Here’s the thing with trade promotions — they’re expensive. In fact, trade promotion budgets typically represent 15-20% of manufacturer sales.
For such a large line item, return on investment is critical — especially in today’s economy where inflation, out-of-stocks, and price increases are putting unprecedented pressure on margins.
In most instances, trade promotions yield high returns and effectively drive volume. Data from our soon-to-be-released 2022 Shopper Behavior Study reveals 61% of shoppers stock up on their regular items when they go on sale.
However, most instances are not all instances, and the potential costs are too large for brands to not optimize their trade dollars. Even best-in-class CPGs often suffer “slippage” of 4-5% of trade spend. For a CPG doing $10 billion in sales, that represents $75 million in waste, which is often written off as “the cost of doing business.” In the words of Jim Hertel, our Senior Vice President of Client Development for Analytics, “It’s almost as if manufacturers have become numb to how much waste exists. The shame of it is there are solutions available that can nearly eliminate all of it.”
(Note: For an estimate of how much money your brand might be leaving on the table for a specific trade promotion, check out our free Trade Savings Calculator).
How can manufacturers know they’re getting the most bang for their trade bucks? It starts with visibility.
No matter the size of your brand, promotion performance insights are essential to identifying opportunities at specific distribution partners, and to improve your ROI. Specifically, brands need visibility into how well retailers are moving promoted UPCs — so they can deploy trade funds based on a retailer’s real, validated product movement across all trade classes. In other words, brands need to be empowered to pay for performance.
Having performance data in hand sets the stage for productive negotiations with distribution partners and, most importantly, allows brands to protect margins by ensuring their trade spend is connected to tangible sales lift.
Brands who want to get serious about protecting their margins are well-served to explore our ScanApps’ consumption-based validation services, which make it possible for brands to allocate, and shift, their promotion funds based on validated results.