Promotion Optimization: can retailers and CPG companies afford to go without?

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Companies the world over spend over $1 trillion on trade promotions annually (Nielson). That’s a mind-boggling number when you consider that most companies don’t break even on their investment!

“Over the last 20 years, trade spend has grown from 13% of gross revenues to nearly 20%, on average, while margins have remained relatively flat. The trend can’t continue indefinitely.” – Ernst & Young

Most companies still can’t validate such a huge expenditure because they can’t gain any transparency, yet promotion costs still remains the second highest expenditure after COGS. So why does everyone still pour money into trade promotions?

  1. Competitors running similar promotion campaigns bring down market prices, forcing everyone to do the same to stay competitive.
  2. Prices and promotions are still the leading drivers behind purchase decisions.
  3. Most importantly, companies lack the ability to measure promotion ROI and performances due to lack of transparency.

The first two reasons above won’t change – they’re dictated by the market. But AI has flipped around our inability to optimize value of trade promotions. With AI, companies are now able to:

  • Discover which promotions offer the greatest ROI
  • Track changes to promotion campaigns and the impact of each change
  • What would sales have been without any promotions
  • Forecast and model based off predictive analytics

I can’t think of any business that does not want to validate every expenditure and discover the value behind every investment. Don’t you want to prove the value of your promotion campaigns? Better yet, weaponize your organization with AI so you can IMprove the value of your promotion campaigns! Discover which promotions are making money instead of losing it.

In a world driven by metrics and analytics – from traffic congestions and delayed ETAs on Google Maps to home run and pitching analytics in baseball, companies are still operating with a black box when it comes to trade promotions. A trillion-dollar black box. Let’s shine a little light on it.