AN UNCOMMON VIEW OF THE CONSUMER - 401k Best...

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AN UNCOMMON VIEW OF THE CONSUMER • Global leader consumer insights

• Operate in over 100 countries measuring what consumers watch and buy

• Work through direct retail relationships and direct sales audit to measure sales

• Data, Measurement + Advanced Analytics + Software + Service

• Four Practices – End-to-End understanding of the Consumer

• Innovation – Drive new products based on consumer demand

• Marketing Effectiveness- Understand the overall spending on advertising and sales

• Sales Effectiveness– Drive performance through the sales process

• Consumerization – Drive programs down to the consumer segment

• Sales Effectiveness

• Price & Promotion

• Assortment & Space Optimization

• In-Store Performance

• Shopper & Loyalty

• Market Measurement

•

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MULTIPLE PROGRAMS DRIVE PERFORMANCE

BRAND MARKETING

PRICE PROMOTION ASSORTMENT

NEW PRODUCT PERFORMANCE

ON SHELF AVAILABILITY

CONSUMER ENGAGEMENT

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SIGNIFICANT INVESTMENTS ARE MADE Globally, over half a trillion $ is invested annually in trade promotion

$500,000,000,000

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MEASURE & MODEL GLOBAL CONSUMER BEHAVIOR Analytics Platform – Big Data, Models, Access

• Building a Common Data Environment – Granular Data

• 11 Countries Loaded – Promotional Benchmarks in Top 7

• 20 Countries In-Progress – Complete by Q2 2015

• 50 Countries Planned – Scheduled for Q4 2015

• Applying Data Sciences on Global Scale

• Promotional Benchmarks

• Price & Promotion Modeling (Coefficients for Performance)

• Market Structure & Assortment

• On-Shelf Availability

Fast - Accurate - Simple

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PROMOTIONAL BENCHMARKING IS ONE OF THE FIRST DELIVERABLES TO COME FROM THIS PROGRAM

Already the most comprehensive study of promotions yet conducted by anyone

Market-wide analysis of promotional performance Understand performance variation (Trade Efficiency) and identify best-in-class promotions Built using granular (store day) data 340 Categories across 16 departments Covers $750 billion annually in NA & Top 5 EU markets’ retail sales across all stores (excluding Walmart, Carrefour, and Discounters) Over 5MM UPCs and over 76MM annual events analyzed

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NORMATIVE FRAMEWORK TO MEASURE RETURN

Isolate Events o Identify promotion weeks based depth of discount vs. everyday price

Build a Calculation Framework o Incremental Sales = Total Sales – Baseline o Incremental Cost = Direct Trade Expense + Incremental COGs o Trade Return = Incremental Sales – Incremental Cost

Derive Promotion Costs by Applying Industry Standards o Manufacturers pay 80%-90% of Discount o Standard Cost for COGs, Feature & Display

Calculate Key Efficiency Metrics for Analysis o Trade Efficiency = Trade Return / Dollar Invested o % Sales on Trade

Robust approach provides rich promotion benchmarks

1

2

3

4

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BENCHMARKING DATA ANALYTICALLY IDENTIFIED EVENTS BASED ON SALES AND CASUAL DATA Sales and Event Examples Events are categorized based on promotion type, depth, and use of holiday timing

$0

$1

$2

$3

$4

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Unit Sales Feature TPR Average Price

Sale

s U

nit

s A

verage Price

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TRADE PROMOTION BENCHMARKING

331 CPG CATEGORIES

5MM UPCs

76MM 2014

EVENT WEEKS

750B 2014

TOTAL RETAIL SALES

The largest global benchmarking program ever conducted. Market coverage US, CA, DE, FR, UK, SP, IT Data starting in Q1 2012 & Updated Quarterly

Source: Nielsen Trade Promotion Landscape Analysis 2015(US, Canada, FR, DE, UK, IT, SP)

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WE ALL KNOW PROMOTIONS CAN BE INEFFICIENT The majority of trade promotion events don’t break even

