Objectifs de La Promotion Communication

PROMOTIONS
Introduction
Promotional spending is increasing...

For most companies:
Promotional spending is larger than Advertising Investment Promotional spending is growing faster than Advertising Investment
This is also the case for a big player in alcohol
In 2003, PR total A&P expenditure will be more than 800 million 20% Media 42% Trade 38% Consumer (e.g. consumer promotions, value added offers, sponsorships, public relations activities etc)
Why is Promotional Spending increasing?

Mature markets: fight for share More price conscious consumers Consumers responding more to promotions Erosion of brand differences Short term management rewards Retailer Power Profit pressure Lack of faith in Advertising Legal Advertising restrictions
On Trade vs Off Trade
By understanding what Promotions can and cannot do, we improve our ability to judge when promotional activity is necessary as part of our overall brand planning.
What promotions can do...

Accelerate product trial
Tastings/Sampling
Establish a purchasing pattern

Money off on next purchase
Increase product consumption

Tasting/Sampling spirits with new mixers
Force distribution
Case bonus for new customers
What promotions cannot do

Promotions are unlikely to build loyalty
when promotion stops brand has to stand on own merits
Cannot reverse persistent sales decline

only gives temporary sales boost
Cannot change non-acceptance of a proposition

promotions are no substitute for lack of consumer appeal
Will not hold distribution for poor selling products

if rate of sale is poor, trade will delist
The Challenge
Big companies are committed to building strong brands Brand Management Challenge:
Build Brand Equity so that that the requirement for promotional activity reduces
Promotional philosophy:
On Trade promotions help build brands Off Trade promotions necessary to be competitive - but beware of over promotion
Promotional Challenge: Improve Effectiveness

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Promotional plans need to...

Fit the brands positioning and personality Be integrated with the brands overall marketing and communication programme Be compatible with the strategic context of the brand
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PROMOTIONS
Off Trade Promotions
Off Trade Promotionsa reminder
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The dangers of over dependence on Off Trade Promotions
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Off Trade Promotions: Unintended Consequences
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Off Trade Promotions: Unintended Consequences
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The dangers from excessive promotional spend..

Consumers see brand as cheap Undermines brand image Result: only purchase on promotion Consumers only buying because of the incentive rather than a reason Excessive promotion can undermine Brand Equity
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But promotions cannot be avoided...

Important and necessary part of your marketing mix
Competitive marketplace Trade expectation To get some extra support (leaflet, endcap,)
But need to use right mechanism And manage activity in order not to hurt the profitability
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Tactical Promotions in the Off Trade

How should you manage the process?
Managing Promotional Activities is a Continuous Process
Evaluate
Evaluation of past Promotional programmes helps plan future Promotional activities... ...good planning helps effective implementation...
Act Plan
...and evaluating the result adds to our learning and helps future planning
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The Process for Improved Performance

Set/Negotiate Objectives Write the Brief Evaluate alternatives Implement Evaluate Results
PLAN
ACT EVALUATE
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1 - PLAN
PLAN IT RIGHT !!
1. Select the right Promotional support 2. Determine the right timing for the Promotion 3. Select the right Promotional mechanism 4. Determine the right promotional quantities / the right promotional pressure
And NEVER FORGET: EASY TO UNDERSTAND and EASY TO EXECUTE !!
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PLAN IT RIGHT !!
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PLAN IT RIGHT !!
Select the right Promotional support
Different type of support can be chosen:
Endcap+leaflet Endcap only Shelf talker TV media in store Consumer Magazine Loyalty card
Sales by Hypermarket (Sales by %ND in Euros) e.g. Chivas
x 1.3
Choice depends on:

What works best in the market Analysis to be done by Category / brand / format
On shelf with standard price On shelf promotions Features + end of Aisles promotions
Source: Nielsen Scantrack promo
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PLAN IT RIGHT !!
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PLAN IT RIGHT !! 2 - Select the right TIMING

The right timing depends on the seasonality of your business
Analyse seasonality by Category / Brand / format
Example: 1Liter format works best during Chinese New Year as Special format
Analyse the promotional activities made by the competitors

Assess promotional pressure of your key competitors Take into account and anticipate competitors pressure in order to tackle this correctly
Promotional pressure by period (especially during peak events such as Chinese new Year) on your key brands vs. competitors Impact on SOM
Take into account the On-Trade activities run in the same time and the possible Media support for greater impact in the market. Source of data: Panel or POS data
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PLAN IT RIGHT !! 3- Select the right Promotional mechanics

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PLAN IT RIGHT !! 3- Select the right Promotional mechanisms

