Planning, tracking, and optimizing advertising and trade spend has become table stakes for marketers at many consumer goods (CPG) companies. Despite those advances, consumer promotions and engagement (CPE) remains something of a forgotten area of marketing spend.
CPE, which includes in-store consumer activation and out-of-store engagement efforts, has too often been overlooked and undermanaged. As the CMO of one CG company put it, "CPE is where all the spend secrets are buried." That's a problem.
Optimizing CPE, in fact, can help companies realize 10-30% savings in marketing spend, which can be reinvested to fund growth initiatives. Yet CPE doesn't get the attention it deserves.
Many organizations assume it represents an insignificant share of the marketing budget, or they simply don't know what they spend money on or how much they spend. Often, they just find it impossible to untangle and classify the various spend components. Alarmingly, it's not uncommon to see 80-90% of shopper marketing and in-store activity unclassified and assigned to the "other" spend category.
Here are five simple rules and tips we recommend companies use to get smarter about understanding and optimizing their CPE.
1. Use CPE to influence your consumers
It's rare to see CPE design start with the question "Does this CPE help give my consumers what they want, when they want it?" Most organizations start instead with "smash and grab" questions, such as "Which CPE can help hit a short-term sales target?" or "How can I use my surplus CPE budget to avoid losing it next year?"
Truly effective CPE involves both gaining a deep understanding of how consumers shop and developing programs to influence decision-making at critical junctures of their journeys.
2. Keep it simple
Effective CPE is based on clear objectives. For example, in-store displays and fixtures can drive awareness and trial. But if they are used primarily to build brand equity, displays typically won't deliver.
That clarification also helps marketers avoid overthinking how much choice consumers actually need. For example, we often advise marketers to limit displays with "bells and whistles" such as holograms, moving parts, lighting, or sound effects because the ROI often doesn't justify the investment.
There is also temptation to layer many tactics together to maximize reach and generate halo effects. But overdoing it can quickly erode margins and ROI. One cautionary example: a CPG company had a tie-in with a Hollywood blockbuster, but it ended up combining new packaging, in-store displays, and a giveaway toy—with the resulting CPE campaign becoming so expensive that the company ended up paying consumers to buy its products.
3. Insist on consistency
Developing a consistent metric across CPE categories can be challenging. Overlapping taxonomy, multiple contributors to spend items, and haphazard spending habits mean there is often poor transparency and limited consistency in how CPE spend is classified. Consequently, many marketing leaders rely on gutfeel or an inconsistent set of metrics to allocate spending across the CPE portfolio.
The best marketers, however, instead create a consistent taxonomy and reclassify P&L codes to reflect the changes.
Introducing apples-to-apples measures helps make tradeoff decisions across three levels: comparing individual CPE activities, comparing clusters of CPE (e.g., in-store vs. out-of-store engagement), and looking across campaigns (e.g., Back to School vs. Christmas).
4. Create a single version of the truth
Every organization has internal myths about which CPE programs work well. But, often, there's no documented, fact-based understanding of why some work better than others.
CPE leaders codify best-practices and learnings (e.g., how-to guidance on designing, deploying, and measuring CPE) in a living playbook. They lay out when to use each CPE activity, which combinations complement each other, and which can erode value—generating at least 10-20% demand-side spending.
5. Clarify accountabilities
Multiple departments often own small slices of CPE budget, making coordination difficult. Stopping siloed and disjointed CPE efforts requires assigning clear responsibilities for every CPE spend line.
Some companies go further and concentrate accountability across similar groups of CPE (e.g., "in-store activation," "out-of-store activation"), or they centralize CPE budget across a small group of executives. At other leading companies, a head of integrated marketing role has emerged. That person is an executive responsible for ensuring that advertising, trade, and CPE are all managed in a holistic way. We've learned that optimizing governance can lead to 5-10% savings in the immediate term.
Although it's still unusual to see CPE truly part of marketing and other trade programs, introducing a stable budgeting process can help address the issue. Many CPG companies use zero-based budgeting (ZBB) to systematically report and adjust spend, which also helps set integrated targets, monitor cross-function spend, and provide regular reporting to relevant marketing and business unit leaders.
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Marketing executives at CPG companies should ask themselves what their CPE spend is and how to get more from it. In a market where every dollar of marketing spend has to work hard for the brand, the potential benefit is huge because CPE can turn into a significant source of dollars to fund growth priorities across the business.
Continue reading "How to Tap Into Hidden Marketing Spend to Fuel Growth: Optimizing CPE" ... Read the full article
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