Promotion Analysis with Predicative Analytics Workshop
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The document discusses the findings and strategies presented during the 2017 AFS User Conference on promoting products using predictive analytics. It highlights the challenges faced in a growth-limited market, where traditional promotional approaches are struggling, and emphasizes the need for a more data-driven and responsive promotional framework. The analysis provides insights into promotional effectiveness across different retailers and suggests a collaborative approach for manufacturers and retailers to enhance their promotional strategies.
Promotion Analysis with Predicative Analytics Workshop
- 1. Promotion Analysis with Predicative Analytics Workshop 2017 AFS USER CONFERENCE “Practical Analytics for Everyday Decision Making”
- 2. ©2017 AFSTechnologies, Inc.,Confidential Information Mike Bruening Vice President Analytics at Genpact 11 Years at Nabisco in Field and HQ Sales Price and Promotion Analytics at IRI, IBM, Nielsen Founding Board member at Promotion Optimization Institute SPEAKER
- 3. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 3 LIVING IN A GROWTH-CHALLENGED ENVIRONMENT Sources: Nielsen Strategic Planner & Nielsen Convenience Planner, Total U.S. – All Outlets Combined (plus Convenience), 52 W/E 12/25/10 (% change vs. year ago); Nielsen Answers, Total U.S. – All Outlets Combined (plus Convenience), 52 W/E 12/31/11, 12/29/12, 12/28/13, 12/27/14, and YTD 21 W/E 05/23/15 (% change vs. year ago); US DOLLAR SALES FLAT OR DECLINING 45% of categories are representing 40% of total revenue ($’s) US UNIT SALES -0.1 -0.2
- 4. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 4 TRADITIONAL APPROACHES ARE FALLING SHORT Source: Nielsen Promotion Benchmark Analysis: 2013 Q1 - 2015 Q4, Nielsen Scantrack: xAOC 2013 vs. 2010 MORE FREQUENT PROMOTIONS, BUT TRADE EFFICIENCY IS ERODING ADDING ITEMS TO THE SHELF ISN’T WORKING EXISTING ITEMS ($17.4B) $18.7BNEW ITEMS $ 1.3BNET GAIN
- 5. 5 Sales Volume $ THE RESULT IS INCREASED PRESSURE AROUND TRADE SPEND Regular Price • Own • Own vs. Competitors Trade Activity (Own and Competitors) • Features • Displays • Price Reductions $ Seasonality, Store Effects, Others
- 6. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 6 EDLP Divert trade investment away from promotions to keep base price low on an everyday basis Options Ability to leverage both base and promotion, depending on objectives and retailer’s category strategy High-Shallow Reduce depth of promotional discounts or increase everyday price to recapture margin and drive additional GP High-Low Invest in promotion to drive volume and protect share by increasing base price to fund additional promotion depth/frequency PROMOTED PRICING STRATEGY Decision Framework for Price Changes & Promotional Discounts Low HighPromotional Price Elasticity/Intensity Low High BasePriceElasticity
- 7. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 7 BOGOS AND PRICE MULTIPLES HAVE TO BE CAREFULLY EVALUATED -8.8% -16.6% 9.7% -7.4% -27.8% 0.0% -6.6% -4.8% -8.2% -7.8% 3.1% -2.6% 0.0% 6.1% 0.0% -17.1% -1.3% 0.0% 1.6% 1.9% Goya Kidney 15-20oz Goya Garbanzo 15- 20oz Goya Garbanzo 20- 31oz Goya Pinto 15-20oz Goya Pinto 20-31oz Goya Southern Peas 15-20oz Goya Black 15-20oz Goya Black 20-31oz Goya Primary Beans 15- 20oz Goya Premium Beans 15- 20oz 3-For Multiplier 4-For or Higher Multiplier Price vs. Single Communicated Price Point AvoidRun
- 8. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 8 31 25 36 82 77 75 60 48 60 125 92 SEGMENT 1 SEGMENT 2 SEGMENT 3 TPR Only Display Feature F&D Total Weeks 11.9 13.9 11.7 TPR Only 9.1 9.8 10.5 Display & TPR 0.7 1.2 0.8 Feature & TPR 1.8 2.6 0.4 F&D & TPR 0.4 0.4 0.0 Ave. Weekly Base Units 11,121,500 1,827,274 926,099 Base Support Weeks (L52 Weeks) Comparison of Brand X at an 15% Promoted Price Discount Feature outperforms Display in both lift and cost to run. UNDERSTANDING WHAT TRADE SPEND DRIVES THE MOST VOLUME
- 9. 9 WHAT ACCOUNTS ARE MOST RESPONSIVE? 30 24 29 33 23 32 25 35 39 37 33 31 31 23 21 28 33 21 21 24 20 40 45 40 35 28 54 45 57 66 43 53 49 55 79 82 72 66 59 0 20 40 60 80 100 120 AHOLD ALB/SFYSHAWS ALB/SFYTOTAL BIGY DEMOULAS FREDMEYER HANNAFORD KROGER MEIJER PRICECHOPPER SHOPRITE WEGMANS WINCO TPR Lift Additional Feature Lift Promotional Lifts @ 15% Discount – Brand X Segment 1 Total Weeks 21.5 35.1 16.4 32.8 16.2 6.7 3.1 10.2 12.4 11.1 11.0 2.5 10.7 TPR Only 15.6 6.9 12.2 23.0 7.6 5.7 2.3 9.9 12.3 3.7 9.5 0.8 6.6 Ad Only 3.99 14.36 2.77 7.47 4.67 1.00 0.00 0.31 0.00 4.72 1.27 0.00 0.00 Base Support Weeks (L52 Weeks) Shift promotional funds to highly responsive accounts
- 10. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 10 PROMOTION RESPONSE VARIES DRAMATICALLY BY RETAILER 0 20 40 60 80 100 120 140 160 180 200 PROMOTIONAL LIFT / CLASS OF TRADE / BY RETAILER – 15% DISCOUNT TPR Lift Display Lift Feature Lift F&D Lift
- 11. Copyright©2015TheNielsenCompany.Confidentialandproprietary. 11 PROMOTION ANALYTICS CAN TELL YOU ALSO WHAT’S IN THE PROMOTIONAL SALES BUMP Current Paradigm Purchase Behaviors Store Switch Brand Switch Non – Promoted Volume Subsidized Volume Incremental Volume Non – Promoted Volume Subsidized Volume Time Switch Market Expansion New Paradigm
