Based from Smithfield in Sydney’s northwest, Campbell Consumer Products is the largest Australian owned manufacturer and marketer of predominantly household laundry and cleansing products.

Predominantly, the Campbell Consumer Products’ range is available throughout Australia & New Zealand. Campbell produces its products at Smithfield, Sydney. The range has a reputation for providing quality products, which represent value for money. Household names include: Greencare Laundry products; MYO Disinfectant; Bushland Products and Zixo bleaches. Campbells has been successful in delivering strong growth in their core categories through sound promotional strategies executed with high precision to ensure they reach their consumers.

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80:20 it is not!

About 12 years ago, in 1987 to be precise, I read an article written by Porter Henry, President of Porter Henry & Co. In an article entitled ‘The Important Few – The Unimportant Many’ he mentioned in passing that the 80:20 distribution with which we all are so familiar, does not describe the distribution of things in FMCG. In his original article he used data to construct calling plans for a territory, and to illustrate how easy it is to over-service small customers – and thus by definition under-service the few big ones who count. In fact Porter Henry did not make a big song and dance about the fact that 80:20 does not fit grocery, so I will address that issue now.

The 80:20 rule is so well known because it does describe distributions which fit many situations in business. In fact it describes accurately the distribution of sales in industrial selling, where one or two big customers will dominate your orders. But wherever consumers play a large part, there is a different distribution. In this situation the sales are far more evenly spread.

So if you are looking to:

• optimise your sales territories, and ensure your merchandisers or sales reps allocate their time efficiently
• determine if your sales are adequately distributed across a territory
• find out if your product range is too deep
• find out if you should expand your product range

Download the full article The distribution of sales in FMCG / Grocery Case Study PDF

The important few – the unimportant many

This article first appeared in print sometime around 1986. It was written by Porter Henry, President of Porter Henry & Co. This is an exact reproduction of the original article, although obviously the tables and charts have had to be recreated. Reproduction here is not intended to infringe the copyright of the original author or the unknown publisher of the original article. Attempts have been made to contact Porter Henry and Co, and the original publisher is unknown, as the photocopied article has no identifying marks.

Theoretically, for every customer, there is a call frequency that will give you your maximum volume, or profit, per call. There is a bell-shaped curve for every customer – a little curve for a little customer, a big curve for a big customer. The maximum return per call might be realized from 3 calls per year for one customer, 6 for another, and 17 for another. It’s just not practical to establish a different call frequency for each customer, however, so we advocate using a short-cut. Presented here is an accurate method of allocating your time based on both your present and your potential business. This method, which requires you to divide your customers into three categories, is based on a principle we call ‘IFUM’ – the Important Few and the Unimportant Many.

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This is a precis of a research paper entitled ‘The Decomposition of Promotional Response: An Empirical Generalisation’ by David R. Bell, Jeongwen Chiang and V. Padmanabhan, published by Marketing Science.

This very interesting paper based on research conducted in 1999, studies 173 brands in 13 categories in the USA over a 52 week period, based on the household expenditure of 250 families and 3 stores. The overall conclusion is that the percentage of promotional lift attributable to brand switching is an average of 75%, which is somewhat below previous studies. In 1988 Gupta measured this at 84%, and A.C.Nielsen more recently (precise date unknown, but published in 1996) at 80%.

Of even more interest is the category by category variance. Categories were selected to encompass both those that are known to expand consumption, as well as those that are ‘storable’ or ‘necessities’.The balance of the lift not attributable to brand switching was also analysed into the two components of category expansion (genuine additional incremental volume) and accelerated purchase (reduction in expected inter-purchase interval). A determination was also made of the relative impact of brand factors, category factors and consumer factors to identify which is the most significant. All in all, they are able to explain 70% of the actual promotional response. One of the significant findings is that category effects are more significant than brand effects, and consumer effects (i.e. demographics) are quite minimal.

