The business challenge
Our client, of of top 10 FMCG retailers in Russia approached us with a major challenge. The retailer lacked dedicated promotional performance evaluation framework.
They also lacked tools to prepare promotional actions for different categories of their products.
However, the most important challenge that their organization faced was ignoring historical data to evaluate the performance of their stores and category managers.
What’s more, data about products, costs and transactions were not integrated - which proved difficult for the management to have an overview of the promotional effectiveness across all channels.
All of those challenges led to limitation of promotion activities that bring insufficient ROI even at planning level. Coupled with very low efficiency of organized promotions taking into account choice of product, promotional mechanism, depth of discounts or promotional frequency - this led to major loss to the daily business as there was no effective process or tool to manage all the pricing aspects.
Our approach
Before finally delivering the BI Dashboard and Tools to effectively measure promotional campaigns - we analyzed a small part of the retailer’s offering - beers.
We took the client’s data and analyzed all historical transactions within the beer category. We worked on a set of data consisting of nearly 600 mln records covering 900 historical promotional events. With just data in this one single category, we were able to deliver 6 important recommendations even before starting the project...
Some of them were:
- The retailer offered very limited promotional mechanisms
- There was almost no differentiation between promotional mechanisms between seasons and products
- Not always deeper promotions give higher uplifts, in those cases there is no need to invest into very deep promotions
- Majority of promotional growth is achieved thanks to increases basket penetration without significant evidence of stocking effects
- High share of solo baskets creates potential of cross-selling and cross-promotions
As shown above, we invest a significant amount of our time and efforts to get to know the organization and deliver value even before any project starts.
In the end, PwC Data Analytics provided 3 tools that helped the client assess promotional effectiveness and design promotional newsletters based on the estimated price elasticities and expected ROI’s.
We also prepared a detailed plan to integrate all available data for further analysis - about 1,2 bln. transactional data.
Our team has performed market tests with self-prepared promotional mechanisms in order to fine tune promo effectiveness.
Areas that we looked for improvements were:
- Sales uplifts
- Promotional mechanisms
- Cannibalisation of different product lines within a category
- Origins of sales growth
Within the development phase, we successfully executed:
- Development of new promotion management process starting from promotion planning and assortment selection to promotion ex-post evaluation
- Development of promotion management tool functional requirements
- Development of promotion guidelines for buyers
- Development of promotion handbook covering hard analytical aspects of promotion management including:
- Product selection
- Depth of discount (many small promotions vs several aggressive promotions)
- Promo mechanism
- Communication support (catalogue, TV, radio, etc)
- Development of instore and out-of-store promotion communication recommendations
Results
The impact of provided tools is yet to be measured. Our client is already using our solution and deploying the results to real orders. We will update this page with real results once the benchmarking period has been done.
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