Select the right Promotional mechanisms:
Know what are the most effective mechanisms for the Category and know whether they are being used:
Gift on Pack, price discount, Multi buy, Free glass, Coupon, For the price discount: Assess exactly the appropriate price discount needed
$1 discount, 10% discount, Specific analysis by brand / format: for example Chivas 70cl Price reduction in Promotions $1 vs. JW Black price reduction of $1.50 .
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PLAN IT RIGHT !! 3 - Select the right MECHANICS Know What Works Best
Use Evaluation and Analysis to determine what works best
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Select the right Promotional mechanics:
Know what are the most effective mechanics for the Category and know whether they are being used:
1$ discount, 10% discount, Specific analyse by brand / format: for example Chivas 70cl Price reduction in Promotionis 1$ vs. JW Black price reduction of 1.50 $.
Check whether that fits the brands strategy

Gift on Pack must support the brands positioning / territory and enhance its image No deep price cuts for Premium brands
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PLAN IT RIGHT !!
3 - Select the right MECHANICS: Linking Objectives and Mechanics /Tactics Shopper promotions should be compatible with the overall brand and category strategies in order to maximise the potential revenue, volume and contribution. Need to understand the broad objectives of the brand:
Objective
Penetration Frequency of purchase AWOP (Average weight of purchase) Awareness
Examples
Improve Chivas Regal penetration from 40% to 50% of households Increase frequency of Martell purchase from 3 per year to 6 per year amongst existing brand users To increase the average amount of Wyborowa purchased by increasing the size purchased Drive unprompted awareness of Martell from 40% to 55%
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PLAN IT RIGHT !!
3 - Select the right MECHANICS: Linking Objectives and Mechanics /Tactics
BRAND OBJECTIVES
STRATEGY / TECHNIQUE
PENETRATION NEW USERS 1

RETRIAL
FREQUENCY CONVERSION BUILD REPEAT OF TRYERS PURCHASE 2 1 1 2 1 2
AWOP
IMAGE
INCREASE AWARENESS PANTRY LOADING CONSUMPTION 1 1 2 1 2 1 1 1 1 1 1 2 2 1 2 1 1 1
Sampling Bonus Packs (extra free) Coupons Reactive Promotions Continuity Programs Event Marketing Refunds Special Packs Premiums (free gift) Point of Sale Materials
1 2
1 2
2 2 1
2 2
1 1
1 = Priority Tool
2 = Secondary Tool
Blank = Inappropriate tool
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Link it to the brand life cycle
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PLAN IT RIGHT !!
3 - Select the right MECHANICS according to the Brand life cycle
Make sure your objectives are compatible with the brands lifecycle
Sales
Animations, In store Tastings Display
On-Packs premium Coupons on the next purchase Free extra product Twin packs
Increase regular purchase

Sampling Coupons Price discount
Stimulating Trial Introduction Growth Maturity
Phase Decline or Relaunch
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Link it to the brand life cycle Take into account the RETAILERs OBJECTIVES
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PLAN IT RIGHT !!
3- Select the right Promotional mechanics Agreeing Shopper Promotions & Retailer Objectives
These brand and category objectives then need to be put into the shopper channel and customer context before any activity should be agreed. Retailer Objectives focus on building LOYALTY via:
Driving traffic Increasing frequency of shopping visits Increasing basket spend
Therefore, we need to create a plan that can link both brand (consumer) and channel (shopper) and customer objectives.
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Link it to the brand life cycle Take into account the RETAILERs OBJECTIVES
Building strong promotion themes through the line can make huge differences in Off Take
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PLAN IT RIGHT !! 3 - Select the right MECHANICS

x9,0
x7,0
x4,0 x2,5
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PLAN IT RIGHT !!
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PLAN IT RIGHT !! 4 determine the Right pressure

Have you offered the right numbers of Promotions in your plan?
Calculate the % of your volumes done in Promotion (by brand/format) To be compared with the key competitors
By period Analyse the evolution
Assess impact of the Share of Market

Compare % of Volumes done in Promotion vs. SOM Evolution
If possible: Get the efficiency rate

You can promote a lot/ more than the competitors but if the Promotion is not efficient (in terms of incremental sales), it will not enhance your brand and SOM
Are we spending the right amount?

