Sensor technology helps track the performance of trade promotions

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In 2017, according to the Cadent Consulting Group, consumer packaged goods manufacturers in the United States spent $225 billion on marketing. The largest share — 43 percent — went to trade promotion, in which manufacturers offer inducements to retailers to highlight certain products in stores for a certain period.

One of the more active product areas in terms of trade promotions is beauty. At any given moment, a shopper in a good-sized drug store or other beauty/cosmetics outlet is likely to encounter a manufacturer’s display devoted to a handful of products singled out for their attention.

There’s a reason for that. “The beauty consumer is a beauty enthusiast who is looking for both her favorite products and the latest new products and trends,” says Karen Van Dongen. “Her trip is not a traditional stock-up, planned purchase, but rather one that is discretionary and impulsive in nature. Her impulse purchase is influenced by what she sees in media and in-store.”

Van Dongen works for perfume and cosmetics manufacturer Coty as vice president of the consumer beauty division for CVS and Coty; she has responsibility for sales of her company’s products through the nearly 8,000 CVS stores that carry them. The beauty consumer and her tendency to make impulse purchases are of major interest to Van Dongen; she estimates that 40 to 45 percent of her department’s total volume comes from promotional sales.

Theory and practice

Van Dongen says each promotion is a carefully choreographed event. “We develop a program,” she says. “Again, this is not aimed at have-to purchases, it’s aimed at impulse buying. The goal is incremental sales.”

As part of the program, a retailer purchases a certain number of displays, each with a certain amount of inventory attached, she says. There’s a window of a certain number of days during which the display will be on the floor, beginning on day X and ending on day Y.

“Behind the scenes there’s all this great dynamic stuff happening in social media, digital marketing, consumer free-standing inserts and so on,” Van Dongen says, “all to influence her purchasing, disrupt her shopping trip and drive incrementality.”

That’s the theory. In practice, the disparate pieces — the media promotion, the target date, the presence of the display on the sales floor for a given number of days — frequently come together late or not at all. The display gets hung up somewhere and never gets to the floor. Or it’s there for less than the agreed-upon time. Or collateral material for the store associates doesn’t arrive, or doesn’t get distributed. “I think we’re being generous when we say that the industry is 50 percent compliant,” Van Dongen says.

This is not because of unwillingness or lack of interest on the retailers’ part. They have, after all, already bought the inventory in the displays; it’s in their interest to get it on the floor and sold.

A lot of the problem is communication. There are a lot of moving parts to one of these programs, and when one part isn’t moving, the others may not know. “We’ve tried various solutions,” Van Dongen says. “We’d go to a third-party partner to make sure the displays got up, or we’d send out an audit team. In either case, we were basically performing a post-mortem. What we needed was actionable data.”

A way to keep track

Enter Shelfbucks, a platform that monitors display compliance in real time. “We put anywhere from five to 15 radio sensors in the stock room of the store, and a few in the front selling area,” says Shelfbucks CEO Erik McMillan. “Then, for a CPG company like Coty, we work with the suppliers who actually build their point-of-purchase displays, and they put a sensor in each display. Now we know when that display arrives at the store. We know when it moves from the back room to the selling floor. We know how many days it’s on the floor and when it leaves.”

With that information, Shelfbucks combines the sales data for each product on the display. If the display is on the sales floor in one set of stores and not another, Coty can know at a glance, for each product, the incrementality over base that was obtained by using that display.

The beauty consumer and her tendency to make impulse purchases are of major interest; Coty’s Karen Van Dongen estimates that 40 to 45 percent of her department’s total volume comes from promotional sales.

“If you’re a retailer,” McMillan says, “and you let hundreds of displays into your stores, and 50 percent of them aren’t hitting the sales floor, you’re losing a major opportunity.” Especially in the impulse purchase-driven beauty category.

Aware of that problem, CVS began working with Shelfbucks in early 2016. “We did a 300-store pilot for about eight months,” McMillan says, “so we worked with a lot of the brands that are sold through CVS. Coty does a lot of display programs at CVS, and they got involved early in the pilot, which was running when Karen [Van Dongen] came on board with Coty, in July. She was very interested and wanted to move ahead. We got approval to roll out chain-wide in early 2017, and we were up to scale in October.”

Learning from the data

That’s not a lot of time to digest the sudden flood of information the new technology has produced, so Van Dongen says she and her team are mostly watching and learning at this point.

“We’re testing different kinds of displays. There are some that get executed at the front of the store in an end cap, some on the cosmetics wall in your home location, others in the seasonal aisle. We’re looking at the compliance rate for all of those.”

If a display is on the sales floor in one set of stores and not another, Coty can know at a glance the incrementality over base that was obtained by using that display.

The next step, she says, will be to take that information and share it with the merchandising team to see if they want to make changes in their programs. “For instance, if we’re shipping 4,000 displays, and we see that some stores are getting two and throwing one away, perhaps in the future we’ll only produce 3,500 of them,” she says.

“Another example would be our in-wall displays in cosmetics, what we call ‘hot spots.’ We rotate those every two months, and we’re seeing poor compliance with them. Maybe we only need to do them every three months. That would eliminate a couple of executions a year, which would make it easier for the store.”

Moving the goods

Making it easier for both stores and manufacturers to execute — and profit from — promotional displays is the real point of the exercise. McMillan says installing the sensors and collecting the data is not wildly expensive. “On the CPG side, after paying for the data, manufacturers are seeing a three- to five-times return in investment. On the retailer side, it’s about 20 times,” he says.

“Retailers are seeing a 25 to 35 percent incremental sales volume increase with actionable data and alerts to improve performance. I mean, the retailers are already buying their display and the inventory, right? All we’re doing is helping them make more money out of something they’re already paying for.”

Peter Johnston is a freelance writer and editor based in the New York City area.

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