Wish you knew how to explode sales and compete more effectively? This show builds on Secrets 155. Learn strategies to maximize sales and profits giving you a significant and sustainable competitive advantage. Make your brand more attractive to investors. 

Welcome. This week’s podcast is an extension of last week’s podcast. What is trade marketing, and why does it matter? In other words, last week, we talked about the basics of trade marketing. What you need to know, and why this matters to your brand, and how you can help leverage these strategies to gain a significant and sustainable competitive advantage.

In this week’s podcast, we’re going to talk about the essentials. Some of the specific things that you need to know, and need to be able to understand to maximize each and every selling opportunity. The reason that this is important is because over 80% of natural brands fail within the first year – I’m committed to change that.

More importantly, about 25% of a brand’s gross revenue is somehow tied to their trade marketing. And yet, 70-90% of those trade funds are wasted or infective. Let me explain. The primary goal of any promotion is to introduce your product to a new customer. Now certainly, promotions include trying to get customers to repurchase your product, generate excitement in the category, and help support your retail partners. But there are better ways and more effective ways to do that.

This is why you need to understand the difference, and how to maximize each and every selling opportunity. For example, some categories promote their product every other month. Customers know this, and they only buy the product when it’s being promoted. This is one of the key reasons why promotions are ineffective or wasted. Today’s story is about how to identify the difference, and how to maximize each and every selling opportunity. How to get the most out of your available resources.

What do I mean by that? Canned top line or templated reports are not going to differentiate you from your competitors. Think about it, the same reports that brands use to sell motor oil are going to not differentiate your brand if you’re an organic baby food. More importantly, those reports don’t reflect the way the consumers buy your products, especially natural products.

To further complicate things, the data available in natural is not going to give you the insights, the depth, and the breadth, and the level of insights that you can get if you’re promoting in a mainstream retailer using mainstream syndicated data. We’ll get into that more in future episodes, in addition to sharing creative strategies to work around that.

What am I talking about, and why is this important? About 25-30 years ago, I’m dating myself now, category management was created. Now, we used to use a lot of canned topline report, similar to the ones I’m referencing now. In fact, I even built my career developing a lot of those reports, those templated reports, including some for retailers. If you were another brand, and you were to sell products into that retailer, you had to complete the template, the canned report that I created.

The reason that I do what I do is to teach you how to go beyond those canned top-line reports. They’re a great starting place. Don’t get me wrong, there’s a lot of value in that information. But if you want to understand what’s really driving sales for your brand, in your category, or for the retailer, you need to go well beyond those reports. That’s the focus of this entire podcast and everything I do.

Now, several years ago, the Category Management Association was founded, and the reason it exists is to develop the minimum standards of category management proficiency. I’m the first person certified at the highest level of category management proficiency. A Certified Professional Strategic Advisor, CPSA. Now, I don’t tell you this to impress you, I tell this to impress upon you the difference of understanding the data, how the data works.

Being able to understand exactly how your promotional dollars flow from your brand, through the distributor, to the retailer, and to your end consumer. In fact, I’ve actually built a lot of really in-depth reports that get to the contribution, the heart of what’s actually driving sales within the category, and for the brand, while I was at Kimberly-Clark, as well as some of my clients.

Now, back to the Category Management Association. Those minimum standards that they created are designed to help brands and retailers identify and assess the quality of the input and the insights that are available through that particular category manager. This is where a talented category manager is worth their weight in gold. This is a far cry from what you typically see in your traditional sales analyst role. Again, that’s what we had before category management was founded.

Let me put this a different way, these are the strategies that the big brands rely on. And if I can help you leverage those strategies in your brand, it’s going to give you a significant and sustainable competitive advantage, and more importantly, it’s going to level the playing field between your brand, and any of the other brands you compete with. In addition, this is going to help you get more out of your available funds, and it’s going to help make you more attractive to potential investors.

Just like in the previous podcast, I invited my friend Kurt Kaiser, who I used to work with at Kimberly-Clark. He managed teams that managed the trade marketing budget for Kimberly-Clark, and he’s had an opportunity to work with a lot of brands since then. His insights are invaluable. The Category Management Association continues to reach out to me on a regular basis and asks me to help produce content for them, for their members.

Today’s podcast episode is a recording of a webinar that we gave to the Category Management Association. I thought that this information, that these insights are so valuable, that I wanted to make sure that you had an opportunity to listen to it, as well.

Download the show notes below

Click here to learn more about ViaggioTrade

Click here to learn more about Category Management Association

BRAND SECRETS AND STRATEGIES

PODCAST #156

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #156

Welcome to the Brand Secrets and Strategies podcast where the focus is on empowering brands and raising the bar.

I’m your host Dan Lohman. This weekly show is dedicated to getting your brand on the shelf and keeping it there.

Get ready to learn actionable insights and strategic solutions to grow your brand and save you valuable time and money.

LETS ROLL UP OUR SLEEVES AND GET STARTED!

Dan: Welcome. This week's podcast is an extension of last week's podcast. What is trade marketing, and why does it matter? In other words, last week, we talked about the basics of trade marketing. What you need to know, and why this matters to your brand, and how you can help leverage these strategies to gain a significant and sustainable competitive advantage.

In this week's podcast, we're going to talk about the essentials. Some of the specific things that you need to know, and need to be able to understand to maximize each and every selling opportunity. The reason that this is important is because over 80% of natural brands fail within the first year. I'm committed to change that.

More importantly, about 25% of a brand's gross revenue is somehow tied to their trade marketing. And yet, 70-90% of those trade funds are wasted or infective. Let me explain. The primary goal of any promotion is to introduce your product to a new customer. Now certainly, promotions include trying to get customers to repurchase your product, generate excitement in the category, and help support your retail partners. But there are better ways and more effective ways to do that.