Too little probably means that we will be at a competitive disadvantage within the off trade Too much can result in undermining longer term Brand Equity
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Analyse the promotional pressure in the Category and by brand (if possible by format)
Hyper Total CHIVAS % volumes under Promotion 18.6% % Hard promotions* Efficiency rate 84% 33% Evol -3.0pts +6pts +5pts Evol -1.0pts +5pts +7pts Supers Evol Total CHINA Evol Supers Evol Total CHINA Evol
Hyper Total Premium+ Whiskies % volumes under Promotion 22.6% % Hard promotions* Efficiency rate 77% 29%
Decrease of the Vol. under Promotion (-3pts at 18.6%) via a better management of the quantities (+5pts of hard promotions at 77%) boosting the efficiency of this format : +7pts at 29% Hyper Total JW BLACK % volumes under Promotion 25.7% % Hard promotions* Efficiency rate 71% 25% Evol -2.0pts +2pts +1pts Supers Evol Total CHINA Evol
*Hard Promotions = Promotions with heavy support: leaflet +/or endcap

Have you offered the right overall Promotional quantity ?? Objective is to cover the needs during the promotional period
Avoid Out of stocks during the Promotion (very detrimental to the business) = Minimum level of supply Avoid overstocking of promotional items
Overcome the pressure of the customer willing to overstock and order much more than the needs Items not sold during the Promotion period (on Endcap) will return to the shelves after the Promotion: this is not efficient (poor visibility of the offer high cost for you)
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2IMPLEMENTATION
Getting the best out of your promotion
Implementation Issues
Where Head Office agreements have not been delivered by a customer:
Calculate the extent of non-implementation and use to negotiate a discount, or an additional concession (e.g. extend length of promotion, extra display space etc.) Consider future prevention
Identifying key learnings and changing company actions for the future are critical to long-term success.
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Create total commitment to the promotion
Get everyone committed Particularly the Sales Force:

Sell the promotion to them so they can sell to the trade
Easy to explain Easy to execute The Sales Force Briefing
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Sales Force Briefing

Brand Situation Trade Channel Situation The Promotion itself - Mechanics Why we need to run it Expected Response Objective Timing Whats in it for the trade Key Selling-In Points Detailed Operational Aspects
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Account Activity Plans

The account activity plans are then drawn from the total company activity plan, and for a specific customer may look like:
Sale Cycles CATEGORY: SPIRITS BRANDS: Ricard Martell Wyborowa Chivas
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Display MONP Press Ad
Price Down
Display MONP
Price Down Loyalty Bonus Card
Multi Buy
Branded Pack
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3 - EVALUATION
Promotional Evaluation
Analytical skills needed to be able to carry out evaluation of key promotional activity.
Evaluations of promotions should occur 4-12 weeks after the event ends. Analysis should begin by reviewing the promotional objective. Collect appropriate available sources of data to ensure analysis is accurate.
The long-term prize is to identify what executions work best for a particular objective, channel and retailer, and the issues that block successful implementation and how to overcome them.
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Promotional Evaluation - Internal Information

This includes:
Ex-factory sales, volume (litres, cases, units), pricing Deliveries to customer: direct or wholesalers / distributors Promotional spending (production, packaging, media, coupons, distribution and redemption, gift, etc.) Trade investment (rebates, shelf space, and display locations)
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Promotional Evaluation - External Information

This includes:
Retail audit (Nielsen and IRI) at category (or at customer) level
Volume (base and incremental measures where available), units, value Share performance Retail selling price Distribution, Out of Stocks
Consumer Panel Data POS data provided by the customers (or via DCI see Carrefour Datasharing) Scanpro Promo (Nieslen and IRI): Efficiency by support / Mechanics Consumer Switching & Shopper behaviour studies
Quantitative and qualitative research interviews / surveys
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Promotional Evaluation - Tangible and Intangible Measures

An analysis should cover both the tangible (hard business building gains) and intangible (softer, hard to quantify gains) results versus objectives set in the proposal: Tangible Measures
1. 2. 3. 4. Incremental sales generated Payback Consumer market share Customer in-store support / implementation 5. Shifts in consumption drivers 6. Retailer value analysis 7. Relative cost effectiveness
Intangible Measures
1. Brand attributes 2. Consumer / shopper attitudes 3. Trade reaction and relationships gains 4. Retail Operations feedback 5. News / PR / impact 6. Internal departmental feedback 7. Supplier feedback 8. Operation distribution impact
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Tangible Measures 1- Incremental Sales Generated

What is Baseline Sales
Pre-activity sales
Sales during Promotions activity
Post-activity sales
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But what is the real Incremental Volume? Its not just the extra volume we will sell over the promotional period But we also need to take into consideration the volume that will be bought forward as a result of the promotional activity
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Incremental Volume Gain due to Promotional Activity
BASELINE SALES A
Sales over Baseline due to Promotional activity
B Sales decline because of Promotional activity (trough)
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Incremental volumes
Volume under Promotion
Standard volume being cannibalized by promo
Volume without promotion
Base line Sales
Efficiency rate : Incremental sales (or volumes) / Sales (or volumes) under promotion
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Tangible Measures 1- Incremental Sales Generated - Example