Source: Nielsen Trade Promotion Landscape Analysis 2015(US, Canada, United Kingdom, Spain, France, Germany, Italy)

59%

OF PROMOTIONS GLOBALLY DON’T BREAK EVEN

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RETAILERS ARE INCREASING USING TRADE PROMOTIONS TO SUPPORT SALES WHILE ROI IS TRENDING DOWN Promotion Frequency and Trade ROI Trend – 2012-2014 U.S., Canada, UK, Germany, France, Spain, and Italy


4.20%

4.40%

4.60%

4.80%

5.00%

5.20%

5.40%

5.60%

$0.93

$0.94

$0.95

$0.96

$0.97

$0.98

$0.99

$1.00

$1.01

2012 2Q 2012 3Q 2012 4Q 2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q 2014 2Q 2014 3Q 2014 4Q

Tim

e o

n P

rom

oti

on

per

UP

C

Man

ufa

ctu

rer

Trad

e Ef

fici

ency

Global Trend: US, Canada, and Top 5 EU Markets

Manufacturer Trade Efficiency Time on Promo Per UPC

Linear (Manufacturer Trade Efficiency) Linear (Time on Promo Per UPC)

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DAIRY

75%

MEAT

62%

FRO

ZEN

FO

OD

S

66

%

GEN

ERA

L M

ERC

HA

ND

ISE

60

%

HO

USE

HO

LD C

AR

E

56

% GROCERY

73%

PER

SON

AL

50

%

BAKERY

73%

PET CARE

66%

HEALTH

59%

BEAUTY CARE

50%

PRODUCE

74%

DELI

72%

70-75% 65-69% 60-64% 55-59% 50-54%

% OF WEEKS THAT DON’T BREAK EVEN

OPPORTUNITIES EXIST ACROSS THE ENTIRE STORE Trade promotion effectiveness varies from across departments

Source: Nielsen Trade Promotion Benchmark Database 2014 Q3

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23 CATEGORIES COULD ELIMINATE TRADE PROMOTIONS AND REVENUES WOULD INCREASE Trade ROI and Promotion Frequency by Category – Food, Drug, Mass, C-Store, Dollar

Promotion Frequency

Trad

e R

OI

-$1 Low High

$0

$1

$2

$3 ROI and promotion frequency are not correlated

63% of sales (over 200 different categories) do not break even on trade

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FOCUSING ON THE RIGHT OPPORTUNITY COULD IMPROVE MARKET LEVEL EFFICIENCY DESPITE OF CONSUMER DIFFERENCES

42%

44%

49%

57%

59%

UK

France

Spain

Germany

Italy

19%

18%

24%

16%

42%

Promo Efficiency (%make money at retailer level)

Willingness to switch store Adjusted

Promo Efficiency (market level)

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42

35 30 29 28 27 25 25 24 23

20 20 19 19 18 17 16 16 15 14 8

I change stores based on which one I think has the best promotions that trip

Nielsen Shopper Trends 2014.

STORE SWITCHING PLAYS IMPORTANT ROLE Italians change stores to look for best available promotional offer

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OPPORTUNITIES EXIST IN EACH MARKET

41%

42%

43%

58%

58%

58%

71%

59%

58%

57%

49%

42%

42%

29%

Italy

Canada

Germany

Spain

UK

France

US

don't break even %make money


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AN OPPORTUNITY EXISTS FOR BOTH MANUFACTURERS AND RETAILERS Promotional Source of Volume

Source: Nielsen Europe, Promotional Source of Volume modelling

17% RETAILER GROWTH

27% MANUFACTURER

GROWTH

24% MUTUAL GROWTH

32% SUBSIDIZATION

LOW

RET

AIL

ER B

ENEF

IT

HIGH

HIGH

LOW

MANUFACTURER BENEFIT

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Manuf. A Manuf. B Manuf. C Manuf. D Manuf. E Manuf. F Manuf. G

