Benefits accrue for both parties, as fact-based promotion collaboration becomes their embedded, everyday mode of interaction and a way of doing business and not just this month's slogan. Leading retail and consumer product companies are already collaborating to win. They are learning to work together for mutual, sustainable promotion and category management success. The game changes when trading partners truly collaborate on promotions.

1. promotion
collaboration
Five StepS to SucceSS
Chapter Title Here 1
a DemandTec eBook

2. the game changes...
...when trading partners truly
collaborate on promotions
RetaileRS and manuFactuReRS ShaRe common inSightS conSumeR-centRicity iS galvanizing ouR induStRy.
and use data to drive superior promotion and merchandising Retailer and manufacturer alike are working to better
decisions based on reliable forecasts and expectation of understand and get closer to shoppers. These initiatives are
mutual success. driving opportunities to collaborate throughout the demand
chain, serving as the foundation for joint business value
tRuSt emeRgeS based on common understanding, creation.
transparency and shared success.
The shopper insights and enabling technology for demand
BeneFitS accRue FoR Both paRtieS, as fact-based data-empowered collaboration are available today. Before you
promotion collaboration becomes their embedded, everyday plan another promotion, set another price, refine another as-
mode of interaction – a way of doing business – not just this sortment, or negotiate another deal with your trading partner,
month’s slogan. review this book and discover the sustainable advantage col-
laboration can build for your business.
Leading retail and consumer product companies are already
collaborating to win. They are learning to work together for
mutual, sustainable promotion and category management
success.
2 Summary 3
Promotion Collaboration

3. promotion
collaboration
taBle oF contentS
what we have leaRned 6
Five StepS to StaRt collaBoRating today 14
thiS iS not the laSt woRd 30
4 5
Promotion Collaboration

4. what we have
learned
manuFactuReRS and RetaileRS who engage
moRe oF theiR paRtneRS in collaBoRative moSt RetaileRS and manuFactuReRS
activitieS RepoRt BetteR SucceSS FRom Believe collaBoRation iS impoRtant to
theiR pRomotionS. theiR FutuRe SucceSS.
For retailers “collaborative engagement” means improved • 92% of retail grocers report collaboration as “very important”
interactions on demand analytics and win-win planning. For • to future success and 8% consider it “important.”
manufacturers “collaborative engagement” means more • Manufacturers rated collaboration as “very important” 56% •
freedom for the field sales force and new tools to more • of the time, and “important” 39% of the time.
effectively manage and measure promotions.
It’s no secret. While retailers tend to be most interested in
DemandTec and Booz Allen Hamilton, in partnership with shopper dynamics and category health, manufacturers have
Trade Promotion Management Associates, jointly sponsored historically maintained focus on consumer events and brand
research on this issue because we observe trading partners profitability. Bridging this “disconnect” will help promotions
striving to gain greater collaboration and mutual benefit. perform better.
The Promotion Collaboration Survey is the first known
to address trade promotion optimization and collaboration. Retailers and manufacturers share related concerns about
demand forecasting and differing objectives (e.g. category
The resultant insights imply ways that the industry can best growth versus trade spend ROI).
work together to improve retail-focused merchandising and
marketing. The big ideas:
• Manufacturers and retailers are becoming increasingly
• interdependent.
• Trade promotion optimization is a key opportunity and the •
• next frontier in collaborative activities.
• Increased collaboration can drive more effective business •
• results.
6 What We Have Learned 7
Promotion Collaboration

5. When RetaileRS rate importance and effectiveness of When manuFactuReRS rate the importance and
vendor capabilities, three gaps stand out [below]. effectiveness of their customers’ capabilities, the largest
gaps differ. However, both share concerns about demand
forecasting [below].
aBility to accuRately FoRecaSt conSumeR and undeRStand the RetuRn on inveStment in a
waRehouSe demand pRopoSed event
evaluate the eFFectiveneSS oF a completed event aBility to accuRately FoRecaSt conSumeR and
waRehouSe demand
plan a pRomotion event conSideRing the oveRall Relate pRomotion eventS to the goalS oF youR
impact on the categoRy paRtneRS
Survey question: Please rate the importance and Survey question: Please rate the importance and
effectiveness of your vendor partners in the following skills effectiveness of your retail partners in the following skills
that support collaboration. that support collaboration.
Source: The Promotion Collaboration Survey Source: The Promotion Collaboration Survey
8 What We Have Learned 9
Promotion Collaboration