100cl + 2nd bottle half price
130Kl
Auchan 70cl + Price off 0.5 Carrefour
110Kl
90Kl
70Kl
50Kl
30Kl
10Kl
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-10Kl Volumes without Promo Volume cannibalized by promo
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Incremental volume

This
example assesses promotional sales: vs. equivalent prior period vs. equivalent year ago period vs. baseline period information required is:
Promotion Period (3 weeks) 1/7 - 21/7 96 32 Wk 1 22/7 - 29/7 10 Post Promotion Period Wk 2 30/7 - 6/8 14 18.25 Wk 3 7/8 - 14/8 24 Wk 4 15/8 - 21/8 25
Core
Baseline Period (26 weeks) 1/1 - 30/6 Case Sales Weekly Rate 572 22
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Calculating
Total Incremental Sales including Post-Promotional Cannibalisation vs. Baseline for this Consumer Promotion:
Baseline Period: Average Sales Rate (Average unit sales per week in baseline period) Promotion Period: Sales at Baseline Rate (Length of promotion period x baseline sales rate) Promotion Period: Actual Sales Promotion Period: Gross Incremental Sales (Line #3 minus Line #2) Post-Promotion Period: Sales Moved Forward (Difference between baseline sales rate and actual sales for post-promotion period) Net Incremental Sales: Driven by Promotion Overall (Line #4 minus Line #5) Percentage Increase: Driven by Promotion (full 7 weeks) 22 66 96 30 (15) 15
1 2 3 4 5 6
Actual 7 week sales - 7x weekly base rate 7x weekly base rate
X 100
9.7%
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If you dont get access to external data on your Promotions (from Nielsen or POS data from the customers), use the shipment data / Retailer Sell in data
Total sales in the year Sale in Promotional months (Baseline measures sales without Promotions) Shipments done in August to cover the needs of the Promotion in September
**
*** Trough = Drop in sales following a Promotion corresponding to forward buying
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2-Tangible Measures - Payback

Incremental Volume Gain =
The increase in sales volume over baseline sales during the promotional period Minus any volume lost in the post promotional period due to forward buying during Promotions
Payback =
when the profit generated by the Incremental Volume Gain due
to the promotional activity is greater than the cost of the promotion

BEWARE !! TAKE EVERY COST INTO ACCOUNT TO ASSESS COST OF THE PROMOTION!
Logistic and production extra costs.
Specific handling costs, lower speed and change of production line.
Margin loss Cannibalisation on the standard product Destruction cost of leftovers Costs of displays, catalogues...
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But dont just wait until you have the promotional results to work out your payback You can estimate payback at the planning stage
Using reasonable expectations of forecast performance Using analysis of previous Promotions and what happened
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Tangible Measures 3- Consumer Market Share

Consumer
share should be compared: Vs. equivalent year ago period Vs. equivalent prior period Vs. baseline period
Key question is what impact did this promotion actually have on brand share?
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Tangible Measures 4- Customer Instore Implementation

Quantitative measures should be taken of:
What level of display was achieved? Was feature advertising support delivered? What price point was actually used on-shelf?
Key question is was the agreement with the retailer delivered. If not, what are the key differences?
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Tangible Measures 5- Consumption Drivers

Did the promotion change consumption, purchasing or imagery:
On penetration Frequency Average weight of purchase Core imagery attributes
Key question is what difference did this promotion make to consumers?
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Tangible Measures 6 - Retailer Value Analysis

This looks at measuring the activity from the customer's perspective to identify success in:
Category impact / performance - total consumption, turnover, profit Retailer market share of total category Trend analysis - i.e. adjusted impact of promotion Impact on link categories / segments Service levels and stock turns Average spending Additional handling costs
Key question is can we assess what benefits this brought to our customers?
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Tangible Measures 7- Relative Cost and Effectiveness

Each promotion can now be assessed on the following criteria:
Incremental sales generated Payback Consumer market share Customer in-store support / implementation Shifts in consumption drivers Retailer value analysis
This allows your business to create a comparative database looking at relative cost effectiveness by brand and customer.
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CONCLUSION
A continuous process of evaluation and learning

Make sure every promotion is evaluated after the event Key learnings Future planning Right ProMoTionS = Pressure - Mechanics - Timing - Support
Evaluate
Act Plan
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APPENDIX
CUSTOMER PROMOTION TYPES

