Promotional Planning

The major challenge in designing an effective Demand Management process is incorporating promotional lift and volume into the forecast. The first challenge is to lay the correct information channel from the field sales to the forecasting group. So that every change to the promotional plan is captured immediately.

In most cases, this can be thought of a 50% win in process design.

In practice, the following challenges are very common in the promotional planning process for a typical manufacturer:

1. Often there could be communication gaps between the manufacturer and the customer on changes at retail. This could more often be due to the lack of proper communication between the manufacturer's account team and the forecasting team at head-quarters.
2. There is no easy apparatus to incorporate and communicate changes to the promotional calendar. This is the major theme of more advanced Customer Relationship Management (CRM) software. But the key is for the information to be integrated into the demand planning process/tool.
3. The Baseline Sales Volume is often difficult to estimate. This is further complicated by the fact that there is not a single consistent definition of baseline versus lift within the organization

CPFR and Collaborative-ABF have attempted to address the issue of promotional planning. It is important to design the collaborative meetings to start with a discussion of major changes in promotional events compared to what was used in the forecast in the previous period. Once both parties are on the same page about the promotional grid, attention should be paid to agreeing on the correct lift for the promotional events.

In summary, Promotional planning involves the following two steps:

1. Review the latest Promotional Calendar to understand changes to key promotional plans
2. Incorporate incremental volume changes in response to the changes identified from the promotional grid

Assuming there is technology in place for Customer Relationship Management, here is one model of information flow of the collaboration process:

Key process driver is the information-sharing between the customer and sales teams with the demand planning group. It is a big process to win if event changes are communicated rapidly to the manufacturer's supply chain. In the above model, the CRM process contains all key data about promotions and lifts. The collaboration process verifies the accuracy of this information, incorporates late-breaking events and achieves consensus on the lift identified with the promotional plan.

In designing this process, a correct and consistent baseline needs to be built carefully so that promotional lift volume is truly incremental to the business. Secondly, the application of exception management is key because there will be so many run-of-the-mill promotions with little or no true volume effect.

Hence, proper thresholds should be established to focus the process on key promotions and retail events.