2. Taming The Trade Promotion Tiger George Lawrie Senior Analyst Forrester Research

3. Theme How to get the best return from trade promotions investment

4. Trade Promotions As A Percentage of CPG Firms’ Gross Revenues Base: 10 global consumer goods manufacturers Source: June 11, 2004 Tech Choices “Grading Trade Promotion Solutions”

5. So What’s Driving Trade Promotions? New product introductions. 2003 33,700 new CPG items in the US marketplace alone »up from about 32,000 in each of the previous two years. Declining shelf space. »Median US store size has declined since its 1999 peak of 44,843 square feet, following nine consecutive annual rises. »Wider assortment range in both North American and European stores constrains shelf space yet more. Private-label products. »Private-label products now account for between 15% and 20% of items sold in US supermarkets, 22% in Europe, and a staggering 42% in the UK. Result - large and rising trade promotion spend »10 CPG firms interviewed by Forrester planned 2003/4 trade promotions at 16% gross revenues It all adds up to more than $100 Billion per year »Based on 2003 revenues, the 50 largest CPG manufacturers. »It’s the single largest element of expense for CPGs, but the least well controlled. Typically CFOs use a complex tangle of spreadsheets and enterprise app extracts to track trade promotion dollars but have no way accurately to estimate in advance the impact of a planned promotion. CRM based approaches typically just rely on sales estimates of trade promotion impact, thus ensuring that trade promotion accruals and supply chain preparations are based only on guess work »No wonder senior execs get mauled by regulators and shareholders alike

6. The Scope Of Trade Promotion Impact Siloed trade promotion management wastes cash. Trade promotions cause costly inventory stock piles. Isolated trade promotion creation puts brands at risk. New accounting measures covering trade funds.

7. The Trade Promotion Activity Cycle Crosses Company Boundaries From Grading Trade Promotion Solutions, June 2004

8. A Multi-Dimensional Puzzle CFO - fund allocation for best RoI VP Manufacturing - smoothest production VP Marketing – brand impact VP Sales – allocation of funds between major accounts and promotions

9. It All Depends On Promotional Uplift… It’s Not Just Glorified CRM! How do you know that your planned promotion is a good investment? »You need a valid predictive model »You need accurate field data »You need to stop guessing about promotion uplift!

10. The Trade Promotion Market Structure Diagnostic From Grading Trade Promotion Solutions, June 2004

11. The Data Synchronization Problem From Winning The CPG Data Synchronization Race, March 2004

12. Interfirm Competition Evolves To Value Chain Competition From Europe’s Unique Enterprise Apps Evolution, January 2005

14. George Lawrie +44 207/323-7675 glawrie@forrester.co.uk www.forrester.com Thank you Entire contents © 2004 Forrester Research, Inc. All rights reserved.

15. Selected bibliography December 1 2002, Business View Report “CPG Brand Loyalty Is Up For Grabs” March 8, 2004, Best Practices “Winning The CPG Data Synchronization Race” April 26, 2004, Trends “ERP Alone Won't Fix CPG Data Synchronization Problems” June 11, 2004, Tech Choices “Grading Trade Promotion Solutions” January 13, 2005, Market Overview “Europe's Unique Enterprise Apps Evolution”