Cadbury Schweppes Plans to Collaborate
With Retailers on Pricing and Promotions
By John Karolefski
Cadbury Schweppes Americas Beverages is planning to start collaborating with retailers on pricing and promotions. Its first trading partner in this new effort will be Food Lion, the operator of 1,300 supermarkets largely in the southeast.
The beverage marketer will be building on a successful relationship with Food Lion in the areas of space management and assortment planning. The companies will be relying on pricing and promotion software provided by DemandTec, a leading provider of on-demand optimization solutions and a vendor partner of both of them for
several years.
“The guidelines we use in space and assortment are going to be identical almost to what we are going to do in pricing and promotions,” said Craig Hodnett, vice president of category management at Cadbury Schweppes. “When you’re working with Food Lion, you’re not in silos. People talk with each other. That’s what makes us successful.”
He outlined the new initiative following a presentation on trading partner collaboration at the annual convention of the National Retail Federation (NRF) in New York recently.
Joining him at the podium were two executives from Food Lion (Charles Davis, vice president of strategy and analytics, and Lewis Campbell, vice president of merchandising services) and two from DemandTec (Dan Fishback, president and CEO, and Marc Dietz, vice president of product marketing). The executives stressed innovative thinking and best practices in the areas of collaborative assortment, space planning, pricing and promotions.
“We believe that assortment, pricing, space and other core tactics are very strategic today,” said Hodnett. “That's why I like to see them linked together. With the Food Lion consumer, you've got to hit all of those buttons. Since they’re so linked, we’ll be talking strategy for carbonated soft drinks. We’ll be doing assortment, space and how pricing fits into it.”
According to Hodnett, not many retailers are using the different strategies of category management very effectively with their pricing and promotion strategies. For example, say next month the retailer wants to drive traffic.
“Typically a manufacturer would give a deal (to the retailer),” he said. “But what we’re really talking about is an opportunity. Before the manufacturer throws out a deal, we can understand what the
strategy is. What’s the best package to do that with? How does that differentiate the customer in the marketplace? Now, let me present
the deal to the customer. That’s new thinking. It doesn’t work that
way today.”
Hodnett said Cadbury is excited about this opportunity because it will be done in collaboration with Food Lion, a long-time partner. “We’ll be doing ‘what if’ strategies. Because of the speed, we can quickly evaluate different strategies. That will be a real point of difference. These guys already deal with assortment and space. We can take it to another level by applying strategy to price.”
Hodnett said trading partner trust built up through collaboration in space management and assortment planning can carry over to price and promotions. It is shaping up to be a win-win.
“Price is so strategic,” he said. “That is where 80% of your funds are being spent. I predict a lot more companies will get on board. I sit on two share groups with all the big CPG companies and we talk about this area a lot. I know it’s drawing the attention of my peers. The collaboration doors are really opening up with retail partners.”
Dietz of DemandTec said the discipline of category management is changing in three fundamental ways: “One, it is becoming more analytical and integrated. Pricing and promotion are certainly linked; assortment and space have always been linked. It’s really a holistic process. What is the right assortment often depends on whether the price is right. Second, category management is becoming more shopper-centric, and third, it is becoming more collaborative.”
Indeed, collaborative planning can deliver significant benefits to
trading partners through better strategic pricing, product assortment and promotion optimization decisions, according to DemandTec’s Fishback.
Davis of Food Lion said the foundation of the collaboration model is the shift to customer centricity at his company. That wasn’t the model years ago when the subsidiary of Belgium’s Delhaize Group had a “one-size-fits-all approach” with all of the stores in the chain offering the same assortment, layout and pricing.
Nowadays, shoppers are segmented according to demographics and stores with similar customer demographics are grouped into clusters. Lewis of Food Lion said the goal now is to have the right product at the right time in the right place for every customer in every store.
JANUARY 2008
Google: Online Media Extends
Reach of Trade Promotion
By Al Heller
Google’s advertising network reaches more people in Chicago than the Chicago Tribune and twice the people in Houston as the Houston Chronicle, according to Brett Goffin, Google’s head of retail industry development. “We at Google don’t know what the love of the circular is. It’s not either-or. It’s about extending reach.”
Goffin, the online giant’s first full-timer dedicated to trade promotion, told attendees at a recent trade promotion conference that CPGs should extend the reach of their trade events through online media “because they drive offline sales.” He added that the “insight and vision” they gain would prepare them for a time soon when over 40% of all sales will be impacted by online media.
“What excites us is that people spend the same amount of time online (14 hours per week, according to Jupiter Research}, yet only 6% of U.S. ad dollars are spent online. The gap between ad spend and media consumption is a vast opportunity,” he noted. Indeed, online ad spend could grow from $177 per household in 2005 to $362 in 2010, projected Universal-McCann data.
Search commands 42% of today’s Internet advertising dollars, and “studies the past five years show that search has the lowest cost per acquisition of new customers than any other mechanism. It grows sales. That’s what trade promotion is about. Yet manufacturers and retailers haven’t gotten the tip of the iceberg around working together to do that,” he observed, speaking at the annual conference of the Trade Promotion Management Associates.
Consumption and buying behavior have changed most radically, said Goffin in his presentation on using online media for trade promotion. “With information at consumers’ fingertips, they are truly in control. No longer does the advertiser have to decide who the core customer is. Target customers now come to Google….You’d be hard-pressed to find a more qualified customer than one who tells you what they’re interested in. It’s similar to displays in stores. This is a virtual aisle seven where you just pay per click.” An added plus: CPG advertisers also see how many people clicked on an ad and how many sales came from that click.
“This comes back to the claiming process,” he went on to say. “Today it’s not about, Can you prove (performance) to me.’ The data is there, and you know the value of the click,” said Goffin, of how online analytics foster accountability. “Manufacturers and retailers collaborate around where and how they ran, and create creative controls to ensure that everyone is following the agreed-upon rules.”
Also positive for CPG advertisers: keywords they can own, and the ability to create standard ad templates for all of their partners to use.
In a Q&A session that followed, Goffin shared that for the near future, Google may figure out “a simple way to geo-target a specific Jewel initiative (say 30 cents off a Red Bull) and see how to drive traffic to the stores.” Long range, Google is “working with a CPG company to promote on the basis of psychographics, demographics, page content, and relevant context rather than what’s in an actual search. I don’t believe there’s a sophisticated manufacturer who’s fully captured that yet. But it’s a great idea for the future.”
Al Heller is co-author of Consumer-Centric Category Management (Nielsen/Wiley 2006) and president, Distinct Communications, LLC.