6. tRuSt RemainS a key FactoR in
collaBoRation eFFectiveneSS, But
Relatively leSS impoRtant than
otheR BaRRieRS.
Data inconsistency, inappropriate tools, misaligned or lack of Survey question: Which of the following do you consider to
defined objectives, and lack of a process are all considered to be barriers to using analytics and insights to collaborate with
be greater barriers to collaboration than a lack of trust. It is also vendors in the future?
highly likely that any efforts to eliminate these other barriers
would also have the secondary benefit of building and ensuring
trust within the relationship and the collaboration activities.
data in FoRmatS that aRe non-StandaRd (hieRaRchieS, FoRmatS, data attRiButeS, etc.)
data that iS not timely
lack oF joint key peRFoRmance indicatoRS
lack oF StandaRdization in how data iS analyzed Between tRading paRtneRS
inadequate toolS to woRk with data
ReSouRceS to utilize gRowing SouRceS oF data
miSaligned oBjectiveS
lack oF FoRmal BuSineSS pRoceSS touchpointS
lack oF agReement on what Should Be meaSuRed
SyStemS that can’t talk with one anotheR So the data can’t Be ShaRed
lack oF tRuSt with youR paRtneRS
10 11
Source: The Promotion Collaboration Survey
Promotion Collaboration

7. collaboration benefits retailer and
manufacturer partners in a variety of ways.
12 13
Promotion Collaboration

8. five steps
3 step three:
define key
performance
indicators
1 step one: plan
4
collaboration
holistically
step four:
establish
collaboration
tools
2 step two:
5
set rules of
engagement
step five:
continually
measure and
14 adjust 15
Promotion Collaboration

9. 1
step one: plan
collaboration holistically
it haS to Begin with the Big pictuRe. wheRe
Collaboration is more than a joint planning meeting and more What must take place in person versus by phone, email, or
than simply sharing data. It’s a way of doing business that in a shared, web-based workspace? Does the work take
defines how retailers and manufacturers go to market, day place on your premises? At your trading partner’s?
in and day out. It requires data and tools but it also depends
on people and processes. As with any enduring change when
initiative, it behooves companies to consider how it will Establish a timetable for collaboration that considers joint
impact their businesses across several dimensions: goals, availability of solutions, and sets milestones
for key tasks.
who
Define who is involved in your organization and who why
they will be interacting with in your trading partner’s The reason to collaborate may seem self-evident. However,
organization. Be certain your people are empowered with the clearly stating the primary objectives can help shape the rest
authority to get the job done. of the plan and also help both parties modify or expand the
initiative as new opportunities emerge. Also, your trading
what partner’s stated reasons to collaborate may be slightly different
Define the processes and roles clearly. Know exactly what than you expect.
you are trying to accomplish and what has to happen. Be
ready to state it clearly.
16 Five Steps 17
Promotion Collaboration

10. holiStic planning RequiReS people,
pRoceSSeS, data, and toolS
key conSideRationS FoR RetaileRS:
• Is promotion collaboration centered around the category
management team? Who else should be involved?
• Who will interact with counterparts on the supplier side
and what tools will they use?
• Are you ready to implement programs developed
with your partners?
• In addition to planning for your own improvements, are you
identifying ways to enable your supplier community to lower
its cost to serve you?
key conSideRationS FoR manuFactuReRS:
• Have you empowered your field-based account
teams to take action?
• Are you engaged in a dialog with retail customers around
collaborative promotion planning?
• Are you ready to leverage transaction log data in your
promotion strategies and tactical recommendations?
• Have you identified ways to lower your cost to serve your
most important retail customers?
18 Five Steps 19
Promotion Collaboration