This is why you need to understand the difference, and how to maximize each and every selling opportunity. For example, some categories promote their product every other month. Customers know this, and they only buy the product when it's being promoted. This is one of the key reasons why promotions are ineffective or wasted. Today's story is about how to identify the difference, and how to maximize each and every selling opportunity. How to get the most out of your available resources.

What do I mean by that? Canned top line or templated reports are not going to differentiate you from your competitors. Think about it, the same reports that brands use to sell motor oil are going to not differentiate your brand if you're an organic baby food. More importantly, those reports don't reflect the way the consumers buy your products, especially natural products.

To further complicate things, the data available in natural is not going to give you the insights, the depth, and the breadth, and the level of insights that you can get if you're promoting in a mainstream retailer using mainstream syndicated data. We'll get into that more in future episodes, in addition to sharing creative strategies to work around that.

What am I talking about, and why is this important? About 25-30 years ago, I'm dating myself now, category management was created. Now, we used to use a lot of canned topline report, similar to the ones I'm referencing now. In fact, I even built my career developing a lot of those reports, those templated reports, including some for retailers. If you were another brand, and you were to sell products into that retailer, you had to complete the template, the canned report that I created.

The reason that I do what I do is to teach you how to go beyond those canned top-line reports. They're a great starting place. Don't get me wrong, there's a lot of value in that information. But if you want to understand what's really driving sales for your brand, in your category, or for the retailer, you need to go well beyond those reports. That's the focus of this entire podcast and everything I do.

Now, several years ago, the Category Management Association was founded, and the reason it exists is to develop the minimum standards of category management proficiency. I'm the first person certified at the highest level of category management proficiency. A Certified Professional Strategic Advisor, CPSA. Now, I don't tell you this to impress you, I tell this to impress upon you the difference of understanding the data, how the data works.

Being able to understand exactly how your promotional dollars flow from your brand, through the distributor, to the retailer, and to your end consumer. In fact, I've actually built a lot of really in-depth reports that get to the contribution, the heart of what's actually driving sales within the category, and for the brand, while I was at Kimberly-Clark, as well as some of my clients.

Now, back to the Category Management Association. Those minimum standards that they created are designed to help brands and retailers identify and assess the quality of the input and the insights that are available through that particular category manager. This is where a talented category manager is worth their weight in gold. This is a far cry from what you typically see in your traditional sales analyst role. Again, that's what we had before category management was founded.

Let me put this a different way, these are the strategies that the big brands rely on. And if I can help you leverage those strategies in your brand, it's going to give you a significant and sustainable competitive advantage, and more importantly, it's going to level the playing field between your brand, and any of the other brands you compete with. In addition, this is going to help you get more out of your available funds, and it's going to help make you more attractive to potential investors.

Just like in the previous podcast, I invited my friend Kurt Kaiser, who I used to work with at Kimberly-Clark. He managed teams that managed the trade marketing budget for Kimberly-Clark, and he's had an opportunity to work with a lot of brands since then. His insights are invaluable. The Category Management Association continues to reach out to me on a regular basis and asks me to help produce content for them, for their members.

Today's podcast episode is a recording of a webinar that we gave to the Category Management Association. I thought that this information, that these insights are so valuable, that I wanted to make sure that you had an opportunity to listen to it, as well.

Now, before I begin, I want to remind you that there's a free downloadable guide for you at the end of every episode.

I always include one free downloadable, quick to digest strategy, that you can it up and make your own. One that you can use to grow sustainable sales with, and compete more effectively. Remember, the goal here is to get your products onto more store shelves, and in the hands of more shoppers. If you like the podcast, share with your friends, subscribe, and leave a review. Now, here's today's podcast.

Phil: Good morning everyone. I'm Phil McGrath, and I'm going to be your host for today's webinar that's being put on by the Shopper Insights Management Association, and Category Management Association. Today, we have an outstanding presentation, the essential strategy to maximizing your trade marketing ROI. And our presenter today is going to be Dan Lohman, who has been part of the trade marketing series that we are putting on for our membership, and for those who are attending today. And joining Dan today is going to be Kurt Kaiser.

To get us started, I'll do a quick introduction to both Dan and Kurt. Dan has over 25 years of industry experience as a CPG and natural industry strategic advisor providing solutions to challenges that brands and retailers face. His Brand Secrets and Strategy Podcast is a popular natural product accelerator for food startups, healthy brands, and retailers.

And Dan is also, I'd like to point out, a certified professional strategic advisor, and he received his certification through the Category Management Association, and that process is available to everybody who is listening in today. If you want more information, by all means, go out to our website, or reach out to either Patty Wheeler or myself.

Kurt Kaiser is the owner of ViaggioTrade, and he is a trade marketing advisor. ViaggioTrade is a company providing a variety of trade marketing services to emerging packaged goods brands. Kurt is the first time he's presenting with us on the webinar. He has a tremendous background, as he has worked at Kimberly-Clark in sales and trade marketing. He worked for the Nielsen company in pricing and promotion analytics, and trade promotion optimization.

And most recently, he also worked for AFS Technologies in trade promotion management with small to midsize companies. We got some really talented individuals here, we got a great topic, and I'm going to turn it over to Dan. He's going to kick off the presentation. Dan, you can take it away.

Dan: Thanks Phil, I really appreciate it. Like Phil said, the reason we're doing this is because this is one of the single greatest opportunities that any brand can level the playing field between a small brand and a big brand. More importantly, this is your unique opportunity to drive sustainable sales at any retailer.

The focus of this is going to be, how does a small brand compete more effectively with big brands? How does a big brand leverage their trade marketing in new and creative ways to help grow sustainable sales? And to able to help me with this, I invited a good friend Kurt Kaiser I used to work with at Kimberly-Clark. Kurt has a robust resume that, anyway, he'll share a little bit more with you now.

