How Can AI Optimize Your Trade Promotion Strategy?

Date: July 12, 2020

At Wise Athena, our Artificial Intelligence is your easy-to-use tool for Trade Promotion Strategies. Athena is a quick learner with countless benefits to aid your company on its successful TPS journey! These large advantages also single out pre-planning to post-evaluation of the promotional grids. Let’s jump right in, and take a look at several optimization techniques AI uses for your TPS:

With regards to planning, AI’s ability to understand which price points are optimum goes on to achieve maximum volume uplift while constraining the margin as little as possible.

  • The optimizations also consider how key competitors in the market may react.

CPGs benefit from AI’s specific learning process and its speed: building, optimization, and evaluation can all be achieved much faster compared to traditionally setting a promotional grid.

  • Avoid delays in POS implementations and improve negotiations with on time price list deliveries.

Accurate decision-making is yet another one of AI’s trade promotion strategies. 

  • AI ensures greater than 85% certainty = better apply-learn process.
  • Where the application precedes a tool that already learned the market behavior, it’s then able to recommend the best promotional solution.

Now that you’ve seen the solid benefits of AI for TPS, let’s delve into what you should know prior to committing to plan your TPS. Pre-plan your new TPS by:

Having a clear objective: What do you expect to gain? Once you decide to either focus on increasing volume or maximizing margin, it will be easier to find the best products and achieve an ideal discount level.

  • If the goal is to be more successful than your competitors, your focus should be on the products that have the highest interaction with your competitor’s portfolio.

Deciding on your Trade Promotion Strategy budget:

  • Know how much money you can invest so you can plan realistically, optimizing every dollar.

Understanding the major rules clearly; “knowing the playground;” Keeping the limits in mind!

  • To guarantee the promotional grid can be applied, your entire team should be aware that both retailers and CPGs put certain restrictions in place.
  • Some rules may be negotiated, and “breaking the rules,” can often be valid in order to shift paradigms for more effective optimization.

“Know how much money you can invest so you can plan realistically, optimizing every dollar”.

Once you’re comfortable with your TPS set-up, it’s time to actually start planning! There are a few basic questions you should ask and answer when you’re organizing your plan: What, When, Where, and How.

Remember, most importantly, there needs to be a “what,” an objective. You may most certainly group these categories as you see fit. The following TPS information focuses on What and When then Where and How: 

What: Make sure to name your objective/goal to give yourself direction!

When: When considering your promotions, decide which moment of the year might be the most fruitful. Depending on the category nature and the goal (increase volume, etc.), you can take advantage of seasonalities or market dynamics. This decision is key to success, as you keep in mind elasticity for the same product is not the same across the year.

  • When you continue to think about when your promotions would be most successful, consider that products with the highest elasticity should be the first option due to a lower discount necessity (and investment) to elevate volume. You may lead with the highest sales option, but be aware that according to the sales level, more investment money may be necessary.

Where: Decide where the promotional grid will be applied. The promotional grid’s application depends on the target of each retailer, the portfolio offered, the sociodemographic characteristics of each zone, etc.

  • You can ensure you’re doing the best optimization of invested money based on several points: talking about retailers and country regions; having more granularity on the implementation; and remembering elasticity is not the same in each region or with each retailer.

How: Exactly how deep should the discount level be? There’s a huge paradigm about “magic price points,” usual level of discounts, but this doesn’t mean these are the best strategies.

  • Along with changing elasticity are shifting price points—elasticity isn’t linear; the more detailed the elasticity, the more optimized and accurate the strategy will be = High Definition Elasticity

Now let’s briefly discuss promotional evaluation relevance by stating how the mechanicals applied to trade promotion strategies are countless—through various methods, CPGs begin to understand what goes right and what goes wrong in their market in order to avoid losses, ensuring success:

  1. Set the basis of comparison. You may use previous sales results against promotional sales results, and the basis is going to set the first point of comparison in the evaluation, determining failure or success.
  2. Set the key metrics to evaluate. You can establish a main goal to your promotion and set “smaller” goals. Say, 20% of volume uplift is the goal but a 10% savings on the investment is quick to follow.
  3. Set the maximum lapsus of time for evaluation. CPGs market is fast evolving, so the evaluations of promotional grids should be continuous, right after the season ends. Often, when the promotion isn’t evaluated immediately, it’s no longer valued, so move fast!

Wise Athena hopes this was friendly and informative! If you’re a CPG company looking to improve your trade promotion strategies process and seek to reduce large promotional investments to achieve higher volume, then let AI’s big brain become your trusted ally, and experience our confidence and accuracy!

Written By Janet A.
Responsible for ensuring the creation of value for the clients in his charge, optimizing prices, promotions and the prediction of their volume with high levels of certainty.

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