According to a new survey from DemandTec and Booz Allen Hamilton, both grocers and CPG manufacturers believe collaboration around trade promotions is critical to their business success. At the same time, both sides remain frustrated by the progress getting there.
Of the retailers surveyed, 92 percent said collaboration was "very important" and 8 percent, "important." Of the manufacturers, 56 percent rated collaboration "very important," and 39 percent, "important." Key benefits of collaboration cited by both sides include not only ROI and effective promotions, but also revenue growth and more efficient planning.
However, the survey also found that although trade promotions are supposed to be mutually beneficial, 87 percent of manufacturer respondents reported they are "not satisfied" with their return on trade promotion events, compared with a still relatively high 50 percent of retailer respondents.
Dan Fishback, president and CEO of DemandTec, which helps both sides collaborate via its electronic deal management technology, TradePoint, told RetailWire that many of the leading CPG companies and grocers have come a long way in improving collaboration in trade promotions. This is partly because trade promotions have become a major cost for both.
But Mr. Fishback said many trade promotion efforts are less than optimal because both sides are still not fully embracing collaborative tools and processes.
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| Dan Fishback, president and CEO of DemandTec (right) last Thursday presided over the NASDAQ closing bell with Mark Culhane, EVP and CFO (left) |
"Historically, these two trading partners have been like two players at the poker table," he said. "They keep their cards close to themselves and they only collaborate when it's in their best interest. So historically, they have fought over every dollar of trade spend versus trying to figure out how to use that dollar to drive the benefits of both parties."
Collaboration efforts are also frustrated because both sides believe they understand the customer better than the other.
On the positive side, the survey shows both sides are more eager to improve collaboration. Mr. Fishback believes continual improvement will be driven by both "fear" and "greed." Many fear that the biggest companies have figured out how to collaborate and "that they need to respond." They also fear they must reach out to the other side to reach today's fickle and less loyal consumer.
"I think people are looking at a more challenging consumer and going, 'Holy smokes! We've got to work together to figure out what the consumer wants and address that need or they'll go somewhere else,'" said Mr. Fishback.
But "greed" is driving many to initially explore collaboration. At the minimum, according to Mr. Fishback, both sides are seeking cost savings and efficiencies in record keeping by putting the whole trade promotions process over a shared network rather than communicating through e-mail, faxes, and endless paper trails. This is helping many on both sides get on the road to better collaboration.
"We're not professing to be the Dr. Phil for the CPG and retail marketplace in that we're going to somehow get them to work together and reconcile their issues," said Mr. Fishback. "What we do is connect the two and we're allowing them to do it for their own good."
"So we're counting on greed and we're seeing success," adds Mr. Fishback, whose company went public on August 9. "But once they agree to reduce their costs, they can decide how many cards they want to show each other. The manufacturers can start to get more value out of their trade spend and the retailers can start making more factual decisions."
Discussion Questions: Why do you think the survey shows that manufacturers seem more frustrated by trade promotion collaboration efforts than retailers? What do you think are some of the main hurdles preventing greater collaboration?