Research suggests that many suppliers feel powerless when managing promotions. Julian Hunt finds out how they can take control and maximise their returns

Apparently, whenever two dogs are locked in a fight to the death, the weaker one will offer its throat when it wants things to end. A piece of trivia that has some resonance for those locked in the fight between retailer and supplier. “When it comes to managing their promotions, too many suppliers have given up and are now offering their throats,” claims one commercial director, who subscribes to the two dogs theory.

Emotive stuff. But that’s hardly surprising in light of research conducted by Billetts Marketing Sciences and The Grocer, which confirms the debate about trade promotions is full of strong emotion - and plenty of contradictions, too.

Billetts quizzed manufacturers of all sizes supplying £14bn of branded and own-label products. Their views are fascinating: just less than half of those quizzed felt they spent too much on promotions; about 25% of their volume on average was sold on promotion; about 41% of people expected to see more promotions in the coming year; and yet suppliers were generally resistant to the charms of EDLP.

David Bridges, CEO of Billetts Marketing Sciences, says: “Just under half of suppliers felt they were spending too much, but very few felt they were spending far too much. So tackling this issue is not going to be about radical realignments.”

OK then, what’s to be done? Backed by the research, Bridges feels there are obvious gaps suppliers need to close if they are to maximise the returns they get from promotional activity.

Most of those surveyed felt that retailers benefited the most from trade promotions - and said that was one reason why they were a great way of driving relationships forward.

Not surprisingly, 76% of those surveyed also agreed that promotions were a great way of building volume. But 48% felt that promotions were ineffective at driving incremental profit. Bridges says: “The poor profit returns were to be expected. We would suggest, though, that they are avoidable - out of more than 20 categories we have recently worked in, we only found one where it was impossible to promote profitably.”

Echoing the two dogs theory, he adds: “There are suppliers who understand all this but feel they cannot do anything because retailers are in the driving seat. But you can say ‘no’ or ‘let’s do it in a different way’.”

That requires employing sales teams with the right negotiating skills who don’t do crazy deals, says Bridges. But the successful suppliers also have the right processes in place to take control of what they are doing from beginning to end - with the right sort of accountability. They also base decisions on facts, not instinct. And they have formal evaluation processes to ensure they never repeat their mistakes.

So are suppliers in control? The research looked at the four key stages of the promotional lifecycle - approval, forecasting, execution and learning. When it came to approval, most suppliers rated themselves highly, with an average score of 4.1 on a scale of one to six (where six was exceptionally strong). But when it came to forecasting, the average slipped to 3.3, with just 47% of companies rating themselves as better than average. As for learning from promotions, 50% rated themselves above average and 50% below average - with most saying this was a priority for the coming year.

However, it is in the area of execution that a fascinating insight came about - with suppliers giving themselves an average score of 3.4 and just 1% awarding themselves the highest marks.

Bridges says: “In-store execution is absolutely critical. For almost all, there is scope to improve. The challenge seems to be how to drive this more effectively without investing significantly in a field sales force.”

It doesn’t help that there is a huge variation in the ability of retailers to execute promotions. The research found suppliers saw the market as comprising a top tier of performers, led by Waitrose, with a second tier of mid-size retailers followed, well off the pace, by Sainsbury.

Bridges says: “There’s no denying the air of frustration among manufacturers about the promotional situation at Sainsbury. But there was also no mistaking the desire to help them turn the situation around; suppliers need a stronger Sainsbury to inject balance into the market.”

Still, he believes those suppliers who understand the three stages involved in getting a promotion off the ground can fill any gaps in execution.

Stage one, Bridges explains, is about having savvy negotiators who can hammer out a good deal with their customers that includes specific performance targets for compliance; stage two is about giving the buyer the facts he needs to win any internal auctions for space so that he can get the gondola ends you require; and stage three is when the promotion is agreed and heading into the stores.

“It’s at this stage that field sales is clearly a benefit,” says Bridges. “But I would also suggest that people do not take advantage of the other resources available to them - particularly using the retailers’ online sales systems to spot issues early. For example, if you expect a 400% uplift on day one of a promotion and get 250%, then you know that you have a problem! And how many suppliers mobilise their entire team on day one of a key promotion to drive compliance?”

He adds: “Fix the first two stages and take advantage of the other stuff and it is not necessary to employ 300 more field sales people. You can get your existing force to work much smarter.”

Working smarter in a world of contradictions is not a bad message to take from the research. And instead of fighting with customers like, well, dogs, the trick for suppliers is deciding how best to target their activity so they can maximise returns.