11. 2
step two: set rules of RuleS oF engagement will vaRy and aRe
dependent on the RelationShip and level oF tRuSt
engagement Between the paRtneRS.
collaBoRation can neveR Be a
“no holdS BaRRed” pRopoSition.
Trust is built in part by setting limits and defining rules. For
some in the industry, collaboration is simply synonymous
with “sharing data,” but there are ways to collaborate that
need not involve any disclosure. Also, levels of collaboration
may vary, and some capabilities may be enabled without
sharing sensitive data.
Overall, retail leaders are opening up more of their
businesses to collaboration with suppliers in order to
achieve the benefits of joint planning and execution. In all
cases, limits do apply. It’s important to recognize that the
retailer sets the rules of engagement.
key conSideRationS FoR RetaileRS:
• Based on what you want to achieve, determine what
information your vendor needs.
• Analyze the different types of vendors you do business
with and define how collaboration might differ between
them.
• Authorize vendors to use software, access reports, or even
use specific data sources based on their roles.
key conSideRationS FoR manuFactuReRS:
• Build your capabilities around retailers’ rules.
• Share best practices and marketing know how.
• Leverage your consumer knowledge.
20 Five Steps 21
Promotion Collaboration

12. 3 key conSideRationS FoR RetaileRS:
• Establish KPIs for promoted item sales, but also
overall category sales and profits.
step three: define key • Analyze cannibalization of private label or other brands
performance indicators as you evaluate deals or offers from different vendors.
• Using KPIs, request that all promotional offers from
and goals your suppliers meet agreed-upon thresholds.
• Finally, consider customer segmentation strategies. Request
promotional offers that are not only good for the category
but are better targeted to your key customer segments.
how do you meaSuRe SucceSS?
Successful trading partners jointly establish key performance
indicators (KPIs) from the outset of a collaborative relationship.
There is no substitute for candor in this discussion, because Retailer Manufacturer
Important Metrics Important Metrics
both sides must recognize that what is optimal for one may be Private label impact Promoted brand volume
unacceptable for the other. Best customer alignment Category profitability
Cannibalization of Cost per incremental unit
It’s well understood that a promotion that drives one brand’s category competitors Trade spend ROI
short term sales at the expense of overall category objectives
is not sustainable. Previously, many of these promotions have
been executed at retail because neither party had a better
alternative, and perhaps experimenting with something new
(versus repeating what was done last year) was too risky. key conSideRationS FoR manuFactuReRS:
In this day and age, this should not be considered “good • Recognize retailers’ interests and how they
enough.” evaluate competing deals.
• For win-win collaboration, make sure your customer
For successful collaboration, it is essential to define what you understands your goals for volume, cost-per-incremental
will measure. This will enable both parties to raise the bar from volume, and trade spend ROI.
what you’ve done in the past. • Explain how lowering the cost-to-serve a given customer
would benefit the customer.
• Bring deep consumer insights and research to the table,
and align with the retailer’s loyalty insights and other
shopper insights to plan targeted promotions together.
22 Five Steps 23
Promotion Collaboration

13. 4
step four: establish
collaboration tools
make SucceSS poSSiBle.
Even more than that – make breakthrough success the
everyday norm. Empower sales and category management
teams with tools that support quick, accurate, informed key conSideRationS FoR RetaileRS:
decision-making, reliable forecasts, and dependable, rapid • Use advanced promotion planning tools to compare vendor
monitoring of results. offers against each other and with regard to the agreed-
upon KPIs and thresholds in Step Three.
Advanced promotion planning software applications today • Create additional “what-if” scenarios to forecast what
apply the science of consumer demand modeling and different deal terms or different uses of ads and displays
predictive simulation. These can be based on a modeled would generate.
platform of either retailer POS/t-log data or syndicated market • For the most collaborative retailers, consider enabling your
data. Retailers and manufacturers will benefit when comparing suppliers to receive metrics (e.g. volume forecasts) from
forecasts and other analytics in an “apples-to-apples” manner. your modeled environment (subject of course to the rules
Using the same methodology and science over different data of engagement defined in Step Two).
sets is a significant opportunity. Using the same underlying
data makes this even more powerful.
24 Five Steps 25
Promotion Collaboration

