It’s the start of a new year and resolutions abound. Unfortunately, most retailers and CPG manufacturers seem to sidestep this annual ritual practiced by so many of us. They are well aware that they waste billions in trade fund dollars annually around the globe, yet they seem to accept this fact as immutable. So, as we kick off the new year, I wanted to update my blog and share a new ebook, “Top Retail Trends for 2020” that we’ve produced that speaks to the importance of making promotions personal, along with 4 other retail trends for 2020 and beyond.
AI for optimized promotions
The days of relying on manual processes and human understanding alone are coming to an end and Artificial Intelligence (AI) is now a must-have capability for optimized and competitive promotions moving forward.
When considering a promotion planning and evaluation solution, there are key questions and underlying issues that must be addressed:
Is AI-based automation and optimization fueling promotion strategy decisions?
Category managers need to forecast and plan promotional events with a high level of accuracy. Then, they must be able to quickly measure results and have the real-time ability to adjust tactics for improved performance in the future. For these reasons, native AI and machine learning capabilities should be considered non-negotiable in any considered solution. When combined, AI and machine learning will power a continuous loop of automation and optimization for your promotion planning.
Automation means the solution will function without continuous input from a user as it constantly mines data sets to find and deliver relevant and timely insights. Where an AI-based promotion forecast informs of possible outcomes in an automated manner – “What is the plan, and how well will it do?” – optimization goes further to ask, “How could we do it better?”
Does the solution streamline collaboration with CPG partners to execute trade promotion forecasting?
The solution you’re evaluating should provide the ability to easily negotiate deals with CPGs – they are funding the trade promotions, after all. Collaboration between a retailer and its partners is important, but far too often the retailer-CPG relationship is overcomplicated with spreadsheets being passed around. There should be a mutual understanding of promotion strategies and the insights that will drive continual value for all parties, which requires a single system of record to operate from.
A platform on which to collaborate and streamline processes affords retailers the added opportunity to monetize promotional performance data and sell analytics and insights to CPGs directly. The best trade promotion collaborators treat their CPG relationships as true partnerships that can bring insights and recommendations to the category managers.
Will the solution account for customer dynamics like switching behavior, store traffic and shopping frequency?
Your promotion forecasting, planning and optimization should put the customer at the heart of the decision-making process. Currently, retailers will repeat promotion strategies that performed well at face value – if there was an uplift in sales, it’s an automatic contender to be run again. But operating with this sole focus doesn’t account for true category impact and the not-so-obvious ways a high-performing promotion can influence other areas of the business.
For example, a number of retailers have unknowingly trained their customers to respond to high-low pricing. This means shoppers know they will always find a product in a category on promotion, so they are more likely to buy what’s available at the lowest cost. A promotion will appear to perform well if a customer is prone to buy what’s on sale – you’ll see an uplift in sales because of your budget-conscious shopper.
The more you contemplate these scenarios and customer dynamics, the more evident it should be that your promotion planning technology needs to also account for them. Planning promotions blindly, without understanding the greater impact on consumer behavior, is not an ideal strategy.
Would the solution be an added tool in the hands of a user, or function as a proactive & intuitive customer insights coach?
If a solution checks the “AI and machine learning boxes” on your checklist, the tool will operate as the eyes and ears of the business, doing what humans alone cannot do with access to data. As you evaluate the solution, look one step ahead to how the technology will integrate into the culture of your teams and the structure of your company as a whole.
The solution you decide to implement must make life easier for your promotions team. You need more than just a tool with loads of data in it. You need a Decision Coach that presents – in a clean and simple way – insights and proactive recommendations for adjusting your promotion strategy.
Learn more about how the right AI-enabled technologies will impact promotions efforts, along with 4 other retail imperatives for the short term. Download Survive or Thrive: Retail Imperatives for 2020.