer segmentation based on historical data
- Information on price sensitivity across different dimensions
- Interactive scenario analysis of promotional spending
- Insights provided to adjust the promotional spend by campaigns/segments as per market dynamics
How Data Is a Game-Changer
In conclusion, building skilled teams with a variety of talents is a requirement for CPG companies to efficiently use data. Businesses can get new levels of understanding and insights by combining technological infrastructure with business and advanced analytics.
Sales and growth can be accelerated over the long term. Polestar Solutions leverages data analytics to drive smart decisions, effectively deliver products to the marketplace, and improve ROI.