Consumer promotions and engagement (CPE) tactics, such as displays, coupons, gifts or other incentives designed to influence a purchase decision at the POS, represent a significantly underutilized weapon in the marketing arsenal. CPE can be incredibly powerful, but the ambiguity surrounding it means CPE is rarely deployed to an organization’s full potential. McKinsey found that organizations really don’t know where CPE money goes or how much they spend on these activities.
Unraveling The Mystery Behind CPE Spending
Typical CPE activities — which can be applied in-store, out-of-store and through digital channels — are often fragmented throughout an organization, with responsibilities spread across multiple teams. Field sales might run sampling, customer marketing could be handling coupons, while brand marketing, in addition to customer marketing, may deal with media activities. It’s a starkly different process than handling something like a TV spot where one team is assigned to take ownership from start to finish. Additionally, many CPE campaign activities require a lot of time and don’t fit into neat budget categories. McKinsey noted that 80% to 90% of shopper marketing and in-store activity can fall into the “other” bucket in a marketing budget.
Why does this matter? Because companies could be doling out far more than they realize, given that they have very little idea how much they realistically spend on CPE. And because CPE activities can have a marked impact on the outcomes of marketing mix models. For example, in past jobs I observed that small CPE investments could lead directly to significant sales spikes. Not only did this prove to me that large investments were not necessary for a big impact, but it also demonstrated that other activities like paid digital or TV ads might disproportionately get the credit. As a result, performance reporting is not accurate, which could lead to future investments that are counterproductive or investments in more expensive channels than necessary.
A Shift Is Underway
Consumer promotions matter, particularly as marketing investments shift towards POS. Research suggests that consumers make up to 75% of their buying decisions in-store. It is often an emotional or impulse decision, and one that a strategic promotion can influence. Some may shrug their shoulders at the importance of brick-and-mortar in a seemingly e-Commerce world, but according to the latest numbers, e-Commerce only represents about 10% of retail sales in the U.S.
Make no mistake, e-Commerce’s share of retail will continue to grow, but the importance of CPE in the future of retail shouldn’t be underestimated. As retail and CPG environments — as well as buying behaviors — change rapidly, it is imperative that companies solve the CPE riddle.
CPE activities can drive awareness and sales with consumers in the most relevant context — right when they are poised to buy a product. But inefficiencies in allocation and measurement have the potential to wreak havoc, particularly if resources are withdrawn from the activities that matter and moved to other areas that don’t have the same level of impact.
But all is not lost. There are three core actions retailers and CPG leaders can take to ensure they maximize ROI while continuing to satisfy customers.
1. Reconsider The Shelf
Think about how much time, energy and money goes into a TV commercial. Brands work tirelessly to ensure that every last element fits together perfectly and that the resulting product will resonate with shoppers. A great commercial can be a major boon for companies. Now, imagine if that kind of energy went into the shelf, where I would argue it matters even more because it’s what shoppers see immediately preceding a purchase.
The same way that advertisers recognize emotion as the most significant factor in driving a campaign forward, emotion also is vital to driving high-frequency, low-risk purchase decisions of consumer goods products. As such, planning and allocation of CPE activities should not be an afterthought. These tactics can significantly pay back when executed in the most compelling way for shoppers, and that involves getting the details right — from creative, to offer structure, to messaging and more.
2. Develop A Clear System For Collaboration
To give shoppers the type of experience they want, whether it’s online or in-store, there has to be collaboration between teams to be sure that everyone — and every detail — are aligned. This is easier said than done, but new technologies (and a whole market segment) are devoted to simplifying communication and workflows. Whether its Slack, Asana, Workplace by Facebook or a platform oriented specifically for promotions — whatever works for a given team — technology has the ability to alleviate day-to-day inefficiencies, eliminate communication lapses and assign ownership and accountability.
When teams collaborate closely, the left hand understands the contributions of the right; they know everything that goes into a promotion. This will help them get smarter about how to track a promotion’s impact, code its costs, and ultimately drive more value.
3. Look Forward, Not Backward
Just as technology can help teams work together in new ways, it can also help them more accurately gauge what people want. Rather than rely on outdated regression models not built for today’s real-time world, retailers can leverage the power of experimentation techniques that unlock the ability to quickly and cost-effectively identify concepts and offers that resonate with shoppers in the here and now. Couple that with advanced predictive analytics and you have a whole new way to consider CPE. Incorporating AI and automation into your marketing operations facilitates a granular, efficient, and less labor-intensive approach to measurement across all marketing, trade, and CPE investments.
By adopting the three strategies above, retail and CPG marketing will advance in unprecedented ways. Reporting will be more accurate, budgets will be allocated correctly, expenses will be cut and increased visibility and collaboration will facilitate more cohesion across promotions. But most importantly, the consumer will be rewarded with a better experience.
David Moran is the Co-Founder and Chairman of Eversight, the recognized leader in AI-powered pricing and promotions. Global brands and retailers rely on the Eversight platform to optimize pricing and respond to market conditions, deliver higher ROI on promotional spend, and enable data-driven collaboration on investments. Prior to founding Eversight, Moran was the Global VP Sales, Revenue Management for Anheuser-Busch InBev nv/sa, the world’s largest brewer. Earlier in his career, Moran was a leader in McKinsey & Company’s Consumer Pricing service line.