Confronting Trade Study 2016

Promotion Fragmentation
Exceptional Agility Required

The Retail and Shopper Specialists

Table of Contents
Introduction......................................................................................................................... 3

Executive Summary............................................................................................................. 5

Key Findings......................................................................................................................... 8

Recommendations............................................................................................................. 19

Research Objectives and Methodology............................................................................. 20

Participants........................................................................................................................ 21

Acknowledgments............................................................................................................. 25

2
Introduction
For more than 20 years, we have surveyed manufacturers and retailers about
the biggest bucket of manufacturer marketing budgets and the lever retailers
consider most important for driving purchases. As we reviewed prior reports,
“ Manufacturers feel they overspend on trade promotion,
the same challenges seem to persist 20 years on. Like the late Yogi Berra said,
“It’s déjà vu all over again.” See if you can guess if the excerpts to the right are
yet dollars allocated to it are increasing.
”
from 1996 or 2016.

All four are from the earlier study – and at first glance it seems little has
changed. Many manufacturers still feel they spend too much on trade “ While TPRs are the least productive vehicle, they are the
most common. ”
promotion, especially in an environment of low to no top-line growth and
increasing use of zero-based budgeting. Temporary price reductions (TPRs)
are still the most common promotion and produce the lowest lift. Both
manufacturers and retailers spend considerable resources on trade promotion
evaluation, but plenty of questions remain. And the organization pendulum “Trade promotion is regarded as an extremely important
issue, but it is not well-evaluated by manufacturers. Only
tends to swing every five years or so between centralized and decentralized,
effectiveness versus efficiency and highly standardized to largely customized. Is
it possible little has changed?
a few rate themselves as highly effective.
”
This industry study, coupled with extensive trade promotion project work
with leading manufacturers and retailers, confirms much in fact has changed.
Although opportunities remain, we are optimistic about the state of CPG
“ Trade promotion is important to manufacturers, but
they are not organizationally aligned for optimum
trade promotion.
management. There is very little centralized control,
Manufacturers are quite passionate about developing data-driven promotion responsibility and accountability throughout the trade
strategies, better leveraging shopper insights to make promotions more effective
and efficient, and measuring the short- and long-term impact of promotion on
promotion management cycle. They are organized to fail. ”
brands and categories.

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The Retail and Shopper Specialists
Likewise, retailers appreciate manufacturer promotion budgets are finite and
seek to leverage those funds to achieve higher in-store conversion, increased
shopper loyalty and real category growth.

While it can be argued today’s marketplace is simply too competitive for

anything less, in our experience manufacturers and their retailer trading
partners understand even incremental improvements can have outsized
effects on business results and are increasingly committed to leveraging
data, analytics and technology in combination to improve mutual performance.

Familiar challenges may persist, but our industry has spent the last 20 years
getting better. Much better in fact. We invite you to read the very latest about
those efforts in the pages that follow and hope the findings and implications
inspire you to consider your own situation and how you can improve. Please
contact us if you wish to discuss the study.

Spend smartly,

Brad Golden Kathy Weber

4
1
Executive Summary

5
The Retail and Shopper Specialists
Executive Summary
Every few years for the past 20 years, Kantar Retail
has surveyed manufacturers and retailers to gain
insight into trade promotion spending, strategies
and management practices. This is an important
topic for several reasons. Trade promotion
spending is the second-largest expense for most
CPG manufacturers after cost of goods sold. It’s
clearly material, particularly in today’s low-growth
environment. Our industry spends considerable
time and effort planning, executing and analyzing
trade promotions. Yet, many opportunities remain.
Aside from the product itself, it is arguably the
single biggest driver of sales, or has the potential
to be. And that’s why we continue to survey, analyze
and recommend how to improve trade promotion
effectiveness and efficiency.
Below is a summary of key findings and
recommended actions from our 2016 trade
promotion industry study.
Trade Spending Still Shifting to
Customer-Specific Tactics
• Total trade spending as a percent of gross
sales has remained flat for some years.
However, the growth of customer-specific
programs and digital promotions has shifted
spending considerably from traditional to
new media. enough. Just 13% of manufacturers have
• Manufacturers are increasingly targeting
trade promotion funds at growth channels
and customers, seeking to better align
investment with potential while still
complying with federal law.
• Manufacturers and retailers share the same
challenge: finding the right combination of
trade promotion strategies, tactics, channels,
customers and vehicles to invest in.
Recommended Actions
1) Segment customers strategically for
better allocation of trade funds and higher
potential for growth.
2) Develop customer-specific promotion
strategies and tactics.
3) Partner closely with retailers to find the
right combination of strategies and tactics
to achieve common goals.
Digital Growing Quickly, Retailers Leading,
Manufacturers Lagging
• Trade promotion spending and activity
is rapidly migrating to digital, yet
manufacturer strategies, budgets and
organizations have not adapted quickly
separate brick-and-mortar and e-commerce
6
budgets and 24% have no e-commerce
budget at all. Conversely, 33% of retailers
have a separate e-commerce budget and
just 8% have no e-commerce budget at all.
Clearly, retailers are out in front.
• Manufacturers and retailers appear to
be taking different approaches to digital
promotion activity, likely leading to
considerable misalignment. Manufacturers
are increasingly focused on promoting
on retailer websites while retailers have
deemphasized their own websites in favor of
social media, email and mobile couponing.
Recommended Actions
4) Establish separate e-commerce teams,
budgets and goals if you haven't already.
5) Manufacturers should better align digital
promotion spending and activity to retailer
strategies and tactics.
6) Retailers should leverage manufacturer
social marketing content in trade offers.
Measuring Impact on Longer-Term Shopper
Behavior Is Next Frontier
• Most manufacturers are using trade
promotion management systems to
support the management and analysis of
 trade spending. Despite this investment
and effort, all parties feel much more
should be done – including analyzing the
impact on categories (as well as brands)
and better aligning spending with retailer-
specific strategies.

• The next level of optimization is understanding

the longer-term effects of trade promotion on
shopper purchase behavior.

• Perhaps the most important takeaway

from this research is the shopper remains
boss. In an increasingly omnichannel
world, the shopper is expected to continue
gaining power.

Recommended Actions

7) Measure the impact of trade promotion on

categories, not just brands, and longer-
term shopper behavior.

8) As you move beyond trade promotion

management (funds focus) to calculating
ROI (performance focus), carefully consider
its many components such as duration,
incrementality and fully-loaded costs.

9) Combining trade promotion activity and

shopper marketing insights with individual
customer strategy is the next frontier
for optimization.

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The Retail and Shopper Specialists
Struggling with Trade
Promotion? Need More Agility?
Reach out to Kantar Retail to obtain the full 2016 Trade Promotion
Industry Study and learn more about how your organization can
become more agile in a rapidly changing environment.

Study 2016

To receive the complete 2016 Trade Promotion Industry Study,

please contact Brad.Golden@KantarRetail.com.

Study Price: US $2,000

8 Study 2016
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The Retail and Shopper Specialists