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EFFICIENT PROMOTION: AN INDIVIDUAL ISSUE

Despite the lack of official reports and joint-industry projects in efficient promotions, retailers and suppliers are still making headway in this rather contentious area of Efficient Consumer Response.Legal concerns about potential charges of industry collusion prevented the ECR Operating Committee from conducting a comprehensive survey of promotional practices and making specific best practices

Despite the lack of official reports and joint-industry projects in efficient promotions, retailers and suppliers are still making headway in this rather contentious area of Efficient Consumer Response.

Legal concerns about potential charges of industry collusion prevented the ECR Operating Committee from conducting a comprehensive survey of promotional practices and making specific best practices recommendations.

But some individual companies are moving forward with specific trading partners to devise a more effective method for promoting products, said the co-chairmen of the Joint Industry ECR Operating Committee.

"It's now best left to trading partners working together individually to sort out this issue. But I wouldn't interpret our inability [as a committee] to move forward to mean that no progress is taking place, because a lot of things are going on," said Jack Haedicke, vice president of activity-based costing at Kraft Foods, Northfield, Ill.

"My belief is that trade spending is down overall in the industry, and that future trade spending is going to be based more on performance -- on pay-for-performance types of promotions," he said.

"I don't see any ECR organizational reports in the area of efficient promotions, or efficient product introductions," said Harvey McCoy, vice president of grocery category management at H.E. Butt Grocery Co., San Antonio. "But there are a lot of individual initiatives taking place, and a lot of companies struggling with how to best go about this."

Probably the greatest promise for proceeding down the path of efficient promotions involves the use of activity-based costing for measuring all aspects of each company's operations, including forward buying, diverting and other practices.

"Part of the problem is the difficulty of getting a handle on efficient promotions. But there are a number of leading companies acting and trying to assess the actual costs of handling products and promotions effectively on both sides of the desk," McCoy said.

"ABC helps companies get to the right numbers rather than look at just part of the equation," he added.

"Part of the reason we pushed ABC so hard as part of ECR was so that retailers and wholesalers could make an intelligent and informed decision on practices like forward buying and diverting," Haedicke said.

Haedicke and McCoy stressed, however, that decisions about efficient promotions, and whether to abandon practices such as forward buying and diverting, will depend on individual retailer circumstances and manufacturer programs.

"Much of the decision-making process in this area will come from companies' own paradigms and financial investments, including whether they're heavily leveraged in warehouse space, rapidly expanding their store count, and things like that," McCoy said.

"I'm seeing more understanding of what is taking place and a more proactive stance by some manufacturers to develop fair and equitable pricing structures that allow companies to design promotions to give consumers what they really want," he said.

"Granted, it's a shared responsibility between all parties," Haedicke said. "But whether companies modify or give up some or all of those behaviors will depend in large part on the deals manufacturers put out there."