Kurt: Yeah. Thanks, Dan. Yeah, as Phil explained, I've had quite a diverse experience both on the manufacturer side, the analytics side of Nielsen, and pricing and promotion, and in trade promotion management, in particular. I've worked with companies of a variety of sizes, and I've seen very, very well developed processes and practices. And I've also seen where there are opportunities, and that's what I hope to add to the conversation today.

Dan: Looking forward to it, thank you. Let's back up, and let's, like Phil, said, this is part of a series. Let's back up and recap what we talked about last time. Trade marketing includes everything required to promote your brand. It's your growth engine and the largest item on your P&L. Most trade spending is wasted. Every brand seeks to maximize your promotional ROI. There's a better way to grow sales and profits, and again, that's what this series is about.

What is trade marketing? Trade marketing includes everything, literally everything that's required to get your product in the hands of shoppers. Retail is expensive. Let's face it, it's pay-to-play. Small brands, though, are unfairly burdened. What we hope to do here is give small brands the strategies that they need to compete more effectively, and in addition to that, help the big brands think about their trade marketing in a different light.

The challenge is this; 70-90% of all trade spending is wasted. If you think about trade spending, the goal is, the primary goal, is to introduce your product to a new shopper. That's it. If you can reward me to go into a store to buy your product when it was already on my list, well, that's good for me. But that doesn't effectively help you move the needle. Again, keep that in mind as we're going forward.

When we talk about wasted, what we're talking about, ineffective ways. In other words, trade marketing spending that's not helping you achieve a higher objective, that's not helping you grow sustainable sales, that's not helping your retailer partner stand out in a crowded market. Trade marketing can add rocket fuel to your brand. According to Nielsen, if you have an effective trade marketing strategy, it can more than 13X your trade marketing ROI.

Today's competitive environment demands advanced strategies others overlooked, why, exactly why we're having this conversation today. Getting this right, as I said, could add rocket fuel to your brand sales. Getting this wrong, however, could be catastrophic. It can even derail and even bankrupt a small brand.

It all starts with a shopper journey, and this is where we need to really focus on, how does a shopper shop the store? How do they look for things? You got to remember that shoppers have virtually unlimited choices as to where they buy their products. The old strategy is throwing a lot of money at a promotion. Those aren't effective anymore. Now, we need to focus on how the shopper buys. When they buy your products, what do they buy? Etcetera. And remember that everyone is fighting for their attention.

The goal here is to help your retail partners remain relevant. What do I mean by relevant? If you think about it, again, shoppers have an opportunity to shop virtually unlimited amount of places. We want to help the retailer remain relevant in their market. We want to invite our consumers a brand to come back into that retailer repeatedly, again, and again, and again, and not invite them to shop our competition, or not give them a reason to go online.

That's why this is so critically important. An effective trade marketing strategy can help you keep those customers coming back into store when done right. To do this, we need to shift your mindset. Your creativity is your single greatest asset. We're going to talk a lot more about that in a minute. The benefits of overall market basket growth. This is where you need to start.

The current strategies tend to focus on a single item or a single brand. In other words, if I promote this brand when the retailer tells me to promote it at this price point, etcetera, what will that do for the lift of that brand? I want to challenge you to think a little more strategically. I want you to think about, how does the shopper shop the store? When they buy your product, what else is in the market basket?

The pros are that this is the tired old strategy that everyone's been using. But if you're able to differentiate yourself by focusing on the market basket, then you'll a significant and sustainable competitive advantage. Using the same strategies that others use will not help you stand out on a crowded shelf. That's why this is so important. Consumers are wary of brands that promote the same thing every single month, every other month, or something like that.

The idea behind this, is you want to use your promotions to drive excitement to the shelf, and again, focus on how the consumer's shop. Again, we want to focus on the shopper journey always. Always, always, always. Shoppers make choices based on what they want. This is contrary to what a lot of the things that we talk about in shopper marketing, where, again, dollars are what drives profit, drives sales at shelf. Shoppers rarely purchase a single item at a time. Co-promoting dramatically boosts lift events.

For example, if you promote ketchup and mustard, well obviously, that's an obvious choice. That's going to help the lift between the two of them, but if you promote across a couple of different brands, or across different categories, that's going to help you even more. For example, at Kimberly-Clark, we would frequently promote Huggies diapers, baby wipes, pull-ups, and even Kleenex facial tissue, etcetera.

And by doing that, we could get a dramatically higher lift. Price is not the first consideration for healthy quality products. The core natural shopper that's driving all the trends across every category wants quality above all else, and they're happy to pay a premium, or even super-premium, for products that actually meet their needs. How does this work? We'll start at the end and work backward. Consider all the items in the shopping basket. Think about what they buy, and the relationship between your products and other products, and then build a promotional strategy that reflects the way the consumers shop your store.

Rolling up your trade marketing into a unified strategy is another critical component of trade marketing. This is why rinse and repeat is not a sustainable strategy. And what I mean by that is, most brands take what they did the prior year, they copy it into the current year, or the future year, and they tweak one or two things, and that's all. This is an opportunity for you to differentiate yourself, and for you to be unique. Your promotional strategy needs to be as unique as your brand, and that's one of the things that I think most brands overlook. The power of a unified voice.

The reason I put this in there is because this is the Achilles' heel. This is the opportunity for you to differentiate yourself and stand out on a crowded shelf. Have you ever played the game where I tell you a story, and then you tell someone else, and so on? By the time the story comes back around to you, it's virtually unrecognizable. This is the core of the strategies course that I created to teach brands these foundational elements. Literally, every brand struggles with this, and this is the strategy that I use to push around some of the biggest brands on the planet.

The point is this; if you can communicate as a unified team, everyone on your sales team leveraging or executing your retail strategy, lockstep, same passion, same enthusiasm, that's how you gain a significant competitive advantage. Retail execution, that's the cornerstone of any solid strategy. And a well thought out strategy, as I said, can give you a significant competitive advantage.

