The Importance of Customer Data in Trade Promotion Optimization

    

The second-largest line item on a company’s P&L is often trade marketing. It eats up  nearly 20% of gross sales, and every year, manufacturers spend over $200 billion on trade marketing with their American partners alone.

As a practice, trade marketing hasn’t kept up with the consumer shift to digital buying.  Thus, current levels of trade spending are simply unsustainable. This means losing millions of opportunities to engage with customers, and also presumably, millions of lost sales.  

Digital marketing equips companies with unprecedented quantities of customer data, which they leverage by way of personalized offers, improved segmentation and more. 

That being said, many companies are oblivious to the fact that customer-level data can also boost trade marketing efforts, and in this post, we’ll discuss how.

Understanding today’s trade marketing challenges

CPG companies, and retailers alike, have initiated efforts into digital marketing, but these efforts are regularly misaligned. This is, in part, because the goals of manufacturers and retailers differ slightly; manufacturers employ trade marketing to get retailers to purchase their goods, while retailers use consumer marketing to sell these goods to customers.

Today’s retailers have varied focusses. Many companies are using digital marketing to engage with customers, constantly, and in every way imaginable, so retailers are continuously hurrying to create new mobile apps, send more email newsletters, and create even more viral social media campaigns throughout the year.

These strategies can be effective when implemented correctly, but the motives are sometimes misunderstood or misdirected.

Retailers are active in anticipating their customers wants and needs, to beat out competing brick-and-mortar stores and e-commerce rivals. They’re doing whatever they can to serve loyal customers, but retailers view competing companies as their only adversaries.

The misalignment between trade and consumer marketing

Trade marketing and consumer tactics are siloed in our current retail ecosystem. Manufacturers focus on promoting their products on partner websites, while retailers fixate on engaging customers through digital marketing tactics. Unsurprisingly, these disparate marketing efforts result in missed opportunities and a lower ROI. 

Consider a CPG company that deems discounts the best stratagem for one of their products. This company doesn’t know that their retailer has an ongoing promotion of a different, complementary product, and consumers would likely buy the CPG company’s product regardless, rendering the discount unnecessary. 

Retailer customers already provide the data necessary for improved decision-making. POS data has been a retail staple since the 1970s, and it’s also used in trade marketing. But companies that have implemented digital marketing tactics have even more data on customer behavior. 

Think about a grocery store that mirrors mobile app deals on their competition. The deals may work for their competitors, but the store’s own customers could respond differently. The only way to know for sure is to analyze their buying behaviors.

Customer data leads to improved coordination

Customer data collected at the retail level is equally advantageous for CPG companies. From our aforementioned discount example, had the CPG known about the retailer’s marketing campaign, they’d know to hold off on the price adjustment.

Manufacturers must recognize that both trade marketing and consumer marketing impact buying decisions, and as such, they need both to understand the true ROI of an in-store promotion.

CPGs and retailers can mutually enhance their trade and consumer marketing strategies by sharing customer data. Of course, this requires careful coordination between the two. There are many factors to consider and we’ve listed a few below:

  • Do you have the infrastructure in place to funnel all customer data into a centralized hub?
  • Do you understand what insights both parties will need to make actionable decisions?
  • Are you analyzing the right data to uncover those insights?
  • What processes do you need to share data and coordinate marketing strategies?

Retailers are right justified in keeping an eye on their competitors, just as it’s reasonable for CPG companies to do what they can to promote their products to retailers. Nevertheless, exhausting customer data to cooperatively ground trade and consumer marketing strategies is worthwhile, and by optimizing these efforts, you can capture a greater ROI. 

Are you ready to elevate your trade and marketing efforts?

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