WEIßBUCH | 2021 | FMCG | REVENUE MANAGEMENT
Über Must-Win-Gefechte und große Wetten
Complexity leads to suboptimal plans
Developing next year's promotional plan is a complex accomplishment that typically emerges from numerous iterations and close collaboration among various departments. This complexity often means that the best business results are not achieved. Many plans remain sub-optimised. Along the process, an unwavering focus on shoppers and customers got lost.
Our 10-5-5 goal: a minimum of 10% reduction of cannibalisation, 5% extra category growth and 5% more shopper upgrading
A 10-5-5 performance improvement
The primary effect of promotions lies in shoppers making different purchases from what they had intended. They switch brands, formats and stores, or stock up, only to buy less in the weeks after the promotion. They also may buy larger quantities or buy at a more valuable price point. Accuris' methodology dissects this behaviour at the level of individual promotions. This data serves as the foundation for enhancing the promotional calendar for the upcoming year.
Through Bayesian modelling and adaptive learning, future plans improve with each iteration. Numerous iterations are carried out, often hundreds, where the impact on sales, revenue, and other metrics is consistently assessed. Different products, mechanics and other tactics are combined to reduce the negative side effects of promotions and increase the positive ones. Combinations that cause cannibalisation are replaced with tactics that do not, while generating comparable uplifts. Those that erode value are changed for tactics that steer shoppers to more premium offerings.
This is how Accuris consistently delivers exceptional outcomes for a wide range of businesses. Introducing our 10-5-5 goal: we ensure most businesses a minimum 10% reduction in cannibalization costs, 5% enhancement in category growth, and 5% increase in shopper upgrading value.
Promotion strategy framework
The promotion strategy framework is at the start of the process. It is a data-driven guide for decision-making to obtain a balanced promotion strategy. The framework looks into business priorities, sales performance, sources of business (how is revenue build up?), competitive, shopper and consumer behaviour. It helps in understanding whether a brand is more responsive to pricing adjustments or promotional activities. It aids in determining the optimal balance between sales at base price and promotional offerings. Moreover, it provides insights into the most effective channels, timing, and tactics for promotions to attain objectives for market penetration, market share, and profitability.
Price & Promotion Strategy Framework (illustration; actual deliverable may differ)
Simulation of sales results
A reliable simulation is the basis for the evaluation of a plan. A forecast is made for each category and each retailer, for the entire annual plan. Full detail for every tactic is provided, including price point, depth of deal, timing, length and mechanic. Each promotion is simulated with results for volume, value, profit and brand penetration. The decomposition of incremental sales is also forecast, with cannibalisation, competitive switching, retail switching, stock piling and category expansion calculated for each event. The amount of expected upgrading (shoppers spending more because of the promotion) and downgrading (shoppers spending less) is also reported for each promotion. Aggregations by scenario, brand or retailer are provided.
Promotion plan forecast (illustration; actual deliverable may differ)
Each promotion receives a forecast for shopper upgrading, downgrading, cost of cannibalisation and category expansion
Market conditions change and scenario planning can anticipate the outcomes. Instead of focusing on one static promotion plan, we create alternatives, reflecting a range of possible futures or changing company priorities. The primary objective is to understand how sales performance will be impacted by competitive activities, a deteriorating economy, falling or accelerating inflation and other uncertainties. This approach will also reveal what it takes, in terms of promotional investment, to achieve various objectives such as market share, revenue growth or brand and product penetration.
Forecast of alternative scenarios (illustration; actual deliverable may differ)
Towards a "Perfect Plan"
We help you getting closer to a "Perfect Plan". Having worked with two thirds of Europe's top 20 consumer goods suppliers and many national champions, we know that for most businesses an improvement of 10-5-5 will be achieved: a minimum 10% reduction in cannibalization costs, 5% enhancement in category growth, and 5% increase in shopper upgrading value.
Our support includes:
A simulation and sales forecast of your plan
Strategic and tactical improvements including reducing the cost of negative side effects such as cannibalisation and increasing the promotion mix to achieve category expansion and shopper upgrading, at a promo-by-promo level
Develop alternative plans, reflecting scenarios of your choice (e.g. maximisation of market share, profit, brand penetration)
Create a selling-in argumentation for the trade
Interested to explore how we can assist you in perfecting your promotion plan? Please get in touch using the form below.
Read more about Accuris, revenue management and industry challenges.
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A deep dive into which promotions generate net incremental sales for supplier or retailer.
5 Ways to Regain Market Share in 2024
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Reduce Data Workload, Increase Capabilities
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All your sales and marketing data in one place with FMCG’s most advanced analytics on top.
Track how shoppers switch between offers on a daily basis and measure the revenue streams they generate
What we do
Accuris provides revenue optimisation services and consulting. We have been using machine learning - mainly Bayesian statistics - since the early 2000s. We use all your available data to detect how shoppers switch between brands, stores and segments. Our Source of Business® model explains revenue streams generated for each promo and media campaign and for new product introductions and assortment changes.
Why it matters
Revenue indicators based on gross rather than net impact will lead to sub-optimal or even wrong decisions. Net effects strip out back-and-forth switching and other false positives. Promotions, price increases and new listings can lead to strong revenue increases in gross terms, but net results may be much lower or negative, thereby misleading decision making.
What other agencies do
Data providers and consulting agencies do not integrate all required data sources to get the full picture of how shoppers behave. They tend to use static methods or once-a-year regression approaches to explain market dynamics. This was perhaps sufficient a decade ago but is not enough for modern markets and categories where shoppers switch between offers on a daily basis.
Revenue Management Lösungen für Konsumgüterführer.
Von der Datenintegration bis zur Modellierung, von der monatlichen Leistungsverfolgung bis hin zu Benchmarking und Workshops: Mit Accuris reduzieren Sie die Zeit, die Ihr Team für Daten und Berichte aufwendet, damit es sich auf Planung, Optimierung und Umsatzwachstum konzentrieren kann.
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