$1

MANUFACTURERS WITHIN A CATEGORY CAN DIFFERENTIATE THROUGH EFFECTIVE USE OF TRADE PROMOTIONS

Best in Class Making money in trade (>$1) Not Breaking Even in trade (<$1) Least Efficient

Trad

e E

ffic

ien

cy

$0

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-3

-2

-1

0

1

2

3

4

12

23

64

47

16

70

68

94

11

11

76

13

41

11

56

46

17

88

12

01

16

22

35

12

45

86

26

82

12

90

56

31

29

13

35

26

35

76

13

79

96

40

23

14

24

66

44

70

14

69

36

49

17

15

14

06

53

64

15

58

76

58

11

16

03

46

62

58

16

48

16

67

05

16

92

86

71

52

17

37

56

75

99

17

82

26

80

46

18

26

96

84

93

18

71

66

89

40

19

16

36

93

87

19

61

06

98

34

11

00

57

61

02

81

11

05

04

61

07

28

11

09

51

61

11

75

11

13

98

61

16

22

11

18

45

61

20

69

1

Average Category: Events' Trade Efficiency Distribution

Don't Break Even Make Money Best in Class Promotion

MANUFACTURERS CAN IMPROVE EFFICIECNY BY UNDERSTANDING BEST IN CLASS EVENTS’ CHARACTERISTICS Events ranked by Trade ROI – Sample Category – All Retail


BREAK EVEN

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Best-in-Class (Top 10%)

Bottom 10%

7X BEST-IN-CLASS

PROMO EVENTS

THE RETURN

VS.

THE LEAST EFFICIENT

Hundreds of millions of dollars for the average manufacturer

BEST-IN-CLASS Driving winning promotions delivers significant returns for manufacturers

Source: Nielsen Trade Promotion Landscape Analysis 2015(BIG 5 EU: FR, DE, UK, IT, SP)

LEARNINGS FOR EUROPE

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TRADE PROMOTION BENCHMARKING IN EUROPE Market coverage: Germany, France, UK, Spain and Italy

TAB 1

THIS ANALYSIS: • Includes all CPG categories and promotional frequency of at least 10% discount • Includes Hypermarkets, Supermarkets channels, Grocery Multiples channel in UK • Excludes tobacco & alcohol products • Excludes Carrefour and Discounters

2014 EVENT WEEKS

26MM 190 CPG CATEGORIES

2.3MM UPCs

232€ 2014 TOTAL RETAIL SALES

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TREMENDOUS IMPROVEMENT OPPORTUNITY Almost a half of trade promotion event weeks don’t break even

Source: Nielsen Trade Promotion Benchmark Database 2014 (BIG 5 EU: FR, DE, UK, IT, SP)

TAB 2

OF PROMOTIONS IN EUROPE DON’T BREAK EVEN

45%

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MORE AND MORE PROMOTIONS No change in efficiency… Are we focused on right things?


2012 1Q 2012 2Q 2012 3Q 2012 4Q 2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q 2014 2Q 2014 3Q 2014 4Q

3.6%

3.8%

4.0%

4.2%

4.4%

4.6%

4.8%

5.0%

$1.10

$1.12

$1.14

$1.16

$1.18

$1.20

$1.22

Big 5 EU Markets

Manufacturer Trade Efficiency Time on Promo per UPC

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SHOPPERS SEARCH FOR PROMOTIONS

23

42

14 16

35 28 30

25 18 16

29 25

19 24

20 20 27

19 17 15 8

44

26

52 42

31 36 34

33 41

41

37

32

34

37 39 36

31

29 37

17

16

20 18 20

26 17 18 16

21 20 22 12

18 22

12 14 13 10

16 10

19

18

I regularly buy differentbrands because ofpromotions

I very seldom changestores, but whenshopping, I activelysearch for promotions

I change stores based onwhich one I think has thebest promotions thattrip

Nielsen Shopper Trends 2014

Q.23 Which of the following best describes how promotions affect your supermarket/hypermarket shopping?

