Today, there is a lot more riding on the ability to effectively execute in retail ad planning. For example, the years since the Covid pandemic have seen the average price of a cut of beef rise dramatically while consumer preferences have changed, making ad planning harder and raising the stakes for getting it right.
For decades, retail meat departments have followed the same process to set their ad features – run the same items for a given calendar week as last year. To be fair, there have been some changes over the years – some of you may remember the transition from yellow notepad to excel spreadsheets – but overall, the process of selecting a feature ad and its pricing is nearly identical to the process 30 years ago.
That’s all changing. DecisionNext is providing leading retailers and buying groups the ability to evaluate the dollar risk associated with an ad feature, review substitute options for that feature, and even project gross margins at varying retail prices all from a single screen.
Essentially, you can now run your ad before you run your ad.
With the Memorial Day Holiday just around the corner, we decided to simulate an ad to find out how profitable the projected retail pricing will be on some grill favorites. With the right tools, one can forecast the profitability on key items and make changes to items or pricing levels, if necessary, in order to attain the desired gross margin.
In this example we entered last year’s Memorial Day ad feature items and their retail price points (Alternative A), and with a keystroke we forecasted this year’s individual costs for one truckload each for May delivery, including cutting yields, freezer storage costs, etc. This gave us an idea of our expected gross margin and expected up and downside margin risk for locking that feature in today. The proposed rerun of last year’s feature of $9.99 Strip Steaks; $1.99 Boneless Pork Chops; and $4.99 Angus Ground Chuck generated an expected $163K (+/- $12K) of net profit (Fig 1).
Meanwhile, we also set up Alternative B, which highlighted three different items and price points to generate a comparison on expected gross margin. Interestingly, we discovered that this option is expected to outperform last year’s feature by around $60K.
Figure 1 – Transaction for two potential retail ads
Not surprisingly we decided to pivot our approach this year, banking on our solid analysis of alternatives to feature $14.99 Ribeyes; $1.99 Baby Back Ribs; and $4.99 81% Lean Ground beef (Fig 2).
Figure 2 – Example of a retail ad featuring bone in ribeye steaks, ground beef, and back rib
Ad plans are hard to get right and painful to get wrong. Since meat prices are up 29% compared to pre-COVID levels, a miss on an ad plan is at least 29% more painful to a retailer. Best in class retailers are using new tools and procedures to get ahead of mistakes in ad planning.