How do you leverage this at retail? Well, when you're talking to the retailer, don't talk about how I'm going to give you a certain penny profit per item, or how I'm going to give you a certain gross margin per item. Instead, talk about the overall shopper experience. How is your promotional strategy going to benefit the retailer over and above the strategies that they're used to?

Kurt: As we're laying the landscape here, I find metaphors are helpful tools to understand things from a different point of view. We're going to talk about the benefits of a trade marketing strategy. But before this, I am going to share a metaphor, and I think gardening is a great one for selling and trade marketing. If you think about sales as vegetables growing in a garden, imagine trade spending as being the water for that garden. And if all you do is plant your seeds and water the garden, but you don't take care of it, maybe you don't water as often as you should, or you over water, or you don't harvest at the right time, you're not going to maximize the yield of that garden. And especially with this topic of trade marketing, I think weeding is an especially applicable metaphor.

If a company that has a passive approach to trade spend performance and how their funds are applied, it's like a gardener that doesn't weed their garden. They're going to get some produce, but they also are going to grow a lot of weeds, and the longer the weeds aren't dealt with, the bigger they get, and the deeper their roots grow. What happens is, if you get to this point, and you haven't taken care of your garden, you're left with some unappealing options.

First of all, you can till up the ground and start all over, and that is obviously not something that anybody wants to do. Secondly, you can take some kind of large instrument and quickly address the problem, like a hedge trimmer. Right? It's going to ... And the analogy is, cutting your trade rate. This is going to quickly address the problem, but this leaves really sharp edges, gaping holes, and obviously, you're not digging out the root. The third option, which takes the most effort, is going foot by foot in the garden, surgically cutting out the weeds, digging out the roots, giving vegetables that remain more room to grow.

Now, unfortunately, the end result in each of these is that you still haven't maximized the yield of your garden, because you haven't taken care of it from the start. A proper trade marketing approach from the very start is going to, in the gardening metaphor, maximize the yield of your watering, and the produce that you get from your garden.

Dan: Love that analogy, and to go one step further, using this strategy is exactly how we're able to get huge double-digit growth sometimes, quarter after quarter, by leveraging exactly what Kurt said. The creativity, focusing on all the key elements. Planning ahead, what are the benefits? A lot of brands are reactive and not proactive. You need to be proactive. What is the difference? Proactive means that you've got a calendar, promotional calendar, that goes out several months, or years, preferably. The point is, as far as you can stretch this out, that's going to help you aim for the targets that you're shooting for.

The benefits of a proactive planning strategy are it also helps you martial all the resources that you need to be able to support the promotion. Don't take this for granted, as Kurt said. Don't farm this out to anyone. I am a firm believer that a brand needs to own its strategy in-house, and then leverage their brokers, distributors, agencies, etcetera, to execute their strategy on their behalf. Now, the reason this matter is because the brand needs to be responsible for trade marketing. The brand needs to own it themselves.

And when you start farming this out to different organizations, etcetera, well, the message gets lost in the clutter, and in the noise, etcetera. Back to the story, the strategy I was talking about, about sharing your story and telling someone else. This is where having a unified selling strategy makes all the difference in the world. Here's where you want to leverage your partners to give you a significant and sustainable competitive advantage. You need to make this a priority, and you need to revisit it often. What does often mean? As often as possible. Some brands might revisit this once a quarter. Now, granted, I don't think daily makes sense. But certainly, a couple of times a month.

Kurt: And, from my perspective on planning ahead, I wanted to put a little definition around it. What we're not talking about here, Dan alluded to this earlier, is just setting trade rate targets, and planning a trade rate target, repeating what you did last year. What we're talking about is creating an intentional game plan for pricing and promotion that is based on your products, your consumers, and your playing field, your retailer partners.

And there are three big benefits from this. First, you're able to assess risks, make more informed decisions. Part of this is kind of planning is identifying all the options that you have, what are the risks associated with them, weighing your options, prioritizing them, and then also creating a response plan if things go wrong. And when you do this, you're not doing what it says up above, which is repeating what you did last year. What people will refer to as the insanity trap. Doing the same thing and expecting different results.

When you look at things more broadly, you create intentional pricing and promotion strategy, you are going to make more informed decisions. Secondly, you're going to avoid unprepared reactive responses. Nobody wants to be reactive, but that's how most of us are. By planning ahead, as I said before, you're going to think about what could go wrong and create a response plan. When you do that, you're going to deal with issues more quickly, and you're going to minimize damage.

And then, third, setting expectations. When you create an intentional strategy around pricing and promotion and then trade marketing, you set expectations in two ways. One, you created a hypothesis about what you believe is going to happen with your product sales. The actual performance is either going to confirm that, or not. And if something hasn't worked, you can move on, and you're going to do that more quickly. Secondly is expectations within your organization. Beyond, again, the trade rate, the volume target, the spending budget, when you talk about things more specifically in pricing and promotion, you're going to set expectations for your teams, and the outcome of this is higher quality dialogue and faster course corrections.

Dan: It's difficult, if not impossible, to hit a target that you're not aiming for. Goal setting is overrated, I hear that from a lot of people. The challenge is, it's really not. The challenge is that few brands, few people, have the discipline to do goal setting. Make this a priority. The reason this matters, is as you're developing your goals, as you're developing your strategies and aligning those with your goals, then you're starting to think about, what are the resources you need to put forward to be able to support those goals?

For example, if you wanted to promote your product in a store next month, how much additional product do you need to have in the backroom to support it when the promotion starts? This is a number one reason why a lot of brands, a lot of retailers, excuse me, have out-of-stocks. If you can help the retailer avoid out of stocks, and then avoid having too much back-stock after the promotion's over. Simple things like this are going to help you stand out.

How often should you revisit your goals? As I mentioned, you should revisit them on a regular basis. This simple strategy can help you rise above your competition. Don't expect the retailer to manage your promotions. This is your brand, your name is on it, you need to take ownership of each and every aspect of your sales strategy. A simple strategy like this could give you a significant and sustainable competitive advantage if you execute properly.