Promotion Sensitivity %

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Minimal Value Growth

Total Sales

€401 Billion

+0.8% Private Label

Products +1.5%

Discounters +3.3%

Branded Products +0.5%

Hyper/Super +0.3%

ZERO-SUM GAME IN BIG 5 EU Promotions do not generate incremental consumer demand

Source: Nielsen Strategic Planner Big 5 Europe 52 Weeks to WE 05.10.14

Big 5 Western Europe

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OPPORTUNITIES EXIST IN EACH MARKET

Source:

41%

43%

51%

58%

58%

59%

57%

49%

42%

42%

Italy

Germany

Spain

France

UK

Don't break even % Make money

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Most Efficient Least Efficient

0 < Trade Efficiency < 100

CATEGORY VARIANCE IS SIGNIFICANT Understanding where your business falls is valuable context


TAB 4

Efficiency + -

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SAU

SAG

ES F

RO

ZEN

AU

TO D

ISH

WA

SHER

RIN

SE

CH

OC

OLA

TE D

RIN

KS

FISH

AM

BIE

NT

INSE

CT

TREA

TMEN

T

HA

ND

DIS

HW

ASH

SEX

UA

L H

EALT

H

LIP

CA

RE

MEA

T FR

OZE

N

RA

ZOR

BLA

DES

BA

BY

MIL

K

HO

USE

HO

LD C

AR

E C

LEA

NER

S

BA

TH A

DD

ITIV

ES

SYR

UP

S/C

ON

CEN

TRA

TES

DEO

DO

RA

NTS

MEA

T P

RO

D A

MB

HA

ND

CA

RE

DO

G F

OO

D

CER

EAL

CO

FFEE

SU

BST

ITU

TES

DES

SER

T M

IXES

FISH

EG

GS/

SEA

FOO

D F

RO

ZEN

FOO

T C

AR

E

CA

NN

ED F

RU

IT

NO

OD

LES

PLA

IN

SOFT

DR

INK

S O

THER

TEA

PA

TE/F

OIS

GR

AS

AM

BIE

NT

DR

Y C

LEA

NIN

G P

RO

DU

CTS

CO

LA S

OFT

DR

INK

S

MIL

K

FLO

UR

S

MU

STA

RD

SPIC

ES

SOU

P A

MB

IEN

T

FILL

ING

S FR

ESH

DR

INK

S YO

GU

RT

CH

ILLE

D D

ESSE

RTS

CH

EWIN

G G

UM

BA

TTER

IES

HO

USE

HO

LD P

AP

ER /

PLA

STIC

SUG

AR

AB

RA

SIV

E C

LEA

NIN

G P

AD

S

FRES

HN

ERS

BR

EATH

PO

RTA

BLE

FRU

IT C

OM

PO

TE F

RES

H

CH

AR

CU

TER

IE

SAU

CES

Euro Categories’ % of Events Weeks Break Even

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CATEGORY SIZE DOESN’T DICTATE PERFORMANCE There is no relationship between category size and promotion efficiency


