Marketing’s hidden treasure: How better promotions and engagement can unlock millions to fuel growth

Marketing’s hidden treasure: How better promotions and engagement can unlock millions to fuel growth Biljana Cvetanovski is a senior expert in McKinsey’s London office.

Planning, tracking, and optimising advertising and trade spend has become table stakes for marketers at many consumer-goods companies. Despite those advances, consumer promotions and engagement (CPE) remains something of a forgotten area of marketing spend.  CPE, which includes in-store consumer activation and out-of-store engagement efforts, has too often been overlooked and undermanaged.  However, optimising CPE can, in fact, help businesses realise up to 10 to 30 percent savings in marketing spend, which can be reinvested to fund growth initiatives.

There are several reasons why CPE doesn’t get the attention it deserves. Many organisations assume it represents an insignificant share of the marketing budget, or simply don’t know what they spend money on, or how much they spend. Often, they just find it impossible to untangle and classify the various spend components. Shopper-marketing campaigns, which typically involve a wide range of CPE activity, from posters and samples to fixtures and demonstrations, are time consuming and cumbersome to log. Alarmingly, it’s not uncommon to see 80 to 90 percent of shopper marketing and in-store activity unclassified and assigned to the “other” spend category.

That is a lot of lost insight, and with so much at stake it is important in terms of more efficient marketing spend and ultimately revenue growth to make the most of CPE activity and analysis. With that in mind, here are five simple rules on how to get smarter about your use of CPE.

Put customers first and use CPE to influence them

Although this sounds logical and even redundant, it’s rare to see CPE design start with asking, “Does this CPE help give my consumers what they want, when they want it?” Most organisations start instead with “smash and grab” questions like “Which CPE can help hit a short-term sales target?” or “How can I use my surplus CPE budget to avoid losing it next year?” Truly effective CPE involves gaining a deep understanding of how consumers shop and developing programmes to influence decision making at the critical junctures of their journey.

Stay lean

Start by keeping things simple: Effective CPE is based on being clear about objectives. For example, in-store displays and fixtures can drive awareness and trial. But if used primarily to build brand equity, displays typically won’t deliver.  Maintaining this clarity also helps marketers avoid overthinking how much choice consumers actually need.  As an example, it is tempting to layer many tactics together to maximise reach and generate halo effects. But overdoing it can quickly erode margins and ROI. 

Stick to the facts

Developing a consistent metric across CPE categories can be challenging. Overlaps in taxonomy, multiple contributors to spend items, and haphazard spending habits mean there is often poor transparency and limited consistency in how CPE spend is classified.  The best marketers address this by creating a consistent taxonomy and reclassify profit-and-loss (P&L) codes to reflect the changes. For example, leading consumer companies increasingly prohibit the use of a shopper-marketing-spend line item, enforcing greater clarity on the actual costs associated with individual components

Use what you learn

Marketing leaders don’t play it safe by relying on a narrow range of traditional approaches. Instead, they refresh the playbook continually by updating it with their own experiences, and observing how others deploy CPE for inspiration. This doesn’t have to cost a lot: they use sampling partners to observe shoppers in-store and key-account managers to interview retail partners on what’s new. They create incentives for their marketing team to share personal in-store experiences. Leading consumer companies are also active in working with digital/mobile startups or retailers on in-store innovations such as mobile coupons or new shelf technology to know what’s coming next.

Elevate CPE

While it’s still unusual to see CPE truly part of marketing and other trade programmes, introducing a stable budgeting process can help address the issue. Many consumer companies use processes like zero-based budgeting (ZBB) to systematically report and adjust spend, which also helps set integrated targets, monitor cross-function spend, and provide regular reporting to relevant marketing and business-unit leaders.

Approaches like ZBB help instill a mind-set of transparency in the organisation. It is bolstered by monthly review meetings that track spend, identify variations in the budget, and then deploy multifunctional SWAT teams to understand root causes for any spend deviations and define remediating actions. This integrated budget process is often a good springboard to other critical integrated processes, such as joint campaign planning.

See that CPE work

Marketing executives at consumer-goods companies ought to be asking themselves what their CPE spend is and how to get more from it. The potential benefit is huge and can turn CPE into a significant source of dollars to fund growth priorities across the business.

With additional contributions from Stacey Haas, Max Magni, and Cathy Wu, from McKinsey & Company.

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