How is your trade marketing plan tied to sales and marketing? The Achilles' heel of most brands, especially big brands, is that they're very siloed in their sales and marketing strategies. They frequently talk past each other. Now, what I mean by this, is that as a brand gets bigger, and they have a sales department, and they have a marketing department, those two become further and further apart. The goal here is to have everyone act as a cohesive collaborative team. The reason this is such a huge issue is that the marketing departments, a lot of companies, might allocate the amount of money the sales department gets to execute with. Where a sales department is trying to execute based upon what the goals the marketing department puts out.

If they can work together on the same strategy, and lockstep, that's going to help you get more out of your trade marketing ROI. An effective trade marketing plan requires the input of both sales and marketing at all levels of the brand. Both sales and marketing need to own the plane in its entirety. More importantly, this needs to go beyond senior management.

I know a lot of companies that I've worked with that have people that work out in the field, that know creative opportunities, know creative opportunities to help grow sales and their brand, help differentiate their brand. But those are always transmitted up the latter. Leveraging your entire team is going to help you compete more effectively than your competitors. More importantly, your competition won't have the discipline to do this.

Kurt: Now, in trade marketing, there are four big areas in a proper kind of structure. Your pricing and promotion, the volume, the trade spending that's involved in that plan, and then your performance. Now, there's a lot of terminologies, and assuming that participants here are CPG folks, I'm just going to focus on some of the things that I think are really important to recognize about these four areas, and I'm going to start with performance.

There's the basic trade spend performance metrics of dollars per case, and then maybe a better one is dollars per incremental case when you're looking at promotion. But more and more companies are looking to understand the contribution and return on investment. And what I think is important to understand is that return on investment involves every other one of these elements, and you cannot think about them in isolation. As an example, ROI requires you to understand incremental contribution, and contribution being the profit of the promotion that Dan's going to talk about a little bit in a second.

Incremental contribution means that you need to know incremental volume. When you have an organization that just plans total volume and doesn't think about things in based incremental, you're not going to be able to get to ROI. You also, in ROI, need to know what your trade spending is, but you need to know that by promotion. And I've experienced many, many companies that do not yet actually and truly associate promotion spending to specific promotions. And all of that, then, comes back to what exactly you're doing, and putting a price strategy together that includes regular price, promotion price, promotion mix, and promotion frequency. All of these things are over related, and my advice is, again, don't look at them in isolation.

Dan: Thanks for the segue, Kurt. Most brands focus on sales velocity, especially small brands. Here's the mistake, here's the problem. Big brands have deep pockets. Big brands can buy promotions. Big brands can buy a velocity. The challenge is that small brands, there's no way they can compete head-to-head, toe-to-toe, with some of the bigger brands with deeper pockets. You need to be creative. You need to think about, how are you driving sales? The reality is that if you promote heavily, you're actually pulling dollars out of the category. Let's focus, as Kurt said, on contribution.

But, before I go there, I want to highlight one of the things that I think creates a lot of issues for a lot of brands. Heavily relying on what is called push point category management. Relying on canned topline or templated reports can cause you to overlook the insights. Here's why; a lot of the databases are not coded around the way the customer shops your category. Those errors in the database and I don't mean errors as in intentional errors, but because they don't align perfectly with your core customer, that can cause you to overlook some of the key insights that are actually driving sales across every category. Across your brand. Across complementary categories. For example, plant-based, etcetera.

Don't overlook the importance of contribution. Contribution is the amount of dollars that you can take to the bank. How is it calculated? Dollars per point of distribution. Time divided by sales, either dollars or units. Now, why does this matter? Because, again, we're focusing on the contribution to the brand, to the category, to the retailer. This contribution impacts the health of your brand and the health of the category. This is how you help your retailer partner drive sales and profits in the category, and help them compete more effectively.

And to do this, you need to not be involved or engaged in every single promotion that comes your way. You need to be able to pick and choose which promotions are best suited for you, and which promotions are going to help you raise the needle, raise the bar, drive sales, etcetera. How much does your brand contribute to profitable category growth? Is that something that you know? It's something that you should know, and it's something that you should be able to share with your retailer. And when you're talking about your contribution, again, what is the contribution of the things in the market basket that aligns with the brand that you're selling? That aligns with the shopper that you attract?

How do you leverage this at retail? I think we need to change our conversation at retail. I think we need to focus on what really matters. What matters most is helping that retailer remain relevant. Helping that retailer retain the customers that are coming back in their store. Helping that retailer compete more effectively, and helping that retailer drive a reasonable profit in all their categories. One of the best ways to do this is with a multichannel approach.

Traditional strategies and why they fail. When we're focused only on one item, on one retailer, on one specific product, etcetera, one category, that overlooks what really matters. The opportunity that we have to drive sales across all the retailers that we support, across all the different channels we support. This is one of the greatest opportunities, I think, a lot of brands overlook. Now, this is a little bit more complicated than looking at historical data through syndicated data providers, etcetera. This is where knowing your shopper, how your shopper shops your category, how your shopper shops your products, and where they buy their products. If they buy something online, what else are they buying with it?

If you were to put together a strategy where you have a promotion, a deep dive promotion, and a traditional brick and mortar store, and at the same time, have an online promotion, that's a great strategy that you can use to leverage, to be able to drive sales back to that retailer. As I mentioned earlier, brands need to own their strategy. More importantly, you also need to own your shopper. This is your most valuable asset. If all the retail stores disappeared tomorrow, who would you sell your products to? Now obviously, that's not going to happen. But the point is this; if you can develop a relationship with your core customer outside of traditional retail, then you can leverage that customer to drive sales inside of a store.

