Spar InfoTech, Inc.
Trade Promotion Analysis – Sales Data Comparison
A critical decision in Trade Promotion Analysis is the type of data to use. Over the years many types of data have been used including Factory Shipments, Scanner data, SAMI, Panel Data and the AC Nielsen (“ACN”) bi-monthly audits. Currently data is either Scanner Data or Factory Shipments. The following are the advantages and disadvantages of both.
Scanner Data Advantages
Easily Available. Scanner Data is sold by IRI and AC Nielsen so the work has been done to vet and clean the data. Errors occur where retailers miss weeks of data or other errors create inaccurate data. IRI/ACN have robust systems to identify errors and fix them with estimated numbers. Many retailers such as Walmart make their scanner data available to CPG companies and have data processing systems to make sure the data is accurate since the retailer will use the data for their own internal operations.
Based on retail sales. Scanner data represents the actual sales by the retailer during a promotion. This is easy to understand, intuitively sensible and simpler to model to calculate baselines and incremental promotional volume.
It is accepted by the Retailer. Since it is the retailers sales it can be used as a common language between CPG sales personnel and the Retail buyers.
CPG payments on sell through. CPG Companies have made an effort to switch from paying on sales into a Retailer to paying on sales out of the Retailer. Scanner Data is needed to make this work.
Scanner Data Disadvantages
It is not easily accessible for all Retail Channels. Walmart does not allow either IRI or ACN to use their scanner data. Since Walmart is such a big segment of the market this can cause distortions. IRI/ACN claim they have adjusted for the lack of Walmart data.
It is expensive if purchased from IRI/ACN. Even the largest company may not buy detailed data for their smaller brands and smaller companies will buy limited data.
If used at the individual chain level and obtained directly from the chain (e.g. Walmart) it can require a great deal of work as all the data from the individual chains must be handled separately. Often the analysis is then ad hoc and ongoing.
It doesn’t tie into a CPG companies markets. CPG Company’s have their own definition of a market (e.g. district, territory, region) and usually promote on that basis. It is difficult to allocate scanner data so it fits into the market definitions that the CPG Company uses.
It doesn’t allow for the full cost of a Promotion to the CPG manufacturer. While the retail discount can be obtained from scanner data it doesn’t measure the actual cost to the Manufacturer.
It doesn’t measure the impact of forward buying or Diverting. Since Scanner Data is based on retail sales it doesn’t factor in Trade Forward Buying or Diverting either in or out of that Retail Chain.
It can distort SKU level analysis since similarly priced products are often scanned base on one product. For example, baby on promotion may be ten for ten dollars but the cashier will only scan the first type of baby food and hit the 10 button showing all sales as one type and not the correct mixture.
Shipment Data Advantages
It is free.
It is based on the CPG Company’s definition of a market.
It covers all SKU’s, channels of distribution and Retailers.
It allows for a full P&L considering all costs for the promotion including the costs of Forward Buying.
Shipment Data Disadvantages
It requires work to build the database.
The CPG Company needs to build systems to clean the data and insure accuracy.
Retailers are less likely to accept the data in negotiations between the Retail Buyer and the Salesperson.
It requires the CPG Company to have a Model to calculate the impact of promotions.
It is more complex to use and understand than scanner data.
The decision to use either Scanner Data or Shipment Data is based on how much can be paid for the data, the skills of the in-house people to be able to analyze data, the need to use the results in Retail Negotiations and the importance of quantifying the true Profit from Trade Promotions. It should be noted that both types of data have an inherent weakness in that they measure sales and not consumption. Selling more product in one period that is not consumed is not Incremental Sales as eventually the extra purchases will reduce sales elsewhere. To truly measure the impact of promotion it is important to know the SOURCE of the incremental sales.