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Promotion Redux Reprise
Last month, conducted a survey entitled "Promotion Redux" to assess the status of consumer promotion in the United States. While this survey dealt specifically with promotion, many of the responses point to how respondents' companies approach marketing in general.
Chris Hoyt

Complete survey results may be found here.

The results reveal significant and reasonably clear-cut differences in the ways in which CPG manufacturers approach the current marketplace; the pivotal differentiator is the importance that respondents' companies ascribe to the role that retailers can play in helping to achieve overall marketing objectives.

In addition, those companies that have re-engineered their strategies and organizations to craft a fully integrated approach to marketing -- from brand to shelf -- project different attitudes and do things differently than those who don't.

Based on the depth of these differences, the indications are that if integrating retailers into one's overall marketing strategy is best practice, the "hold-outs" should begin to catch up ASAP. This is because, based on the survey results, the process for doing this will require not just an organizational and process re-engineering but -- for some companies -- a major cultural and attitudinal adjustment.

To amplify these points, we have chosen to divide all survey respondents into three classifications: "Maximizers", "Sub-optimizers" and "Chapter 11s." While these classifications may seem harsh, the responses within each group speak for themselves.

Maximizers: The indications are that the companies in this group place equal importance on securing retailer acceptance and understanding how to market to specific retailers' shoppers as they do to achieving brand consumer objectives -- two formerly separate functions which these companies now view as an integrated process. As one respondent put it, "I rarely see consumers at retail but lots of shoppers."

Survey responses reflective of companies that fall into this classification are as follows:

  • 38 percent believe that consumer promotion is the most important and potentially effective tool their companies have to differentiate in the eyes of their key retailers and to help their key retailers differentiate on a non-price basis from their key competitors.
  • 38 percent feel that it is "very important" to secure maximum retailer support on every promotion and routinely customize their promotions to achieve this.
  • 34 percent think that "shopper marketing" has potential and are definitely pursuing it.
  • 31 percent believe that their promotion development people are up-to-date with the objectives, strategies, tactics, shopper profiles and promotion protocols of their key retailers and acknowledge that their management makes this a top priority.
  • 31 percent regularly do post-promotion analyses against pre-defined objectives in order to know how to make the next event better.
  • Only 10 percent are satisfied that their company's current state of readiness to develop promotions that take all factors into account is "excellent" -- defined as "we're on top of it" -- suggesting a continual, healthy dissatisfaction with the status quo.

One respondent summed up the attitudes indicated by these "Maximizers" as follows: "We have always carried unified brand messages in all of our promotions since before 1999 and we always benchmark ROI." And from another, when referring to working with top accounts: "All twenty . . . that's what we do . . . and we're the best at it!"

Sub-optimizers: Survey responses suggest that the companies in this group may be characterized by a growing awareness of the importance of retail but are attempting to respond to this by continually band-aiding an organizational structure and approach that the marketplace is gradually but progressively outgrowing. Indicative responses:

  • 46 percent note: "We try to blend both brand and retailer objectives into every promotion on a general basis but leave it up to the Customer Marketing and /or Sales Department to tailor the promotion to our top retailers' needs and priorities."
  • 49 percent believe that their promotion development people know "just enough to get along" with respect to their key retailers and acknowledge that what they do know "is the result of our own initiative and unofficial Sales Department input" because "this requirement does not come from the top."
  • 42 percent characterize their state of readiness to develop and execute promotions that take all factors into account as "average" noting, "We've got the brand and consumer covered but need work in understanding retail and shoppers."
  • 38 percent acknowledge that the principal impediment to maximizing the potential of consumer promotion in their companies over the next five years is "budget constraints" while another 34 percent attribute this to a "siloed approach."

With regard to silos, one respondent noted that as far as taking retail considerations into account when planning promotions, "For me in the promotion industry, it is very important but for areas such as brand management and advertising, it unfortunately remains completely irrelevant."

Chapter 11s: These companies are defined as those that believe that "marketing stops at the door of the store" and who find it unnecessary to make any changes in the way they have approached the marketplace since the 1970's. Characteristic of these responses:

  • 16 percent believe that being well versed in the objectives, strategies and promotion protocols, etc., of their key retailers is not the responsibility of their promotion development people but should be handled by either their Sales Department or agency. With respect to this, one agency executive noted, "We are often briefed on promotions with very little thought put into briefs -- I think this reflects the lack of excitement the client has towards this activity vs. going on a TV commercial shoot!"
  • 12 percent believe that taking retail considerations into account when planning promotions is either "unimportant" or "not important at all." Specifically, these latter respondents disagree with the premise that understanding retailers and their shoppers in important on the face of it.

So what does one do with this information if one's company is not already in the "Maximizer" classification? We have a few suggestions for those of you who may be chomping at the bit and may be striving to bring about change within your own companies. Specifically:

  • Accept the fact that the marketplace has permanently changed. If you already believe this, get your top management on board ASAP because, in our judgment, most of the difficulties CPG companies are experiencing today stem from top management's denial or ignorance of new realities.
  • Re-engineer your organization and processes to align with these changes. As many companies are starting to find out, more band-aids only prolong the inevitable. As IBM Consulting put it in a recent comprehensive analysis on this subject entitled, "The Strategic Agenda for Consumer Products Customer Management" (December, 2004): "Consumer products companies cannot continue to do business as usual or else they will find themselves struggling to sustain growth and profitability."
  • Agree on newly revised definitions of the elements that should comprise "consumer promotion" vs. "trade promotion" vs. "consumer advertising" and ensure a sufficient number of buckets to accommodate every activity that could even remotely occur under each classification.
  • Along with this, zero-base budget all future allocations. This forces the discipline of excavating new and different opportunities on an annual basis and enables one to sidestep assumptions that may no longer be applicable and to avoid the trap of "sub-optimization."
  • Measure the results of all account-specific events -- both trade and consumer. Otherwise, one will never be able to build a case for proper allocations between the two.

Meeting objectives and not motivated to change? This is exactly where supermarkets were 10 years ago when Wal-Mart decided to enter the grocery business. For details, talk to Winn-Dixie or Albertsons.

Christopher W. Hoyt is President of Hoyt & Company LLC, a packaged goods training and consulting organization based in Scottsdale, AZ.