As we continue our discussion about trade spend, we take a more in-depth look at the role of capital allocation in long-term, profitable demand creation. There is a reason consumer products companies should be examining their capital allocation decisions. Each component of the marketing mix can deliver value to the brand, whether it’s a long or short-term benefit. All marketing spend types have a role in developing brand value and securing the consumer’s decision to buy – whether in-store or online.
Marketing mix historically included three components: media, consumer, and trade. We now see digital, omni-channel, and other paths to the consumer becoming part of the total spend dynamic. Determining how much funding to allocate to each component—spend optimization—will require a clear understanding of the value each vehicle can drive, as well as having data and metrics that allow you to judge how that value becomes real. Vehicles like media and digital are focused on building long-term brand interest and trust with the consumer.
Trade, consumer and omni-channel are more focused on short-term purchases within the preferred shopping channels of each consumer. Today’s metrics for measuring the long and short-term are ‘share of market’ and ‘revenue’ – respectively. Unfortunately, day-to-day business processes can get in the way of the best laid plans. For example: when a brand is missing annual volume targets, it is very difficult to resolve that shortfall with long-term messaging tools like media, print, and radio (all have longer timelines to implement).
Trade and consumer have become the avenues for generating shipments in the near term (shorter time from offer to execution), but often require cuts to other marketing and digital programs. As you can imagine, this improves the brand’s short-term objectives (e.g., hitting financial targets), but the long-term growth strategies could be hindered as media programming gets cut. In order to become better at forecasting realistic capital allocations, manufacturers need a strong analytical approach. With the right external and internal data sets, coupled with solid value-add metrics and KPIs, any brand can generate consumer insights to support how these funds should be allocated, so that all of the brand’s goals are met on a consistent, year over year, profitable basis. As companies are building an insight-driven organization, the foundation should include a clear data strategy.
Brand insights should incorporate internal and external data sources that are aligned, harmonized, and normalized. With this foundation, analytics can derive accurate and timely insights for the many decision-makers involved in growing brand value. Often, critical insights are gathered through weekly program execution and performance tracking. Companies that consistently measure their performance against plan and react accordingly will become trusted partners with their retail customers. In future blogs, we will discuss how the foundation could be designed to deliver the right KPIs and metrics to each user, every time they have a business decision to make.