TAB 5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

€ -

€ 500

€ 1,000

€ 1,500

€ 2,000

€ 2,500

MIL

K

OIL

S ED

IBLE

MIN

ERA

L W

ATE

R

CO

FFEE

FRU

IT J

UIC

E A

MB

IEN

T

PIZ

ZA F

RES

H

FISH

FR

OZE

N

MEA

LS F

RES

H

DR

Y P

AST

A

SEA

FOO

D/S

UR

IMI A

MB

RIC

E

PIZ

ZA F

RO

ZEN

SUG

AR

HA

IR C

ON

DIT

ION

ER

CR

EAM

FR

ESH

SEA

FOO

D/S

UR

IMI F

RES

H

CO

SMET

ICS

EYE

MEA

T FR

OZE

N

RA

ZOR

S

CA

NN

ED F

RU

IT

SOU

P F

RES

H

BU

TTER

BO

UIL

LON

FRU

IT J

UIC

E FR

ESH

TOIL

ET S

OA

P

SHA

VIN

G P

REP

MIL

K F

RES

H

AFT

ER S

HA

VE

FILL

ING

S FR

ESH

FRU

IT C

OM

PO

TE A

MB

IEN

T

MEA

T P

RO

D A

MB

HB

A O

THER

S

DEN

TUR

E FI

XA

TIV

ES

AC

NE

REM

EDIE

S

LIP

CA

RE

TOO

TH W

HIT

ENER

S

SAU

SAG

ES F

RO

ZEN

FRU

IT C

OM

PO

TE F

RES

H

% o

f Ev

ents

Mak

ing

Mo

ney

Euro

Cat

ego

ry S

ize

(ret

ail s

ales

)

Mill

ion

s

Euro Categories

Euro Category Size & % of Event Weeks Making Money

Category Size(Retail Sales Value) % of events with trade efficiency >1

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CATEGORY HEALTH IS NOT DISCRIMINATING Growing and declining categories alike have tremendous variance in efficiency


Category % of Event Weeks Making Money

% Change in Category Sales

+ -

+

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

-20% -15% -10% -5% 0% 5% 10% 15% 20%

20

14

% o

f Ev

ents

Wee

ks M

akin

g M

on

ey

Euro Category Size Change since 2013(retail sales)

EU Category Size Change from 2013 on % of Event Weeks Making Money in 2014

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YOUR FATE IS NOT SEALED Categories improved their performance by applying optimal strategies


TAB 6

Point Change in Break Even

Weeks

% of Event Weeks That Don’t Break Even

+ -

+

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

% C

han

ge o

f Ev

ent

Wee

ks M

akin

g M

on

ey S

ince

20

13

2014 % of Event Weeks Making Money

X: % of Event Weeks Breaking Even, Y: % Improvement in Events Breaking Even

Missing Opportunity Inefficient and Getting Worse

Seizing Opportunity Inefficient but Moving

Off Course Efficient but Getting Worse

Becoming Winners High Efficiency and Improving

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+21.4 %

+4 % +13 pts.

CHANGE IN VALUE

SALES

CHANGE IN # OF EVENTS

CHANGE IN % OF DEEP DISCOUNT EVENTS

HOW ARE CATEGORIES GETTING OFF TRACK? Trying to drive significant volume from promotions if current events are efficient does not always work well.


-4 pts.

CHANGE IN % of Events

Breaking Even

-5%

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HOW ARE CATEGORIES SEIZING OPORTUNITY? Decreasing depth of discount while increasing frequency is working for some


+5 pts. +4% +3%

-10pts

CHANGE IN % of Events

Breaking Even

CHANGE IN # OF EVENTS

CHANGE IN SALES

CHANGE IN % OF DEEP DISCOUNT EVENTS

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Best-in-Class (Top 10%)

Bottom 10%

7X BEST-IN-CLASS

PROMO EVENTS

THE RETURN

VS.

THE LEAST EFFICIENT

Hundreds of millions of dollars for the average manufacturer

BEST-IN-CLASS Driving winning promotions delivers significant returns for manufacturers

Source: Nielsen Trade Promotion Landscape Analysis 2015(BIG 5 EU: FR, DE, UK, IT, SP)

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€ -

€ 0.20

€ 0.40

€ 0.60

€ 0.80

€ 1.00

€ 1.20

€ 1.40

€ 1.60

Case Study Category’s Top Manufacturers

Breaking Even

THE MOST EFFICIENT MANUFACTURER DELIVERS 70% GREATER TRADE EFFICIENCY THAN THE LEAST EFFICIENT

Source: Nielsen Trade Promotion Landscape Analysis 2015 (United Kingdom, Spain, France, Germany, Italy)

TAB 11

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0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5Case Study Cateogry

Bottom 10% Do Not Break Even Make Money Top 10%

31% 69% Do Not Break Even Trade Efficiency < 1

Make Money Trade Efficiency > 1

BREAK EVEN

BEST-IN-CLASS (TOP 10%) EVENTS DELIVERS 9X GREATER TRADE EFFICIENCY THAN THE LEAST EFFICIENT (BOTTOM 10%)


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DEEP DISCOUNT IS NOT FAVORED The least efficient events promotes using deep discount 14% more than those Best-in-Class.