I mentioned earlier that if I'm already planning on buying your product, and you're rewarding me to buy their product, that's not an effective trade spend. Instead, if I'm an evangelist for your product, and you've got a relationship with me online, outside of the traditional store, you could perhaps give me a coupon, a high-value coupon, to answer questions about innovation, or how I buy your product, etcetera, that I could use, then, in traditional store.

Leveraging creative strategies like this can give you a significant competitive advantage. And more importantly, that's how you convert an occasional customer into a loyal evangelist. Adopt a robust digital strategy. A solid digital strategy can add rocket fuel to your growth. And this means, not just simply putting products on Amazon, or Jet, or a retailer's online store. This means leveraging your trade spending, your overall market approach as you put together your trade plans, and as you help drive sales in the category. Remember, the customers are your first priority.

One of the other things that I think we overlook is the ability to drive sales through co-promoting, dual merchandising, etcetera. Your creativity here can pay huge dividends, and it all begins with how the customer shops your brand. When they buy your brand, what else do they buy? This is where understanding your market basket strategy pays off. Consider promotions that compliment your brands. Think about this; if you had the opportunity to go talk to every one of your customers when they buy your product, or when they choose your competitors product over your product, and understand, at that level, why they made the choices that they do, that would be tremendous in terms of giving you insights.

Buying shopper market data, horribly expensive. But this is one way where you can leverage your ability to drive sales in-store by a better understanding of how your consumer buys the product. And by the way, if you have a digital strategy and online strategy, this is how you start collecting those insights. The impact on this can dramatically increase your lift and your promotional ROI. How do you leverage this strategy? Again, you tie it back to the customer that the retailer's trying to attract to their store, by leveraging the strength of the unique brand, of your shopper that buys your brand.

Kurt: As we zoom in here from the principle of omni-market approach, and different creative types of merchandising, then we come back to mix in frequency and depth of promotions. And unfortunately, there's no formula for this. There's no exact formula for this, and the starting point is understanding your product, what consumer needs it meets, what your objectives are for your promotions, and ultimately, what funds that you have to promote.

Assuming that you're just starting out, you can take a look at like products and see what kind of things they're doing, and what kind of inferences you can take on their performance. You need to identify your retailer's margin requirements to understand what it's going to cost you to discount your prices. And then ultimately, it's putting together a strategy that is specific to your product, it's target consumer, and ideally, that specific customer.

For example, the pricing strategy. You are well to do to try to get as good of an understanding that you can of your shopper's response to price changes. And in this context, I'm not talking just about promoted prices. You look at pricing together, promoted price and regular price. This is something that's going to affect your investment decisions for discounted prices. And then a couple of other best practices. Negotiation is, it's, I think, an underused tactic because manufacturers just need to maintain a relationship.

But at the end of the day, this manufacturer and retailer relationship has two parties, and they both need one another. Please negotiate whenever you can. Try to get something that gets your product, when you spend money, get activities that will put your products in the hands of consumers. Okay? Another best practice is always to pay on scan whenever you can. This is the type of spending that gets directly to consumers most effectively. The alternatives create opportunities for spending money that doesn't work for you, and it's usually in the form of forward buy.

Again, assuming that you're starting out, and you don't have the advanced analytics that larger companies have, you have to just test, and test, and test, and do different things, and track your results, and ultimately, do more of what works. And if something doesn't work, don't repeat it. Move onto something else.

Dan: We talked about some of the strategies to leverage the insights of your consumer. One of the best ways to do that, tying back to what Kurt just talked about, are in-store demo strategies. The reason this is important is that this gives you a unique opportunity to have a one-on-one conversation with your current and future customers. This gives you an opportunity to mine those insights that we were talking about just a little bit ago. This gives you an opportunity to understand what that customer looks like, how they shop the category. When they buy the category, what else do they buy?

If you want to know what a successful in-store demo strategy looks like, listen to the podcast episode, Brand Secrets and Strategies, 123 central in-store marketing strategies that put your customer first, and grow sales and profits.

Kurt: A couple of other best practices to help you in this area of trade marketing. Number one, make it a priority as early as you can. If it's not your largest expense right now, it will be at some point. The industry average is 25%, and it's growing. And as Dan mentioned earlier, 70% plus of promotion spend is not efficient, does not break even. Right? It's a huge portion of your P&L and the more attention that you can give to it, the better. Create intentional pricing and promotion strategy, and that's your game plan.

And again, we're not talking about trade rates, and volume targets, and spending targets. We're talking about mixed frequency discount plans for your promotions. Use scorecards to set clear expectations, and track your results. And this is not an easy step here, because data is so hard to get, and in some cases, expensive. And as Dan explained, in other cases, it is not existent. But do what you can with what you have in the tracking of results. Weed the garden, go beyond the top line, look at what tactics work and what doesn't work. Don't copy and paste, because ...

And you can fall into this trap early. And when you do that, again, going back to the weed analogy, when you just duplicate, all you're doing is you're allowing the weeds to grow, and the roots to get deeper. It becomes harder to change, the further along that you get. And then, finally, negotiate. There are two parties. You both bring unique factors to the relationship.

Dan: I want to thank the CMA for inviting us on and having this conversation. And I also want to thank Kurt for showing up and participating in this. Because this is such a complicated area, trade marketing, Kurt and I are in the process of putting together a lot of great content to help support brands, so stay tuned. One of the things you can do is listen to the Brand Secrets and Strategies Podcast. We've actually created two podcasts now where we talk about this important topic. This is also one of the most important topics that people are asking about.

You can learn more about it on my podcast, Brand Secrets and Strategies. In addition to that, there's a free guide here that will help you get started. Trade management essentials to grow sales, to grow and scale your brand. Again, this is a complicated topic, you need to own it. You need to understand all the variables, and even if you use some of the push-button tools that are out there, you need to know how they work. You need to know what the mechanics are behind the tools so that you can get the most out of them so that you can differentiate your brand from your competition. Phil, we're finished.