- 12. ©2017 AFSTechnologies, Inc.,Confidential Information BRAND X TOTAL US - ALL CHANNEL - ANY PROMOTION 21% 38% 13% 27% PROMOTIONAL IMPACT FRAMEWORK Retailer Growth Subsidization Manufacturer Growth Mutual Growth Manufacturer Benefit RetailerBenefit HIGHLOW LOWHIGH Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models
- 13. ©2017 AFSTechnologies, Inc.,Confidential Information BRAND X TOTAL US - ALL CHANNEL – FEATURE AND DISPLAY Manufacturer Benefit RetailerBenefit HIGHLOW LOWHIGH 16% 45% 8% 29% PROMOTIONAL IMPACT FRAMEWORK Retailer Growth Subsidization Manufacturer Growth Mutual Growth Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models
- 14. ©2017 AFSTechnologies, Inc.,Confidential Information Manufacturer Benefit RetailerBenefit HIGHLOW LOWHIGH BRAND X TOTAL US - ALL CHANNEL – FEATURE ONLY 10% 40% 15% 35% PROMOTIONAL IMPACT FRAMEWORK Retailer Growth Subsidization Manufacturer Growth Mutual Growth Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models
- 15. ©2017 AFSTechnologies, Inc.,Confidential Information Manufacturer Benefit RetailerBenefit HIGHLOW LOWHIGH BRAND X TOTAL US - ALL CHANNEL – DISPLAY ONLY 35% 25% 22% 17% PROMOTIONAL IMPACT FRAMEWORK Retailer Growth Subsidization Manufacturer Growth Mutual Growth Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models
- 16. ©2017 AFSTechnologies, Inc.,Confidential Information Manufacturer Benefit RetailerBenefit HIGHLOW LOWHIGH BRAND X TOTAL US - ALL CHANNEL – TPR ONLY 27% 28% 25% 20% PROMOTIONAL IMPACT FRAMEWORK Retailer Growth Subsidization Manufacturer Growth Mutual Growth Note: 30 category average 2013 Source: Nielsen Promotional Source of Volume Models
- 17. ©2017 AFSTechnologies, Inc.,Confidential Information BUILDING ANALYTICS IN TO PLANNING The output of the Live Simulator session will be a series of validated planning scenarios and a winning scenario that optimizes performance against key KPIs
- 18. ©2017 AFSTechnologies, Inc.,Confidential Information CREATE WIN/WIN SCENARIOS Detailed output will be created for each potential plan to determine the best strategy Descriptive Information - Account Planned - Date Planned - Attendees - Current Account Tactics - Recommended Change - Optimized Account Tactics Financial Implications (Manufacturer) - Mfg Gross Revenue - Mfg Profit Dollars - Mfg Margin - Trade Rate Financial Implications (Retailer) - Retail Sales Dollars - Retail Profit Dollars - Retailer Margin Winning Scenario Summary Tab
- 19. ©2017 AFSTechnologies, Inc.,Confidential Information THANK YOU! Q & A Next Session: TOPGOLF ACTIVITY – Transportation 6:15 pm
Editor's Notes
- #4: We’re living in a growth challenged environment; CPG sales are flat with almost half of the categories across the store declining. Growth is coming from price – industry is taking price overall – how long is that sustainable? How long are consumers going to stand for increased prices relative to other options that are out there? Especially amongst branded products?
- #5: Two traditional drivers of growth, Innovation and Promotion are proving ineffective. Innovation: while new items have generated nearly $19B in sales, the items they’re replacing on-shelf have eroded nearly all of those sales gains. Net result – industry can talk about growth from innovation but can’t just look at it in isolation potential drivers – innovation might not be unique, differentiated or fit consumer needs Maybe just be line extensions that show up as innovation Assortment on how they are executing on shelf Promotion: promotion dollars continue to increase while the effectiveness of those promotions continues to decline. This is not sustainable.
- #6: Lack of upside growth has put increased on pressure to optimize cost areas particularly trade given the size of the spend and the need to drive incremental sales
- #7: Before digging into the specific trade drivers lets review the promoted pricing strategy frameworks using analytics Looking at price elasticity for both everyday price and promoted can help to create a pricing strategy for a brand and channel Often times pricing policy is based on historical patterns or retail policy but that can often be suboptimal from that brands price elasticities.
- #8: Another area around price points that can be looked at analytically is the use of BOGOs and price multiples. For many firms price multplies are a key part of their promotional strategy but in many cases they can actually hurt sales vs communicating the single price point to the consumer.
- #9: Once Pricing strategy is established. You can look at what promotional vehicles drive the most volume.
- #10: Promotional response can vary dramatically by retailer, so the one trade plan for all accounts is not an optimal plan. Creating a more prescriptive plan based on the analytic findings can drive increased sales for the same or less spend.
- #12: Analytics also can tell what is happening in the bump, Not everything within the bump is good for you and the retailer