0%

2%

4%

6%

8%

10%

12%

14%

16%

Top 10% Events Bottom 10% Events

Deep Discount Use

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PROMOTIONAL SUPPORT BRINGS MORE EFFICIENCY Best-in-Class events use 22% more promotional support than those least efficient.


TAB 13

0%

5%

10%

15%

20%

25%

30%

35%

Tactic (any DP) Tactic (any FT)

Promotional Support Usage

Top 10% Events Bottom 10% Events

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KNOWING WHAT SEGMENT HAS HIGHER RETURN Segment A tends to generate better return than Segment B.


7% 22%

-15%

TOP 10% EVENTS

DIFFERENCE

BOTTOM 10% EVENTS

SEGMENT A All Events Within Category: 71%

-5% -19%

14% TOP 10% EVENTS DIFFERENCE

BOTTOM 10% EVENTS

SEGMENT B All Events Within Category: 21%

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LAGGING: USE PRINCIPLES AT ACCOUNT LEVEL Predictive analytics identify pricing and promotion variance at your customers

Base and Promoted Price Elasticity by Account Event Type Lift by Account

Lagging

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MIDDLE: EVALUATE COMPETITIVE EFFECTS Managing gaps and thresholds in joint business plans drives win/win outcomes

Localize price via market specific price thresholds and competitive gaps

Simulate and define customer business plans for mutual wins

MIDDLE

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WINNING: CONTINUOUS IMPROVEMENT Isolate consumer response to drive greater insight to your overall promotion process

Net Promotion Source of Volume Across Accounts and Products

Robust Post Promotion Analysis Linked to TPM

HIGH END

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PROMOTION EFFICIENCY INDEX Manufacturer A can significantly improve its performance when optimizing depth of discount across two distribution channels.

PROMOTION EFFECTIVENESS RATING SCORECARD

HYPERMARKET BEST-IN-CLASS MFR. J MFR. K MFR. F MFR. B MFR. A

Depth

Segment

Tactic

Timing

Overall

Supermarkets

Depth

Segment

Tactic

Timing

Overall

Over-Performing On Par Under-Performing

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TYPICAL OPPORTUNITY

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LEARNINGS

Don’t expect. There is not A MAGIC KEY that opens each door (magic formula of efficient trade promotions that will fit each market, each category, each channel, brand, and SKU).

Crack the code of Best-in-Class Trade Promotion in YOUR category, YOUR market, taking into account multichannel retail landscape.

Nowadays, learning from your own actions is not enough. Learn also from what competition does. Compete with other when it comes to trade efficiency, not only on market share.

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DON’T KNOW

THIS IS A BIG CHALLENGE WHERE DO I START? Understand context and focus on biggest problems in overall process

Benchmark your performance to the industry and your key competitors

Identify the largest pain points in your overall planning process and align solutions

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PROMOTION BENCHMARK ANALYSIS A three-step approach to help you understand how well your promotions perform and differences in strategy vs. your competition

Benchmark Assessment

Benchmark your trade promotion performance against other categories and competitors within

your categories

Promotion Diagnostic Check Measure the effectiveness

of different trade controllables such as promotion tactic and

discount depth

Benchmark your promotion strategy vs. best-in-class

across channels, segments, depth, frequency and

timing

Drill Site Scorecard

Outcome: Understand how your

promotions compare to best-in-class

Outcome: Identify the best-in-class

trade promotion strategies and tactics

Outcome: Prioritize focus areas to

bring your promotions to best-in-class levels

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REVENUE MANAGEMENT CYCLE

Dynamic solution with predictive analytics applied to latest sales data to support on-going pricing and promotion decisions, analysis and business planning process

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SAP

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