Customer:
Possible (yes/no) Preferred (yes/no) Running time (week) Frequency (per year) Costs (DM) Lead time in weeks Promotion type Comments
Feature in prospectus + secondary store placement + price promotion Feature in prospectus + secondary store placement Feature in prospectus + shelf animation (displays) Shelf animation (displays) Personalized animation (tastings) ...
Conclusion 72
CUSTOMER PROMOTION PROCESS

Customer:
General process information
Decision-making
Who makes the decision? (person/team)
Execution
Who is responsible at central level?
Frequency of decision-making/teammeeting?
Who is responsible at store level?
Key decision criteria
Success evaluation criteria
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SEQUENCE OF PR KEY PROMOTION

Plan For Current Calendar Year
Timing Product Promotion type Merchandising / Location
Customer:
Buy-in
Volume MSP(1) Comment(2) Volume
Sell-out
RSP(3) Comment(4)
(1) Manufacturer sales price (3) I.e. volume decision centrally or at store level
(2) Retail sales price (4) I.e. agreement about supplies volume
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Your task: calculate the payback for a promotion where you are offering the consumer a banded pack of two bottles at a discount price which resulted in a 50% increase in sales
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TEAM EXERCICE PAYBACK calculation

We have already calculated the Baseline Sales profit - the profit you would have made if you did not run the promotion All you have to do is fill in the rest of the table: calculate the profit made by the promotion and what the payback is
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TEAM EXERCICE PAYBACK calculation
Many people would think that a 20% price reduction and a 50% volume increase would result in more profit But in this instance, you are $47,000 worse off than if you had not run the promotion So - would you run this promotion?
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Objectifs de La Promotion Communication

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PROMOTIONS

Promotional spending is increasing...

This is also the case for a big player in alcohol

Why is Promotional Spending increasing?

On Trade vs Off Trade

What promotions can do...

Establish a purchasing pattern

Increase product consumption

What promotions cannot do

Cannot reverse persistent sales decline

Cannot change non-acceptance of a proposition

Will not hold distribution for poor selling products

Promotional Challenge: Improve Effectiveness

Promotional plans need to...

Off Trade Promotionsa reminder

The dangers of over dependence on Off Trade Promotions

Off Trade Promotions: Unintended Consequences

Off Trade Promotions: Unintended Consequences

The dangers from excessive promotional spend..

But promotions cannot be avoided...

Tactical Promotions in the Off Trade

Managing Promotional Activities is a Continuous Process

The Process for Improved Performance

Sales by Hypermarket (Sales by %ND in Euros) e.g. Chivas

Choice depends on:

Source: Nielsen Scantrack promo

PLAN IT RIGHT !! 2 - Select the right TIMING

Analyse the promotional activities made by the competitors

PLAN IT RIGHT !! 3- Select the right Promotional mechanics

PLAN IT RIGHT !! 3- Select the right Promotional mechanisms

PLAN IT RIGHT !! 3- Select the right Promotional mechanics

Check whether that fits the brands strategy

PENETRATION NEW USERS 1

FREQUENCY CONVERSION BUILD REPEAT OF TRYERS PURCHASE 2 1 1 2 1 2

INCREASE AWARENESS PANTRY LOADING CONSUMPTION 1 1 2 1 2 1 1 1 1 1 1 2 2 1 2 1 1 1

Blank = Inappropriate tool

PLAN IT RIGHT !! 3- Select the right Promotional mechanics

Check whether that fits the brands strategy

Link it to the brand life cycle

Animations, In store Tastings Display

Increase regular purchase

Stimulating Trial Introduction Growth Maturity

Phase Decline or Relaunch

PLAN IT RIGHT !! 3- Select the right Promotional mechanics

Check whether that fits the brands strategy

PLAN IT RIGHT !! 3- Select the right Promotional mechanics

Check whether that fits the brands strategy

PLAN IT RIGHT !! 3 - Select the right MECHANICS

PLAN IT RIGHT !! 4 determine the Right pressure

Assess impact of the Share of Market

If possible: Get the efficiency rate

Are we spending the right amount?

PLAN IT RIGHT !! 4 determine the Right pressure

*Hard Promotions = Promotions with heavy support: leaflet +/or endcap

PLAN IT RIGHT !! 4 determine the Right pressure

Create total commitment to the promotion

Get everyone committed Particularly the Sales Force:

Easy to explain Easy to execute The Sales Force Briefing

Sales Force Briefing

Account Activity Plans

Sale Cycles CATEGORY: SPIRITS BRANDS: Ricard Martell Wyborowa Chivas

Display MONP Press Ad

Price Down Loyalty Bonus Card