PROMOTION OPTIMIZATION
Supported by CatMan® Solution
Table of contents
Table of Contents Introduction............................................................................................................................................................. 6 Concepts in CatMan Solution............................................................................................................................ 7 Working guidelines................................................................................................................................................ 8 1.0 Best Practice - Which of my promotions has performed best? .................................................10 2.0 What are the promotion key drivers to success?............................................................................19 3.0 D o we have regional and/or local performance differences and growth opportunities? .............................................................................................22 4.0 How is our promotion pressure developing? ..................................................................................24 5.0 How have our promotion investments developed? ......................................................................30 6.0 D o we have a promotion sales potential? If yes, on which brands, retailers and banners?..............................................................................33 7.0 Forecasting year end result using POS data .....................................................................................35 8.0 Data validity is crucial ...............................................................................................................................37 Appendix ................................................................................................................................................................39
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Introduction
Introduction
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CatManÂŽSolution is designed to handle vast amounts of complex data sets from many different data sources. Our mission is to transform data into knowledge, which can be used efficiently and business oriented at all levels of a company.
Introduction
Introduction Continuously optimizing your promotion strategies and tactics using CatMan®Solution Promo V2 reports. Together with our customers, we have developed a unique promotion module in CatMan®Solution.
When opening your solution, you can access a restricted user area with a total promotion setup. The setup is designed to help you and your promotion responsible, Key Account managers, Marketing managers or Sales managers etc., optimizing your promotion efforts from a business perspective focusing on: 1. Improving your promotion investments:
• Creating the platform for better and more effective promotion strategies and tactics.
• Analyze and understand best practice promotions in “real time” with no delay.
• Creating true promotion profitability based on both ERP data and EPOS-data.
• Continuously improve promotion effectiveness and profitability
2. Tracking your promotion effectiveness:
• Using promotion planning and POS-data to estimate year end results.
• Forecasting year end results - Where are your business headed customer by customer, brand by brand?
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Introduction
Concepts in CatMan Solution Promotion management is a decisive and natural part of the business development concepts in CatMan Solution.
Business Performance
Business Development
Tracking and analyze your on-going business
Analyze key parameters creating actionable
performance throughout the total value chain.
best practice and understand the effect of
Improved performance
your execution.
Performance Management Status and ranking of results Development, benchmarking and potentials Better and more accurate prioritization
Promotion Management Effectiveness, uplift and baseline analyzes Promotion profitability.
of key resources.
Business profitability
Innovation Efficiency
Wholesaler profitability.
Improving the innovation process
Customer, banner and product profitability.
and new product introductions. StoreEvent and Store Pictures.
Price Optimization Price analyzes Price elasticity
Media effectiveness Media data, TRP analyses, Facebook Leaflet.
On Shelves Availability Estimating the lost value of out of stock
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Introduction
Working guidelines Working with the promo V2 module and the promo reports. Over the next pages, we will give you top guidelines on how to work with and use the promo V2 module.
The Promo Report module consist of three reports groups and six reports designed to make the reports easy and effective to work with. The setup is created for several users and interest groups within your organization to use the same database without jeopardizing tracking of key performance indicators. When using the reports, making analyzes and your strategical or tactical conclusions, it is crucial that there is a company consensus of how to prioritize the promotion results. How are you going to evaluate your promotion results focusing on? 1. Increased volume in units or volume lift in units? 2. Increased sales value or sales value lift? 3. Promotion profitability? 4. Split between your company result and the customer/retailer promotion result? When there is an agreement and consensus in the company of how to measure promotion success, we can move on by using the different promotion reports to analyze and answer seven key questions related to promotion optimization and development. 1. Best practice. Which of your promotion has performed best related to:? Increase in volume, units, units lift, sales value, sales value lift, profitability and ROI? 2. What are the promotion key drivers to success? Evaluating promotion types, prices levels and promotion mechanics. 3. Do we have regional and/or local performance differences and growth opportunities? Evaluating brands, banners and channels
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Introduction
4. Promotion pressure How is our promotion pressure developing? How has our promotion share developed? Do we have a fair share of promotions? 5. How have our promotion investments developed? Relative compared to sales, by brand, by retailer, by banner, by region. 6. Do we have a promotion sales potential, if yes, on which brands, retailers and banners? 7. How do we use our promotion planning and POS-data to estimate year end results? Answering the key questions, could and should be related to your area of main interest, responsibilities and the level of analyzes you are looking for. Area of main interest Management
Key Account Manager
Marketing
Field Sales
Level of analyzes Retailer Chain/Banner Main Brand/Brand/SKU’s Region/Municipality Sales Reps Individual stores/POS Analyzes of the key questions i.e. “which of my promotions has performed best?� by using the six different reports in various ways, will give you a better and stronger decision, when it comes to planning promotion strategies and tactics. Be aware that the reports are designed to be used by: 1. Management focusing on:
a.
