Promotions are a major feature of business today, and are often the make or break between a poor year and a successful one. One thing is clear, the business benefits of effective promotion planning and evaluation remain one of the untapped opportunities for bottom line improvement for manufacturers and suppliers to the retail trade
Promotional planning processes vary widely between companies, but all are trying to achieve the same objectives of satisfying the needs of the retailers whilst maximising margins. This is much easier said than done. It involves Account Managers, Demand Planners, Production Planners and Commercial Accountants in a process which is constantly moving as retail priorities and demands change throughout the year.
For many suppliers, the difficulties of planning promotional activity beyond the next 4-6 weeks causes their effective business forecast horizon to be reduced. This leaves them in a vulnerable position in which they are unable to effectively plan and manage their medium and longer term resource requirements.
For these companies, the gap between the live forecast and the budget is no longer a gap, but a gaping chasm with limited visibility of how the chasm may be filled.
The foundation for improving the management of promotional margins and closing the gap between base sales and the budget is an accurate volume forecast. This starts with a base forecast above which promotional uplifts are overlaid, meaning an accurate base forecast drives more accurate promotional forecasts.
The volume forecast ensures that on one hand the right materials and resources are in place to fulfill the promotion, and on the other hand waste is minimised as a consequence of running the promotion. Ensuring high sales margins are maintained throughout this process is also key to success, and carrying out a financial profitability assessment can be a vital asset to promotional planning.