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Retailers tend to have an ambiguous relationship with the phenomenon “promotions”

Guest blogger: Erik-Jan Mares, former Senior-Vice President Merchandising & Sourcing Albert Heijn

Promotions are ubiquitous. You cannot think of the daily (factual or virtual) shopping world without thinking of promotions. Consumers are bombarded by discounts, sales, ‘soldes’ and ‘rebajas’ in every store they enter, across the globe. Generally, they have no idea anymore what the actual price of the product is, or should be.

Exceptions aside, almost no brand, product or retailer can avoid the necessity of attracting consumers through discounts or other (perceived) offers. Considering the large amounts of money that are associated with promotions, both manufacturers and retailers have major interests in this process. Not only because of the actual discounts, but also the costs involved in efficiently driving promotions through the value chain. Making promotions profitable remains a particular challenge for both parties.

From a retailer perspective, two topics are of big importance. First, the correct promotions need to be offered at the right time to attract or reward the right consumers. Secondly, this needs to be done with the least possible disturbance of other important processes within their value chain (eg. logistics, administration). However, every retailer, even the ‘everyday low price’ chains, knows that they cannot survive without promotions. That is something the recent economic crisis has taught us: low prices in combination with good quality, is here to stay.

A lot of A-brand vendors, despite the fact that they complain about the costs of promotions and the pains associated with it, cannot afford a business plan without promotions. For some categories, 70-80% of the sales are only generated through promotions. Hence, it is of utmost importance for both manufacturer as well as retailers that promotions are as cost-effective as possible. However, this is only manageable when one is able to integrate all available data and intelligence on both sides, and make it available on a platform that provides continuous insight into the entire promotion process. This is the only way for manufacturers and retailers to able to make the best decisions to serve their common customer: against the lowest costs with the least possible disturbance of the value chain.

Currently, there are only a few solutions in the market that accurately respond to the issues outlined above. Many companies still work in a suboptimal, out-dated way where they use for example Excel and other ‘home-grown’ solutions that often require a lot of manual input with almost no data integration. All of this in an era where the costs that are involved in trade promotions continue to increase according to the latest update of Gartner: $500 billion worldwide.

Visualfabriq has found a flexible solution for a lot of these problems. For starters, they have been able to integrate large amounts of internal and external source data in such a way that it is scalable without performance issues. To speak for myself, I hadn’t encountered that before. Next to data integration, the company’s main focus is on artificial intelligence. Gartner comments on that combining ‘predictive and prescriptive’ in one solution will be the way forward. Hence, Visualfabriq offers a true future-proof solution for manufacturers. In addition to this advantage, they also are able to switch quickly and always use the most recent technology (open source), leading to relatively low implementation costs compared to other providers. As a result, Visualfabriq makes the solution accessible for a broad range of companies and countries. For example, the solution is accessible to the smaller entities of Global Players; and to countries that do not want to wait any longer and would like to invest in their future. It is also an interesting option for smaller companies that always wanted a solution like this, but couldn’t afford the implementation.

Manufacturers that are able to reduce costs in the value chain (through increasing the forecast accuracy by using Artificial Intelligence resulting in less disturbances in the supply chain of retailers) and those suppliers that are able to propose the correct promotions at the right time for the right customer, have a clear advantage with every retailer. This is because retailers want nothing more than satisfied customers who walk out their door with the feeling of a benefit they haven’t had before and the intention to return for more of the same.

About Erik-Jan Mares After finishing his master degree of Business Administration at the University of Groningen, Erik-Jan Mares kicked off his career in recruitment. Within a few years he switched to a position in the FMCG world. Soon Erik-Jan Mares became familiar with global jobs as Commercial Director Nutricia Argentina, Marketing & Sales Director Nutricia Indonesia and Sales Director Nutricia Netherlands. In November 2009, he traded the manufacturer world for the Retailer world. Since 2013, Erik-Jan Mares has fulfilled several Senior Vice President roles within the Ahold-Delhaize group and has become a true expert on the FMCG business.