Phil: Okay. Hey, Dan, Kurt, that was outstanding. I got a tremendous amount of value out of listening to the best practices at the end, and the way you identified those. That was outstanding. To the audience, please, now is the time we're going to do some Q&A with Dan and Kurt. If you have questions, go to the chat room, and go ahead and enter your question, and we'll be able to pick it up here, and I will convey the question to Dan and Kurt.

Once again, if you have a question, enter it in the chat room. We've got people here monitoring those, that forum right now, and we'll be able to pass the question on up to Dan and Kurt. All right, I do have one question here. The first one that came in is, what is your opinion, what is your opinion, is the best data source to understand what is in the basket in this omnichannel world?

Dan: Do you want me to take that, Kurt?

Kurt: Please.

Dan: The best data source, honestly, is to go out and do the work yourself. Go out and get to know the customer. Like I said, if you can ask the customer out of the shell, what do they buy when they buy your product, etcetera, that's the best source. The second best source is to do surveys. I have baked surveys from customers using some of these strategies we've talked about, into their sales presentations, that have helped them gain incremental distribution, etcetera. From there, then, of course, you can buy the data. And there are a lot of products out there where you can actually go out and physically buy the data, Dunnhumby, etcetera. And those insights, those resources, are great.

But here's the watch out. You need to understand who that core customer is that's buying your product, and differentiate them. What I'm getting at here is, instead of commoditizing the customer, like a lot of those tools, do. Female, head of household, two, going on three kids. Get to know who your core customer is, and understand how they buy your products, and how that differentiates from traditional strategies that said all females buy there, all females of this age group, whatever, buy these products at this time. Does that make sense?

Phil: Yeah, absolutely. Absolutely, from my perspective. Okay, I have another question here. You emphasized the need to track promotion results. This infers that many do not. Why do you think that is?

Kurt: Well, priorities. I would say there's, I think, a view out there that trade spending in the cost of doing business, and as a result of that, you kind of just take what you get. I think there's a better approach to that. I also think that the proactive, reactive piece comes into it. I mean, people are just, teams, organizations, are just not doing the work upfront to plan, and they are reactive. And instead of understanding what happened, they're just looking to the future to see, what's the next promotion that I can get?

And then the relationship piece comes into it, as well. I think there's obviously a need for the retail outlet to sell products, and going back and saying something didn't work isn't all that enticing. I think there are many reasons that people don't, but I think there's a lot of benefits if you do go back and look at your promotion results.

Dan: I think a lot of people also just don't know what questions to ask. Thanks, Kurt.

Phil: You've talked about weeds developing if you don't have a trade marketing strategy. Can you provide some specific examples?

Kurt: Yeah. Yeah, Dan, I'll take this one. At the end of the day, the weeds are spending money on things that don't move the needle. Right? And it's either your regular price, or it's promotions. If you have a product that doesn't, it is not affected by price changes. The consumer response to a price change is not that deep. There's no need to have an EDLP price strategy where you're subsidizing the price every day. Right? That's one kind of weed. Right?

Let's say you're not able to get a feature or a display type of ad, and all that's left to you is a price discount or a TPR. Right? Again, if that doesn't move the needle for you, all you're doing is spending money unnecessarily. And then, another area where weeds can grow that we haven't talked about today, yet, is in the area of settlements and deductions. And validation of deductions, it ties back to having a plan of what you expected to happen. And then negative outcome there, or the weed, is that you have invalid deductions come through that are just pure profit leakage. An approach that allows you to, very specifically, identify what a deduction matches up to, and do it quickly, is another weed that you can prevent from growing.

Phil: Okay. Thanks, Kurt. Here's another question. Could you please repeat the contribution equation that you mentioned earlier?

Dan: It's ACV divided by dollars per point of ... Excuse me, dollars per point of distribution is the measure. It's ACV divided by sales. And the reason this matters is, ACV determines the health and the wealth of your product, of your brand, of your item, etcetera. That's something that's calculated by the syndicated data providers. The reason that matters so much, is we can understand how well your brand is performing at a given retailer because not all retailers are the same. Now, when you divide that by your sales or your units, now you're understanding what the contribution is of your brand to the overall category. As I've always used it, this is the profit. These are the dollars, if you will, that you take to the bank.

Phil: Okay, thank you. Got another question here. We've got a few coming in still. Is there a place where I can find data around mail-in rebates? I'd like to understand, for every mail-in request, how many consumers were influenced, and how many of those were incremental, new to the brand.

Dan: Kurt, you want to do that one?

Kurt: Dan, that's one I'll followup on. We can take the information and get back to the individual that asked that.

Phil: Okay, that'll work after the presentation, Kurt, if you want to respond, then we'll connect you with the individual who's asked the question.

Dan: I have something I want to throw in there, if I may. Coupon rates are extremely low. By leveraging your digital strategy, this is how you're able to identify better who buys your product. If you have a link on that coupon that they can click on to get something extra to get involved in your community, that's an easier, more effective way to track that. It's an easier, more effective way, for you to drive, develop a relationship with that customer.

Phil: Another question here for you. Distributors require OIF in order to treat you well, and not discontinue products. How do these play on the overall promotion strategy? Four times a year, great bridging opportunities for them, and reduce your budget for the idea scan promotion you would want. Did that make sense to you guys?

Dan: Yeah. It does, actually. Well, first, I'll start by saying that distributors and retailers use promotions as a profit center. That's contrary to just talked about. That's them, I hate to say, lighting their path. That's not the right terminology. That's them using your promotion to drive bottom-line sales. Overall profit to the retailer. The challenge is that most of those are ineffective. You need to go beyond that. A lot of the brands, a lot of the retailers, excuse me, retailers and distributors, are going to push back on that.

