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ECR OPENS PROMO PANDORA'S BOX BUT AGENCIES SEE PAY-FOR-PERFORMANCE OPPORTUNITIES

By Published on .

As marketers and research companies accelerate their Efficient Consumer Re sponse initiatives, savvy promotional marketing agencies are anxious to see how it will affect their business.

Using grocery scanner data from research companies such as Information Resources Inc., Nielsen Marketing Research and Efficient Market Services, marketers can accurately measure the success of consumer and trade promotions by tracking same-day sales volume.

They've only just begun using scanner data to plan promotions, but sales promotion agencies envision a day when this will be an integral part of their business.

Pay-for-performance promotions is one of the cornerstones of ECR, a strategy designed to expedite the flow of products from marketer to retailer to consumer. It will potentially eliminate trade promotion spending and the waste that often entails, holding retailers accountable for their sales volume.

Marketers will use scanner data to reward retailers for each item they sell on promotion.

Nielsen marked its foray into pay-for-performance promotions last October when it bought an interest in Scanner Applications, and IRI is developing its Customer Marketing Resources division to expedite "scan-down" promotions.

Efficient Market Services is the third player in scanner data, offering manufacturers daily data from each retailer during a promotion. Earlier this month, Nielsen agreed to pay $60 million for a minority stake in EMS, enabling Nielsen to integrate EMS's daily census data into weekly data passed along to clients.

But scanner data won't just hold retailers accountable. It will also hold sales promotion agencies accountable, as marketers are better equipped to judge how successful a promotion was at each participating retailer.

Tom McCann, VP-client services at Focus Marketing, Norwalk, Conn., acknowledges the standards by which promotions traditionally have been evaluated are far from accurate.

"Clients count the number of sweepstakes entries or the number of coupons redeemed, and if they get a certain number, they say the promotion was successful," Mr. McCann says. "But that's not an evaluation of product movement."

Promotion agencies would welcome a tougher jury, he adds.

"Anything with respect to accountability is positive for sales promotion agencies," says Victor Imbimbo, ceo of Hadley Group, New York.

"There are many things that have to happen at the operations end. Pay-for-performance will give sales promotion agencies a chance to work with the sales force and the trade, so we know all operational aspects of the promotion are in place," he says.

Marketers already use scanner data to ease the logistics of a promotion. An executive at one frozen-food marketer says daily scanner data enables his sales force to avoid out-of-stocks by predicting the volume needed to support each promotion.

Most marketers agree ECR means a change in operations. But beyond logistics, what remains to be seen is how the data will be used to conceive a promotion, to plot it from start to finish.

"I see promotion people elevating themselves to the level of strategic planning," says Chris Sutherland, executive director of Promotion Marketing Association of America. "Manufacturers will look to agencies more for help in the initial planning phases of discretionary funds-how many dollars for trade promotion, how many for advertising or consumer promotion."

Whether a marketer's use of scanner data will put a crimp on promotion agencies' creative license is debatable. If accurate sales data prove a promotion a winner, will marketers go back to it again and again?

"I think once a promotion tactic is proven over time, and continues to perform and outperform other tactics, it might narrow the range of promotions that are considered," says Jeff McElnea, president-ceo of Einson Freeman, Paramus, N.J. "But in spite of the fact that clients want proven promotions, they also want to out-innovate the competition."

Joe Flanagan, president-ceo of Impact, says heavy reliance on scanner data might result in information overload.

Agencies also are concerned about compensation. In an environment where retailers are compensated for the number of products they sell, will promotion agencies be paid based on the sales their promotions generated?

It's a vague threat that's been held over the advertising industry for years, where the response has been that it's too difficult to measure quantitatively the effectiveness of advertising.

Scanner data, however, provides that quantitative measure for short-term promotions. It's an idea sales promotion agencies dismiss, but one that may challenge them in the future.

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