Total wholesaler results and performance
b.
Category and brand performances
2. Marketing and Brand manager
a.
Category and brand performance
b.
Regional and local results and performance
3. Key Account manager focusing on:
a.
Total wholesaler results and performance
b.
Channel results and performance
c.
Chain/Banner results and performance
d.
Category and brand performance
4. Field Sales manager
a.
Chain/Banner results and performance
b.
Category and brand performance
c.
Regional and local results and performance
d.
Results and performance sales rep by sales rep
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1.0 Best Practice - Which of my promotions has performed best?
1.0 Best Practice - Which of my promotions has performed best?
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1.0 Best Practice - Which of my promotions has performed best?
1.0 Best Practice - Which of my promotions has performed best? Key Question 1 To answer that question, we could use the Promotion Ranking report. The Promotion Ranking report is built to be both easy to work with, flexible and somewhat complicated until you get acquainted with how it works.
Above, we have been analyzing Christmas promotions from week 47 to week 52. In this case the objectives related to Christmas promotions was: 1. Maximize volume – Units sales 2. Minimize promotion investments Results, best performing promotion: The chain Netto - Main Brand – Units sales 415.288 units Unit sales lift 255.817 units = Lift factor 2,6 Price reduction marginal Sales value to Netto + DKK 2.967.286 in additional turnover The Promo Ranking report is very effective to work with, to make sure that you have the full understanding of all the build in possibilities, we can only recommend that you spent a couple of hours assessing all the opportunities, related to your responsibility, needs and working area. Below you have a brief introduction to the report functionalities. When opening the report, you will get a set of default parameters, which you can easily edit to suit your specific needs for analyzes.
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1.0 Best Practice - Which of my promotions has performed best?
1. Choose the period you want to analyze. 2. Decide which retailers and/or chains you want to appear in the report. 3. Select promotion type, state and position. 4. Decide category and/or brand to analyze. 5. Select the number of baseline weeks to use, when calculating promotion lift. Be aware that the longer baseline period you choose, the more accurate your baseline calculation will be. 6. Using “Show Column Sets” is an easy way to design you “own” report. POS-sales and lift will always be shown as the first 11 columns. When you want to expand the report, you just click on the variable you want to look at besides POS-sales and lift and the columns will appear in the report.
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1.0 Best Practice - Which of my promotions has performed best?
Let us look at the Chain Bilka and the row Avis (meaning promotion leaflet in English).
We have had 11 Avis activities with an average price reduction of 41,0%, leading to a promotion sales of 82.346 units equals to a sales lift of 75.341units - a lift factor of 11,8 times the expected baseline unit sales.
If we open the Avis promotion in Bilka, we get an overview of each individual promotion and how they contribute to the overall result of Avis promotions in Bilka.
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1.0 Best Practice - Which of my promotions has performed best?
As a first indication, we can use the red, green and yellow marks calculated on the promotion lift factor. In this case, we have six promotions with a lift factor above three, and two red promotions with a lift factor less than one, meaning that we have lost relative sales during the promotion period (the white promotions indicate that those promotions have been run on specific promo SKU’s that are not sold regularly). Promotion 36641 has a relative high promotion sale in units and a unit lift factor on 23 and a value lift factor of 40. If we click on the specific promotion, we get down to store level and we get a picture of variance in store effectiveness.
In the case above, we have 12 stores performing below average sales lift and six performing above. And a potential in promo sales units on 7.399. The potential promo sales units is calculated based on the average lift factor on 23, meaning that every store below a lift of 23 has a potential.
Example: How to calculate the potential promo sales units and potential promo sales value for an individual store: We have six stores, three stores with a lift factor above average of 5,3 and three store with a lift factor below.
The three stores with a promotion lift factor below average, have a unit and a promotion sales value factor, related to the assumption that they could have had at least an average lift factor of 5,3.
