The Importance of POS Marketing in Demand Management and Forecasting

Recently I was having a conversation regarding business analytics with a large mid-western beer distributor’s purchasing manager.  His job, as he explained it, is Math: “Demand management — and forecasting.”

Fundamentally, the job is to make certain the distributor has enough inventory on hand and on the way (with a known delivery date) in order to have as little inventory as is feasible but at the same time retaining a very high service level.

The goal of course is to reach 100% service level; although, in reality the carrying costs required for a 100% service level would noticeably decrease profits. So the technical service level goal used for calculations is something less than 100%. On the other hand, it should be noted that for products in high demand, a service level drop to about 92% will result in a reduction of overall revenue of 4% (Note 1).

Key Factors

Factors such as lead times, item’s seasonality, growth trends, new product introductions, and substitute products all figure into the job of purchasing manager. Other factors affecting demand are increasingly important, including retail pricing incentives and promotions are always in flux, and it follows that demand management and forecasting is, on a good day, a constantly moving target. Yet, with profit margins under pressure from all sides, proper demand management can have positive and profitable outcomes for distributors.

POS Marketing and Demand Management

Today, much more so than in previous periods, better demand management really is critical in helping to gain the extra pennies (or so) per-case saved — or perhaps earned — that distributors are looking for. And, increasingly, demand management involves yet another variable: Point-of-sale (POS) marketing and promotional programs designed and implemented with the goal of increasing demand, often within a few days of POS promotion program launch.

Collecting POS data and correlating it to item sales data certainly facilitates the effectiveness of the distributor’s purchasing manager; but, probably of greater importance is the distributor’s ability to collect and report on POS data thereby helping determine the impact (and ROI) of distributors’ shopper marketing initiatives. In short, both purchasing and sales managers will benefit from tracked and measured POS marketing programs.

POS Marketing and Forecasting

As you know, beverage alcohol distributors’ sales and purchasing functions rely heavily upon forecasting to help predict future sales (and assure high service levels). Today, more than ever, forecasting requires that all data-points influencing decision making are recorded and at hand. In the past decade it has become even more important to know demand patterns, economic factors, competitors’ movements and the impact of pricing — perhaps the key component of POS marketing content.

Until the advent of OnTrak’s digital tools, such as SignTrak, MenuTrak and PermaTrak, very little granular data pertaining to POS promotions was even captured, let alone able to be used in the forecasting formulas distributors rely upon.

Until the advent of POS applications such as those mentioned above, ordering and tracking tools were virtually non-existent and therefore the impact of POS marketing was relegated to the qualitative and subjective realm — essentially anecdotal observations — not the quantitative realm: employing correlation or causal statistical methods. Now is the time to look into OnTrak’s suite of digital tools for today’s beverage distributors.

To learn more about OnTrak’s digital tools for tracking your POS Marketing and positively impacting your demand management and forecasting activities, please click this button:

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Note 1 - Grocery Manufacturers Association Study, 2002; URL:

http://itsoutofstock.com/wp-content/uploads/2013/04/GMA_2002_-Worldwide_OOS_Study.pdf