Bricks and Clicks

The first recorded episode of the year

• DSD or direct store delivery vs other types of delivery
• Impact of Omicron variant on supply chains and logistics
• How we would spend $75M if we were a CPG brand.

Bricks and Clicks is hosted by Johnny Valeriote and Colin Davidson, two of the three managing partners at Omnium. Produced by Rolled Up, submit your comments and questions to us on Twitter.

Colin and Johnny of Omnium breakdown why it's so hard to sell online.

Bricks and Clicks is hosted by Johnny Valeriote and Colin Davidson, two of the three managing partners at Omnium. Produced by Rolled Up, submit your comments and questions to us on Twitter.

60-75% of account planning is spent on distribution planning because it's going through SKU by SKU to see what products are selling well in each location.

In this episode, Johnny and Colin talk about how they approach account planning with their clients.

What happens during account planning? In short it’s a collaborative process when everyone, from the team at Omnium, heads of sales, account management, and customer marketing go over weeks and years of data to drive and execute the strategy for each account (retail store).

When one store can have 2500 locations, the strategy of a single SKU can make a big impact, it’s about a $1.3M sales opportunity.

Prior to an account planning session, it’s easy to talk about what would be nice to do in terms of promotions and prices, but it’s not until the account planning actually happens that action can actually be taken. Otherwise you’re just guessing and gambling big dollars away.

Hone in on each account to see what you can, and should run.

Typically account planning will look at a year of promotions in advance, this could be your fiscal year, the calendar year or even the customer’s fiscal year. It’s critical to line up your promotions with high seasonality points. If the most shoppers are in the category during Thanksgiving, run your promotions then.

Many products have opposite seasonality, and will come in strong, but finish the year weak. For instance, health products and foods to get healthier typically they do well at the start of the year because people want to undo the unhealthy habits at the start of the year.

You want to avoid running promotions when nobody is buying in your category.

Spending $100,000 on an event can be expensive, work with your retailers to come up with variable rate or blended rates. This mitigates your risk if you run a promotion but environmental factors make it harder to sell.

Historical data is the best friend you have. Looking backwards at how products and promotions have run, will be the best tool for predicting the future.

Transactional spending is something we all spend on, buying events, ads, shopper marketing, any type of marketing in store -- the goal of these is to drive sales in store, but also to build relationships with your retail partners.

Johnny and Colin break down the nuances in this episode of Bricks and Clicks.

Events are time based promotions like flyers or endcaps. 

Not all partnership spend is created equal, the best investment you can make is into distribution and slotting. If you aren’t aware of slotting fees, it’s a fee to get a slot in the warehouse, and then the stores will pull that from the warehouse.

Instead of being intimidated by slotting fees, you can work to build a partnership with your retail partners.

Spending $500,000 on slotting fees may seem expensive, but it mitigates risk. If the grocery store brings on a new item and it doesn’t sell, they’ve already made $500,000. As a supplier, brand or manufacturer, you’re confident you’re bringing in the products that will be profitable based on your other sales.

Spending heavy can be intimidating so it’s important to know when to do it. In addition to launching new products, if a product is slipping in sales or struggling, and at risk of being discontinued, it can be worth over investing. When a buyer looks at this, they see you spending a bit more than a competitor. It’s not a solution to low velocity, but it may be enough to buy yourself some time in the category reset when a human sees you spending and not your competition. Especially if you have the inventory to move already.

Understanding what your buyers want, and what impacts their P&L will get things done. Trade spend is a big line item 

When you walk the grocery store, you always see the same products. Why is that? It might be easy to ignore when launching a new product, but most products that are launched, don’t make it. Your favourite brands probably started out with one product, and even if you do succeed, it’s very hard to replicate that.

As much as we want to launch the next best item in a category, which is why it’s important to use the analytics and numbers to lower expectations and set budgets accordingly. Other things to consider before launching a product are the previous attempts to launch in the category. Even if you do everything right, you may only have a 5% chance of success.

This comes from the CEO of Wild Planet, Terry Hunt, if you are putting revenue into the plan, plan for 0% margin. Your sales team still has a number to hit, but if it is a flop, that’s what you planned for. Any profit, no matter how small is exceeding your plan.

DTC launches are also risk free environments, especially in small batches.

No matter what you do, you can’t predict the future. Even when you do everything right you can still flop, you need actual sales data to predict what will happen. Velocity in the first 13 weeks is what will determine what your sales look like.

Promotions have a quick burst of sales, but it’s short lived. Over time, more promotions will lead to more sales because customers are used to seeing your promotions but that takes time.

Retail data comes over looking at 104 weeks, or two years worth of data to be able to make multimillion dollar decisions for CPG brands.

All of the purchases at point of sale goes through a syndication of data providers like Neilson and IRI who collect and sell the data to manufactures. This is layered on with other contextual information like products being sold, and promotions going on in the store at the time.

They clean and structure the data so it’s ready to use.

Brands who start DTC or in ecommerce are used to having great first party data sets. When using data from different sources, it doesn’t always mesh well, skewing the results you’re looking to achieve or uncover.

For example, your on-site data, discount wholesaler, Amazon, premium grocery etc.

The goal of these data sets is to uncover what’s driving sales, if a website promotion is going on, did it impact offline sales as well?

1st party and owned data is great, but it can lack context. Having access to all the data, for example, offline sales, can tell you when you are increasing sales but compared to the market as well. It can unlock insights like increasing prices at one store, but decreasing prices at another bring the greatest lift in sales. 

Rarely will there be findings on a national scale. There may be some generic trends, but it will differ from store to store. For example, Publix, a Florida grocery store is great at running BOGOs. The same promotion at Publix won’t work as a nationwide go to market strategy.

New flavors are tricky, chocolate and vanilla always sell, and people love new unique flavors. When you walk through a grocery store, you’re hit with survivorship bias. Those products and flavors made it, but what happened to the ones that didn’t.

What is Trade Marketing?

Trade marketing and advanced analytics is like playing Moneyball (what Jonah Hill did in Moneyball). It’s using data to make better decisions. It’s a bit different than looking at things like Packaging, it’s a study of the purchase environment, where people make purchases.

What do those different marketing and trade activities do to impact the trade environment itself?

Is this going to drive sales where we need it to drive sales? 

DTC and Brick and Mortar marketing is similar, especially on the analysis side, it’s the lens of increase sales, and knowing where you accel. Online or offline.

The data and analysis helps companies make better decisions like which promotion to run, for example a 10 for 10 or a 4 for 5.

Clif bar might be running a promotion for a 10 for 10, when you can get 10 bars for $10. This type of promotion is bought by the manufacturer from the grocery store.

Buying promotions can be a few different things. Buying the promotional inventory from the retailer, and the amount that’s discounted. There are other layers to add on as well, such as buying the ad and getting it printed in the flyer. 

Endcaps, displays, and signage in the store all cost money, it’s not the stores choosing to discount old inventory.

Your brand may have to pay the retailer before the store even before you’ve sold any inventory. It’s expensive but can be very lucrative.

That’s what Trade Marketing is, making sure your retail investments are profitable.

It’s not magic, it’s math to predict the future sales, using the vast sets of data available in the CPG industry.

Welcome to Bricks and Clicks, hosted by Johnny and Colin of Omnium. Every day they bring strategy and insights to their CPG clients developed by mathematicians with PhDs. Now they're sharing insights, strategy, and weekly events with you!

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