14. common data, Science, and toolS enSuRe
“appleS to appleS” analyticS and moRe
eFFective collaBoRation.
key conSideRationS FoR manuFactuReRS:
• Choose the right “metric” system. Your plans will be more
easily sold in if the analytics used to prove their value are
consistent with what your customer uses.
• Use the same promotion planning system as your customer
with your syndicated data. This ensures that both parties
are not only comfortable with the modeling and forecasting
approach, but process efficiencies can be gained as well
when data is not entered multiple times.
• Encourage your customers to open up their analytical
platforms to give you the key metrics you would need
to help drive their business and meet the established
KPIs and thresholds. But recognize that your customer
sets the rules of engagement.
26 Five Steps 27
Promotion Collaboration

15. 5
step five: continuously
measure and adjust a continuouS and collaBoRative cycle to
meaSuRe and adjuSt enSuReS oBjectiveS
aRe Being met.
Build a cycle oF SucceSS.
Empowered, informed collaborators continually measure,
evaluate and adjust merchandising programs based on a
common understanding of mutual goals and gains. Sample ScoRecaRd
Retailer Performance Target Actual Status
The outcome is a virtuous collaboration cycle that engages
both retailers and manufacturers in an upward spiral of On-time reports 100% 90%
performance that yields mutual benefits. On-time payments 100% 85%
Manufacturer Performance Target Actual Status
Just as importantly, the iterative process influences trading
partners to reduce sub-par or non-performing programs, On-time reports 100% 87%
freeing scarce resources that may be reallocated to more On-time billing 100% 92%
powerful and productive promotions.
Ac-
Collaboration KPIs Target Status
tual
key conSideRationS FoR Both RetaileRS and
Promoted brand volume + 8% + 5%
manuFactuReRS:
• Based on the KPIs defined in Step Three, are promotion Category profitability + 4% + 5%
plans achieving the goals each party set? Cost per incremental unit - 3% - 2%
• Don’t forget to scorecard the process itself. Even if all
Category cannibalization - 2% - 3%
KPIs are in the green, is the process working as efficiently
as it can be? Private label volume loss - 10% - 6%
• Re-assess Steps One through Four. Should others be Best customer alignment 75% 81%
involved in the process? Are you measuring the right KPIs
Trade spend ROI + 4% + 6%
and using the best tools?
28 Five Steps 29
Promotion Collaboration

16. this is not the
last word...
Collaboration is a big concept that is certainly not limited
to trade promotion. It is fundamental to driving innovation
and yields great advantages in assortment and new item
planning, shelf planning and other category management
activities. For many retailers and consumer product
manufacturers, most collaboration to date has been taking
place in some of these other areas with fewer initiatives
centered on improving promotions. Given new technology
and changing attitudes towards win-win promotion planning,
trade promotion collaboration is now a key initiative for more
and more leading innovators in our industry.
www.demandtec.com
30 This is Not the Last Word 31
Promotion Collaboration

17. about
demandtec contact uS
DemandTec
One Franklin Parkway
Building 910
San Mateo, CA 94403
USA
inquiRieS
Phone: +1.650.645.7100
DemandTec (NASDAQ:DMAN) connects more than 400 Please visit www.demandtec.com
retailers and consumer products companies, providing
common solutions to transact, interact, and collaborate on
core merchandising and marketing activities. DemandTec’s
services enable customers to achieve their sales volume,
revenue, shopper loyalty, and profitability objectives.
DemandTec customers have collaborated on nearly four
million trade deals. DemandTec software and analytical
services utilize a science-based platform to model and
understand consumer behavior. DemandTec customers
include leading retailers and consumer products companies
such as Ahold USA, Best Buy, ConAgra Foods, Delhaize
America, General Mills, H-E-B Grocery Co., The Home Depot,
Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target,
Walmart, and WH Smith.
32 Chapter Title Here 33
Promotion Collaboration

18. promotion
collaboration
Five StepS to SucceSS
a DemandTec eBook