By: Gopika Maya Gopal, Lead Analyst, Marketing Materials
08 August, 2018
Companies, especially those in the CPG, FBT, Retail and Pharmaceutical industries rely on point of sale materials (POSM) for trade marketing activities. Companies who are currently cutting budgets on trade marketing activities could really focus on cost savings while sourcing POSM.
Buyers could make savings via cost reduction by procuring materials efficiently, choosing the right suppliers and efficient design.
This whitepaper mainly talks about choosing the right set of suppliers and efficiently procuring POSM for trade promotional activities
Even though the share of buyers’ spending on POSM, as a proportion of their total trade marketing budget, is small, companies globally spend about USD 28 billion on POSM, with North America and Europe being the top two markets for the total spend. Currently, companies worldwide are trying to cut down their trade marketing spend. Buyers are currently trying to utilize their trade marketing budget more efficiently and effectively so that they can achieve greater sales from lower budgets.
POSM are considered to be an effective tool to attract consumers inside the store. This is considered to be a more efficient method for increasing sales and promoting the brand. Companies could achieve cost savings and cost reduction by efficiently sourcing the materials required.
There are different sourcing models existing in POSM. Procurement models and type of suppliers will vary based on the quantity and frequency of demand for the materials. Therefore, the sourcing models for POSM vary from client to client and industry to industry.
“Client A – I need different types of materials for instore and trade marketing activities. I run a lot of promotional campaigns throughout the year. I would also have a lot of ad hoc demand, apart from the materials required as per contract.”
Type of suppliers : It is always ideal to engage with an aggregator, rather than a specialist POS supplier. Aggregators can take care of the huge and ad hoc demands easily and deliver the services with a lower lead time. They can also take care of services in almost all the markets due to their global presence. Buyers also get additonal volume discounts for bulk buying.
Type of sourcing: It is always better to adopt full service outsourcing. Here, companies can outsource all their services, from design to installation, to a single player. This model is adopted by many buyers across markets (especially in North America, Europe and Latin America)
Type of engagement and contract: It is ideal to adopt a global sourcing model, by choosing the same aggregator to offer services across multiple markets. To achieve additional savings, it is better to adopt a long-term contract.
“Client B: The type of materials that I need is minimal since there are a lot of regulations for trade marketing in the pharmaceutical industry. The promotional campaigns are mostly decided at the beginning of the year and I do not face ad hoc requirements during the year.”
Type of Suppliers: It would be ideal to choose POS specialist suppliers who offer POSM. They would be able to offer them at a cost lower than that of aggregators.
Type of sourcing: It is better to adopt full service outsourcing, where a single supplier takes care of all the services, from design and strategy till installation and ROI measurement
Type of engagement and contract: It is ideal to adopt a local or regional sourcing model. To achieve additional savings, it is better to adopt a long-term contract.
“Client C – I would like to re-strategize my brand’s message and image. I would like to change the design, as well as the look and feel of the promotional campaign.”
Type of sourcing: It is better to adopt bundled outsourcing, where a service such as design is outsourced to design-specific agencies and the remaining services are outsourced to POS specialists or aggregators, based on demand.
Companies can also adopt hybrid sourcing (mix of full + bundled outsourcing) if re-strategizing is required only for one or two product brands.
Type of engagement and contract: It is better to adopt regional sourcing with design agencies, where the same design could be implemented in multiple markets in order to maintain consistency across markets.
Companies can attain cost savings or cost reduction by choosing the right supplier, type of sourcing, uniformity in design and right pricing with suppliers
Choosing the right supplier: Companies should decide on which type of supplier to engage with based on their demand, how frequently they need the materials, how often ad-hoc requirements would arise etc.
Buyers with lower demand for materials should engage with POS specialists who are capable of offering suitable materials at a cost lower than that of aggregators. Buyers can negotiate for a better price by having a long term contract with their preferred agency.
Buyers with huge demand can choose aggregators since they are capable of handling bulk demand and can also meet ad hoc requirements with a shorter lead time. Companies can negotiate with aggregators for volume discounts, global contracts and long-term agreements.
Type of sourcing: It is always ideal to choose full service outsourcing due to the advantages of ease of management and a single point of contact. Lead times could also be reduced tremendously with the help of this model. Companies can negotiate for better prices since all the services are being outsourced to the same agency.
Uniformity in design: Buyers should pay more attention to the design of materials in order to maintain consistency and also to reduce wastage. FSUs, end caps etc. with multiple specifications should have similar panels, color code or joints so that they could be re-used for a different specification or a different campaign. Convertible displays can also be considered since this will help the buyer to reduce cost on a long-term basis.
Pricing: Companies who have a large account with aggregators would go for a gain sharing model, where the suppliers are incentivized on the basis of the profit that they create for the buyers. This is considered efficient, especially when companies buy items with the same specifications every year. This type of pricing will help the companies to attain better savings (upto 30%) over a period of time (less than 5 years).
Companies by adopting the best fit strategy based on their demand could acheive savings in POSM procurement. The need for POSM will grow in the coming years, especially for CPG, FBT, Retail and Pharmaceutical companies. Formulating efficient strategies based on the requirement and campaign needs will help buyers attain savings and reduce cost while procuring POSM.