Crunch the Numbers that Really Matter (hint:they’re the ones that relate to downstream demand)

A New Approach to Trade Spend for Foodservice Manufacturers

There is no shortage of quantitative analysis in the trade spend practices of foodservice manufacturers.  Unfortunately, very little of this analysis helps give decision-makers insights about the effectiveness of their trade spend programs.  The numbers being crunched do not relate to signals about actual downstream demand, but rather to the formidable mountain of claims from their distributors.  These claims come in all manner of data formats and accounting entries and it typically takes armies of brokers, salespeople and financial staff to figure them out.  After all the cumbersome and error-prone line-by-line calculations to validate claims are said and done, you are no more informed about the profitability or the potential risks associated with any given program.  No wonder there is widespread dissatisfaction with the effectiveness of these programs.  Over 75% of manufacturers in this sector consider their trade spend initiatives to be inefficient, according to the 2010 Market Intelligence Foodservice Trade Survey. Read the rest of this entry »

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Finding Pricing Excellence on a Roulette Wheel

One of my recent posts, “You Are Not At the Mercy of the Market…”, attracted a rather thought-provoking response posted directly to the blog.  The crux of this response, and others sent directly to me, have all revolved around a similar theme:  With so much uncertainty surrounding consumer behavior, words such as “pinpoint” or “optimize” should not be uttered when it comes to the decisions that pricing and marketing managers must make.  This is indeed a compelling sentiment, and has stirred much discussion amongst my colleagues in industry and in academia (our research organization collaborates closely with professors within the University of Chicago and Carnegie Mellon University).  This discussion has taken on many twists and turns, which we hope to summarize in future posts.  But, there is one particular question that has resonated throughout our discussions:

What are the implications of the words “pinpoint” and “optimal” when market behavior is so uncertain?

In other words, is it possible to find a single decision that will maximize the odds of earning a handsome payoff when the outcome of any decision is uncertain?  In a rather extreme example, in the highly uncertain world of gambling, can I make some decisions that are clearly better than others in light of the uncertainty? Read the rest of this entry »

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