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The smaller food suppliers seem to swap their own sales force for a broker service, only to go back to a direct force a few years later. Sometimes they then return to a broker yet again. Brokers naturally present themselves as an efficient and experienced alternative. Even large grocery companies sometimes go with a broker service – Kelloggs did that here in Australia. The question that has puzzled many a Sales Director is ‘How can you decide whether a broker would be less expensive?’ (The question of better I leave to another day!) And why should a broker be able to offer a better service that is lower in cost?

A couple of years ago I was able to compare the merchandising costs of a number of Australian Food suppliers. These companies differed in size, and indeed differed in the objectives they set for their field force. Nevertheless I was intrigued to discover that costs can be predicted with relative ease.

Download the full When brokers can offer a low cost merchandising service Case Study PDF

For some time those seeking to measure promotions have talked about efficiency and effectiveness. However I have never seen a universally accepted definition of these terms, and in my book I set out a number of ways of measuring each. It seems logical to me to use the term efficiency to relate to the overall promotional program – a period of time that is reasonably long, and the inclusion of all promotional costs for a number of promotions compared to the total sales over that period. On this basis, efficiency is a measure of the average cost of trade spend. To relate this to a single promotion, the promotional costs would be expressed as a percentage of the sales on that promotion. Individual promotional efficiencies would be related to the overall promotional program efficiency in terms of the frequency with which that promotion is repeated. To use an example, if a single promotion has an efficiency cost of 20% to sales, and the frequency is such that 30% of the total sales in a period are on a promotion, then the overall efficiency will be 6% of sales.

Effectiveness on the other hand would seem to relate to any gain in sales achieved by the promotion, and be measured in terms of the costs to achieve that gain. A simple theoretical model using real world price/volume relationships indicates that efficiency and effectiveness can have a minimum point – that there are optimum price points. It also indicates that both measures reach a minimum at about the same price point. This suggests that if you optimise effectiveness you will optimise efficiency at the same time. However my own experience indicates that this is not the case, and indeed I have now developed a promotional evaluation system which proves this to be the case. If effectiveness and efficiency are independent, there are four possible states for a product on a promotion.

Download the full A quick outline of the Promotional Planning framework Case Study PDF

The availability of retail scan data means that suppliers can now evaluate their promotions in terms of the additional sales that were sold through to the consumer. In this paper we will look at the issues surrounding this, and some of the problems.

Download the full The Mirage of Promotional Lift Case Study PDF

So you have done your promotional planning, does that mean no more problems? Unfortunately not. It is still quite easy to end up with a severe overspend situation. This is because most promotions have no limit on the amount the chain may wish to buy. Why this should be so is one of those things that has become ‘part of the way we do business’, and has no basis in logic. It is just as illogical as extended buy periods, for businesses where there is perpetual motion and a pipeline of product! But it causes very real problems. Even with the most careful of planning, unless you monitor the trade spend during the year, you will almost certainly get a big surprise at the end of the year. Planning alone will not control trade spend. In this section we are not concerned whether the trade spend is worthwhile, only with keeping the total costs within predefined boundaries.

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Promotions have been a regular part of the Grocery retailing scene for many years now – maybe 30 or more years. When I was first involved in Grocery, nearly fifteen years ago, this question typically was dismissed as obvious. The theory that was put forward at that time was that a promotion was run so that the rate of sale after the promotion would be higher than that before – in other words one was led to believe that the objective was to gain a permanent increase in the rate of sale. Now that scan data is readily available (sales through the cash register) we realise that this is not something that can be guaranteed, indeed the vast majority of products appear to continue with precisely the same sales pattern as existed prior to the promotion. If it is in a growth cycle, that probably continues, if it is in decline, that also continues. Why then do we promote?

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Cottonsoft is New Zealand’s only 100% New Zealand owned paper tissue manufacturer. Manufacturing in Dunedin, Cottonsoft supplies the popular toile tissue brands CottonSofts and Kiwisoft, and Tuffy Paper Towel. Cottonsoft also supplies product for the private label and Away from Home markets.

Cottonsoft has identified a need for greater visibility and measurement of its promotions as well as a need to review and streamline the entire sales planning processes. This includes the integration of strategy and business planning through to the execution of every promotion.

After a rigorous evaluation Cottonsoft selected Promax to enable promotional planning and trade spend management.

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