Calculating potential in “Butik A” (Baseline sales units 200) X (average lift sales units 5,3) – (the actual promotion sales in units 664) = A potential promo sale in units of 406 units. If “Butik A” have had a lift factor of 5,3 we would have had a total promo sale in units of 1060 units.In the same report, you can get a graphical view, looking at either promo baseline sales related to lift factor in units.
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1.0 Best Practice - Which of my promotions has performed best?
Or our total sales value in the chosen baseline period related to the promo lift unit factor.
To analyze the promotion at an even deeper level to understand potential and possibilities for future promotions, you can click on the Promo Sales Details (Single Promo) link and get to the individual store level.
In this case, the Promo Sales Details report is by default setup to open segmenting on the “Bilka Stores� into sales rep areas.
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1.0 Best Practice - Which of my promotions has performed best?
In the report, we notice that Bilka Hjørring have maybe been out of stock for six promotion days out of seven promotion days, impacting the sales result significantly. The parameter setting allows you to design the report you need.
In the report on the next page, we would especially attract your attention to the Select Level filter.
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1.0 Best Practice - Which of my promotions has performed best?
The settings chosen in this case, will give you an analyzes based on Sales Reps, the store they are responsible for and the promotion products sold in each store during the promotion period day by day. If we change the Select Level filters to Commercial Region, Store and Product we will get another relevant promotion analyzes focusing on regional issues and opportunities product by product, spilt by individual store. The red dots, in the report, are promotion days without any promotion sales in the store.
Below you can see a report displaying the differences.
The Select Level 1, 2 and 3 each has five different variables allowing you to create 243 analyzes. As mentioned in the beginning, it depends on your objectives and you can access the Promo Ranking reports in different ways, using the “Show Column Sets�.
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1.0 Best Practice - Which of my promotions has performed best?
Below you see examples of the Promo Ranking report on two different parameters settings in Show Column Sets. The first report shows: • POS Sales and Lift (first 11 columns) • Supplier Profitability (next 4 columns)
The second report shows: • POS Sales and Lift (first 11 columns) • Retailer Sales Value and profit (next 6 columns)
The Standard Promotion P&L The 4 supplier profitability columns are defined as: Own net profit: (Net selling price * Unit sold (POS data)) – ((Cost of goods * Units Sold) + (Unit discount + Subsider)) Own net profit pct.: Own net profit / own net sales * 100 Profit on sales lift: (Unit sales lift * Supplier Gross Profit) - (Unit Discount + Subsider) ROI% on Unit Discount + Subsider (fixed promotion allowance): (Profit on sales lift) / (Unit Discount + Subsider) See Appendix for a simplified “total” overview of the key figures being used in the CatMan Promo module.
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2.0 What are the promotion key drivers to success?
2.0 What are the promotion key drivers to success?
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2.0 What are the promotion key drivers to success?
2.0 What are the promotion key drivers to success? Evaluating promotion types, price levels and promotion mechanics.
Key Question 2 Working with Promotion V2 in CatManÂŽSolution, gives you a unique opportunity to start analyzing and understanding promotion key drivers in an effective way. You can work with several promotion driver variables such as price levels, periods, types of promotions, single and multi-pricing, promotion position etc. To utilize the opportunity, you need to be aware of the following: 1. Define a series of unique types of promotions related to your categories, which could be repeated such as:
a.
In-store activity
b.
Leaflet
c.
Leaflet + social media campaign and/or television
2. Define a series of promotion positions (promotion mechanics) related to your categories, which could be repeated such as:
a.
Soft price, Normal promotion price, Hard price
b.
Single pack promotion, multi pack promotion
c.
High season (pay day etc.), Low season (midmonth etc.)
Having clearly defined and agreed on promotion types and mechanics related to your business, will allow you and the organization to build up a strong platform of knowledge, when it comes to optimizing future promotion strategies and tactics. On the next page, you can see how the parameters is displayed when you run a report
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2.0 What are the promotion key drivers to success?
When you want to utilize the opportunities to evaluate promotion key drives using CatManÂŽSolution, we recommend you to have a workshop with a CatMan consultant to discuss the most effective approach for you and your company.
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3.0 Do we have regional and/or local performance differences and growth opportunities?
3.0 Do we have regional and/or local performance differences and growth opportunities?
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3.0 Do we have regional and/or local performance differences and growth opportunities?
3.0 D o we have regional and/or local performance differences and growth opportunities? Evaluating brands, banners and channels.