This is where you need to leverage the strength of your consumer. Yes, you do have to play the game. Yes, you do need to participate in their programs. But not each and every one of them. And as Kurt said earlier, you need to pay out scan. If they're not going to give you some sort of performance metric, I'd avoid that like the plague. That's not going to be effective. It's simply throwing money away because you have no ability to identify how well that particular promotion performed.

Kurt: Yeah. And I would just add to that, that is, the distributor and indirect retailer promotion planning is going to come down in large parts of resources. There are some indirect retailers where you're going to want to present promotion activities to them directly, and that's where you have an opportunity to do scan promotions.

In other cases, you have a reliance on the distributor to pass along your promotional plans, and as Dan mentioned, to distributors and to retailers, promotion money is income, and that's something that they're going to want to do. There's a balancing act because the most effective kind of promotion that you can get that ensures that the money goes to the consumers that scan, but in some cases, the off-invoice allowance, or OI that was discussed, also needs to be part of the mix.

Dan: That's part of the strategy that we're talking about. If you can leverage the customer to go into the retailer and say, "Well, how do I get your product?" That's going to help change the conversation. One of the things that we didn't talk about, that I really wish I would've brought up earlier, is that the more effectively you can do this, the more attractive your brand is to investors, the more attractive your brand is to a retailer.

Being able to push back on a distributor or retailer and say, "You know what? I can't promote at that level 12 times a year. But I could promote a couple of times a year at a deeper level with displays and stuff like that." To be able to have those conversations, going back to what Kurt said about negotiation, that's where you can maximize your trade spending ROI. That's where you change the conversation from being another product on their shelf, a commodity, if you will, to being a value-added resource, or partner to that retailer.

Kurt: And just to conclude, the risk with the off-invoice is that it doesn't make it's the way to the consumer, and that's what we talked about earlier. You have a couple of activities that are just not desirable. If you're paying on shipments, and it doesn't get passed onto the consumer, all you're doing is, you're subsidizing base volume. Again, I can't say that you can totally avoid it, but you should think a bigger picture of who your strategic indirect customers are. Try to do as much as you can with them, specifically, and also recognizing that the OI needs to be part of the mix to maintain your relationship with the distributor.

Phil: Okay. I've got one more question here. When should a company start thinking about getting tools to support the process?

Dan: Kurt's going to want to answer this question, but I would say you need to understand the mechanics. You need to understand how to use it. Regardless of what kind of tool you adopt, you've got to understand how all this works. Because if you throw all your data into something, and you push a button, and it spits out a report if you don't understand where that information came from, why that matters, how that's valid, how you differentiate your product, then you're simply just throwing money away. The better you can understand this, the more you can take advantage of those tools. Kurt?

Kurt: Yeah. I'll just kind of explain the path that I have seen historically. When a company first starts out and is launching a product, or launching their brand, and there is a product, and a customer, a few customers, spreadsheet tools are more than sufficient to get the job done. What happens over time is that, as you gain distribution, you add more people to the process, there are simply more transactions. We talked about deductions a little bit earlier, that at some point the lack of a system to kind of encompass the process and efficiently communicate, it becomes a problem.

That's when companies tend to look to a system like trade promotion management. And at that point, the value is more about getting more efficient. Right? And then as time goes on, and again, you are growing, and you've got more and more resources, that's typically when companies tend to look towards the optimization space and adding advanced analytics. Whether that's just pricing elasticities and promotion lifts, or some post-event analysis tools that are out there or an optimization system that lets you predict the outcomes of different scenarios. That tends to be the progression.

Phil: Okay. I do not have any additional questions. And I'd ask the audience one more time, if you have questions, please go into the chat room and enter them, and I'll be glad to forward them right here to Dan and to Kurt. In addition, please look on the screen and make sure you jot down Dan and Kurt's contact information, and you can follow up with them directly if you would like at any time, and they'd welcome that as well. With that, I'm going to say, Dan and Kurt, do you have any additional closing comments that you would like to make?

Dan: I'd like to just say, thank you again for this opportunity. I really appreciate it. Kurt, thanks for coming on this journey with me. Again, we're coming up with a lot of, we're going to be coming up with a lot of great content that's going to help answer these questions. It's going to help these brands, brands of all sizes and shapes, including retailers, figure this out. Again, thank you, Kurt.

Kurt: Likewise. I'd just like to thank CMA for the opportunity to participate in this.

Phil: Gentlemen, outstanding presentation. The content was really exactly what we would love to hear in this arena. This is part of a series of presentations. Keep an eye out, for everybody out there, in our newsletter, because Dan will be coming and presenting again in the near future. With that, I would like to wish everybody a wonderful rest of the day and enjoy the weekend coming up. Take care, everybody. This concludes the broadcast.

Dan: I want to thank the Category Management Association for hosting this webinar series, and I also want to thank my friend Kurt Kaiser for participating and adding his insights. Kurt and I are in the process of creating a lot more content about trade marketing. About how to maximize each and every selling opportunity. About being able to assess your trade marketing so that you can maximize your trade marketing ROI. So that you can get the biggest bang for a buck so that you can promote more effectively. You can learn more about that on my website. This week's free downloadable guide is Trade Marketing Essentials to Grow and Scale Your Brand.

This is an overview of some of the many things we talked about today. The foundational things that you need to have in place to successfully grow and scale your brand. You can get instant access to it on today's show notes, or today's podcast web page, by going to brandsecretsandstrategies.com/session156. Thank you for listening, and I look forward to seeing you in the next episode.

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Category Management Association https://www.catman.global

Thanks again for joining us today. Make sure to stop over at brandsecretsandstrategies.com for the show notes along with more great brand building articles and resources. Check out my free course Turnkey Sales Story Strategies, your roadmap to success. You can find that on my website or at TurnkeySalesStoryStrategies.com/growsales. Please subscribe to the podcast, leave a review, and recommend it to your friends and colleagues.

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Until next time, this is Dan Lohman with Brand Secrets and Strategies where the focus is on empowering brands and raising the bar.

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