Today we are talking about how better reporting and tracking can address some of the challenges that promotions can cause in the supply chain in terms of inventory and customer service for organizations that are attempting to innovate. Typically, what you see with promotions, and this is the case with forecasting, in general, you have too much or not enough.
Typically, what we see, especially in kind of these difficult economic times, if you will, which I know is over used, but people are running a lot of promotions to drive demand. Some of those promotions are doing quite well, and some of those promotions aren't doing well at all. And you end up with a double-edged sword of, in some locations, you have way too much product, and other locations, you do have not enough.
So you have the problem of too much inventory and not enough inventory at the same time. And from not enough inventory, that obviously causes customer service issues and dissatisfaction. And if you have got too much, then you are going to have to have lower prices to get it out the door later on.
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Reporting in the Telecommunications Industry
With my work in the telecommunications industry, I am seeing lot of similar challenges, promotions of organizations who may be third or fourth in the place in the marketplace trying to get up in the first or second area, so they release new products and new services. I am seeing a lot of issues like that. I think some of the more common ones we might see are, like you said, the undersubscribed or the oversubscribed promotion. How can companies address these issues when they go out to a promotion, whether they have a physical good, whether it would be like a gift card or some type of merchandise that is part of their promotion and try to avoid these particular issues?
Companies generally have a promotion management process either through marketing or sales or what have you. I think part of the issue that we see out in the industry is a lot of this information on when products are going to be promoted and where products are going to promoted and what kind of promotions there are or events, it doesn’t have to necessarily have to be even a promotion, maybe how you are displaying a product or those sorts of things. Those are not systematically being captured and available for use later for an analysis. So oftentimes, what we see is that people aren’t even starting to capture that in a systematic way to be able to then later analyze it. Basically, you need to have in association with in your customer data and your sales transaction data and your inventory data and so on and so forth, so that then, you can get a 100% view of that promotion or that event that you have just carried out.
So for example, what customers bought into that promotion? How much did they buy in the promotion? Did you have enough inventory for the promotion? All of those sorts of issues can't be addressed until you are doing a good job of actually capturing what's going on within the promotional event and so forth.
It is not just a matter of looking at the promotional events as they happen either in the historical perspective or in the here and the now, you need to take a look at what are the projections or what are the forecasting models that you have available to say, “This type of promotion will result in x, y, z type of sales.” How you can get a more accurate future view or forecast associated with those promotions?
A lot of people have looked at promotions historically and have done projections as to what a promotion is going to do going forward. But those projections are generally fairly higher level. We really believe that you need to get to a lot more granular in those promotions to figure out what locations did you have those in.
What was the performance on that promotion when you have things like price drops and special displays? Did you have a specific type of display that you used? Did you have a specific type of media that you used? Was it radio or television? Was it a coupon? Was it a flyer?
Tracking Marketing Promotions
If it was a flyer, where was it in the flyer? Was it on the front page of the flyer, on the back page of the flyer and so forth? What locations carried all the specific SKUs or items. With all this detail, you have the opportunity to really execute on the promotional forecast. If I drive a promotional forecast for 50,000 units and I am spot on, well, that’s great. Overall, I am spot on, but how did it perform in a specific location, in a specific store, in a specific e-channel.
The point is that to really be able to start to improve promotional execution performance, you really need to start at that lowest level, that item level, by location. Create a good forecast at that lowest level, and then roll it up. You can then compare that, if you have a tops down forecast, what the promotion is going to do, you can compare the two. But then it gives you at least an idea of what’s the share of that promotion by each location. Then you can do what-ifs, such as making the promotion 20% bigger or whatever.
Also, if you do it that way, you have an opportunity to start to simulate what happens on promotion. And from an execution perspective, that allows you to put it back into your ordering systems. The earlier you do that, the better off you are from the standpoint of the supply chain itself.
Now the supply chain executes better because you have got a forecast that starts at the lowest level. It's driven by that lowest level demand. It may be a kiosk. It may be a store. It may be a web channel. It may be a branch in the case of consumer good company or something like that.
But anyway, the bottom line is you use that lowest level information you have, then create that lowest level forecast. And that improved accuracy in that forecast is an operational or executable type of view to that forecast, and that will improve your promotional performance.
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So by tracking results where you identify the channels, the locations and breaking down to that atomic level, that allows forecasts to truly be effective as opposed. You can avoid that problem of offering what they want but not at the channel or the geographic location that is most desirable.
It's the old saying, “the right product in the right place at the right time for the right price.” And you have got a couple of those in motion when you have got promotional forecasts. You have got the customers that you want and that sort of thing. The next step is definitely, as you say, to get down to that okay, so where are they going to buy in, how do they want to buy in, that sort of thing.