Key Question 3 To answer key question 3 and to come up with relevant and actionable conclusions, we recommend to use: 1. The Promo Development report and click on Promotion Evaluation by Store focusing on:
a.
Store performance, below and above average
b.
Regions and municipalities
c.
Sales reps
2. The Promo Development report and click on Promotion Evaluation by Store focusing on:
a.
Promotion potential
3. The Promo Development report and click on Promo Sales Detail (Single Promo) focusing on issues and opportunities:
a.
Promotion sales issues, zero sales days by store
b.
Regional split compared to local potential
Below you see an example of Promo Evaluation by Store focusing on store performance.
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4.0 How is our promotion pressure developing?
4.0 How is our promotion pressure developing?
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4.0 How is our promotion pressure developing?
4.0 How is our promotion pressure developing? How is our promotion pressure developing? How has our promotion share developed? Do we have a fair share of promotions?
Key Question 4 To answer key question 4 and to come up with relevant and actionable conclusions, we recommend to use: 1. The Promo Counter report focusing on:
a.
Channels, Wholesales, Chains, Types and Promotion Position
Below you see an example of the Promo Counter report. Evaluating change in promotion pressure from q4 2015 to q4 2016 split by channels, wholesales chains and type of activities.
The report is very flexible to use, allowing you to filter the parameters in four different level.
With the parameter settings, product managers and marketing gets a good and effective overview on executed and planned pressure by category and brand.
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4.0 Promotion pressure
2. The Promo Calendar focus on:
a.
Getting an overview over the near past and the coming month.
b.
Understanding where we might have some planning failures in the coming month.
c.
Evaluate the running differences between level of planned and executed promotions by chain.
Below you see an example of the Promo Calendar report. Evaluating the overall promotion plan for one main brand and two products for the first half of 2017
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4.0 Promotion pressure
The parameters and the filter opportunities makes the report very flexible and effective to use.
With the parameter setting, product managers and marketing gets a good and effective overview on executed and planned pressure by category and brand.
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4.0 Promotion pressure
If you are integrating leaflet data in your CatMan®Solution, you will have a direct link from your Development report to Leaflet data and the “leaflet” related to your promotion.
Giving you an easy access to evaluate the general promotion pressure for the chosen week
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4.0 Promotion pressure
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5.0 How have our promotion investments developed?
5.0 How have our promotion investments developed?
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5.0 How have our promotion investments developed?
5.0 How have our promotion investments developed? Compare sales and investments, by brand, by retailer, by banner and by region.
Key Question 5 To answer key question 5 and to come up with relevant and actionable conclusions, we recommend to use: 1. Promo Ranking report
a.
Focusing on POS Sales and Lift combined with Supplier Sales Value and Profit
The report could be run covering specific relevant periods evaluation of the total investment for the period or comparing periods by running two reports covering comparable periods. Below we are comparing 4 quarter investments of 2015 to 4 quarter investments of 2016, focusing on wholesaler, channels and chains for a specific category and brand.
When you want to compare own results with the retailer results, you can run a Promo Ranking report selecting Show Column Sets as:
Doing that, you get the “full promotion P&L� for both your business and the retailer business.
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5.0 How have our promotion investments developed?
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6.0 Do we have a promotion sales potential? If yes, on which brands, retailers and banners?
6.0 Do we have a promotion sales potential? If yes, on which brands, retailers and banners?
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6.0 Do we have a promotion sales potential? If yes, on which brands, retailers and banners?
6.0 D o we have a promotion sales potential? If yes, on which brands, retailers and banners? Key Question 6 To answer key question 6 and to come up with relevant and actionable conclusions, we recommend to use: 1. Promo Evaluation by Store
a.
Focusing on potential Promo Sales unit
Calculating the potential sales when moving stores with a promotions sales lift below average up to average, promotion by promotion. Example: How to calculate the potential promo sales unit and potential promo sales value for an individual store:
We have six stores, three stores with a lift factor above average of 5,3 and three stores with a lift factor below. The three stores with a promotion lift factor below average, have a unit and a promotion sales value factor related to the assumption that they could have had at least an average lift factor of 5,3.
Calculating potential in “Butik A� (Baseline sales units 200) X (average lift sales units 5,3) – (the actual promotion sales in units 664) = A potential promotion sale in units of 406 units. On the right you have a simplified graph visualizing the value.
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7.0 Forecasting year end result using POS data
7.0 Forecasting year end result using POS data
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7.0 Forecasting year end result using POS data
7. Forecasting year end result using POS data Get indication on planned year end result, chain by chain and brand by brand.
Key Question 7 To answer key question 7 using POS data, we would recommend to use the brand sales and price development report. Below we have the following case: 1. Sales year to date is DKK 125.954 giving an index of 69,1. 2. Promotion share year to date is 0% indicating, why we have a relative low sales value index. 3. For the rest of 2017 with a promotion sales share of 19,6% of turnover, we could expect a total sales value index in Føtex of 95,3. 4. Comparing the planned promotion and the result indicates that we will get serious sales issues in Føtex, depending on the planned budget.
When you want to use the opportunities to work with the Brand Sales and Price Development report to estimate annual sales results based on promotion plans and POS data, contact your CatMan consultant to discuss the most effective approach for you and your company.
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8.0 Data validity is crucial
8.0 Data validity is crucial
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8.0 Data validity is crucial
8.0 Data validity is crucial Working with promotion data, requires clear definitions and consensus among the involved, to be able to get relevant and actionable output. We believe that everybody agrees to that fact. BUT in reality, we very often experience data slack and inconsistency, which makes it impossible to use and work with the data. There is an old saying “shit in = shit out”. It could not be more right, when it comes to promotion data. In CatMan®Solution, we have implemented a “FIRE WALL” to help our users avoid uploading of inconsistent data into the promo module. Below you find a list of data, which must be correct to be uploaded, when it comes to the promotion standard module:
•
Customer name
•
Campaign id
•
Promotion status
•
Promotion start date and finishing date
•
Promotion type
•
Product name and EAN code
In addition to above data requirements, we will need the data below, when it comes to the promotion advanced module:
•
Customer invoicing price
•
Cost of goods
•
Unit discount
•
Fixed promotion allowance/subsider
Besides the key requirements, we have some optional data, which could be uploaded to expand your analysis capabilities:
•
Promotion position / mechanics
•
Selling data – Expected delivery and after delivery actual delivery
•
Promotion price point
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Appendix
Appendix Below we have the standard promotion P&L (profit and loss statement) key figures in CatMan in a simplified overview, making it easier to assess the calculations of key figures. If you need to familiarize yourselves with the standard promotion P&L mindset, it should be easy to follow the calculation in the table below. The key figures are related to both supplier and retailer analyzes (be aware that several of our customers have different definitions and tailor made calculations in their own solution). POS Unit Sold Baseline sales units Normal sales on days without any promotion activity.
10
Promotion sales units Units sold at POS (Scanned at point of sales) during the promotion period usually varying form one day to several days - typical seven days
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Lift factor sales units (Promotion sales in units/Baseline sales units for a similar selling period)
2
Lift factor sales value (Promotion sales in value/Baseline sales in value for a similar selling period)
1,2
Per Unit
POS Unit Sold
Total
Own list price (Normal invoicing Price)
10
20
200
Own gross sales
Unit discount
1
20
Unit discount (Variable Promotion Investment)
Subsider (fixed allowance
2
40
Subsider (fixed Promotion investment)
Unit discount + Subsider (Total trade allowance)
3
60
Unit discount + Subsider (Total trade allowance)
Retailer net price Own list price - (unit discount + subsider)
7
140
Own net sales based on POS Own list price - (unit discount + subsider per pcs) * Promotion sales units
Our cost (Cost of goods)
2
40
Total cost of goods
Own net profil Retailer Net price- Supplier cost of goods
5
100
Total own net profit (own list price * promotion sales units) - (total unit discount + subsider)
Baseline sales price Retailer selling price
20
200
Baseline sales value Retailer sales value
Avg. Promo sales price Promotion Retailer selling price
12
240
POS sales value ex. vat Retailer Promotion sales value
Retailer gross profit Supplier retailer list price - Promotion retailer selling price
2
40
Total retailer gross profit (Retailer selling price-Normal invoicing price) * Promotion selling units
Retailer net profit Retailer gross profit - (Unit discount + subsider per unit)
5
100
Total retailer net profit Total retailer gross profit + (unit discount + subsider per unit) * Promotion selling units
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Retailer net profit on sales lift Retailer net profit per unit * unit lift
50
Supplier net profit on sales lift Supplier net profit per unit * unit lift
-20%
ROI % on unit discount + subsider (Supplier net profit on sales lift 50 - Total trade allowance 60) /supplier net profit on sales lift 50 * 100
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