One Blog |February 20, 2017 | Permanent POS Software
Distributors Who Invest in POS Marketing Management Will Emerge as Market Leaders
This blog presents several challenges related to the use of permanent point-of-sale (POS) marketing materials. Those marketing items supplied by wholesale distributors to their retail customers in order to promote the distributor’s brands and increase the sales of beverage alcohol.
Our objective however is to also present solutions that help you better track, measure and manage your significant investment is POS marketing management.
We will be using beer distributors in our examples, but what we will discuss applies to wine and spirits distributors as well.
A Little History
On December 5th, 1933, the 21st Amendment to the Constitution was ratified — repealing the 18th Amendment — and technically ending national Prohibition.
But even after the repeal of the 18th Amendment, some states maintained temperance laws effectively continuing Prohibition. Another 33 years passed when in 1966, Mississippi, the last state still maintaining temperance laws, ended its support for a ban on beverage alcohol, finally and fully ending Prohibition in the US.
One of the key elements that were contained in the “repeal-it” amendment was a provision that gave each state complete control over its beverage alcohol regulation. It was thought that giving each state control over beverage alcohol would reduce some of the problems previously associated with alcohol consumption. Although each state was free to adopt whatever approach they wanted to use to control the sale and consumption of beverage alcohol, eventually every state adopted a similar three-tier system.
The Three-Tier System
Here’s how it works: The three-tier system requires beer, and other beverage alcohol products, to pass from supplier, to distributor, to retailer, and finally to the consumer. So, the supplier may only sell to distributors, and distributors may only sell to retailers.
Importantly, the distributor does the local sales and point-of-sale (POS) marketing for the supplier, bringing benefit to both the supplier and the retailer.
A key takeaway in the above paragraph is that it is the distributor, not the supplier, who is ultimately responsible for the POS marketing activities in their territory
The Lack of Brand Loyalty
Beer, wine and spirits enjoyed some measure of consumer loyalty for many years after the repeal of Prohibition. Brand loyalty has been fading over the last few decades. It finally ended when consumers, faced with an exploding number of brand choices, became far less likely to be exclusively Bud, Coors, Miller or Schlitz drinkers.
Indeed, since the turn of the century, the proliferation of beverage alcohol choices has blossomed from hundreds, to thousands, to hundreds of thousands.
By the end of 2016, a conservative estimate of the number of beers alone exceeded 20,000 different labels; wine labels are well into six-figures and estimates of “about a hundred thousand plus” spirits are routine. And, of course, every year thousands more beverage alcohol products are added to distributors’ inventories.
It bears repeating that it is the distributor who is responsible for fulfilling the required marketing at-retail programs. Remember, too, that in both bull and bear business conditions it is the distributors, who put adequate resources into building the brands they carry, who will emerge as the overall winners.
We noted in a previous blog (2017 Marketing Productivity Challenges) that marketing expenses, the largest share being POS, were identified as the number-three out of the top-five targeted areas for cost improvement. The results come from a nationwide Beer Business Daily Survey of 424 beer distributors who participated in the August, 2016 survey.
One of the reasons for these rising marketing expenses is the growth in the number of brands carried and suppliers engaged. This dramatically increases the number of POS campaigns. The number of permanent POS materials inventoried, has grown from a few hundred, to tens of thousands of SKUs. For most distributors, the investment in permanent POS has also grown into the multiple millions of dollars.
Combine all this with the fact that for most beer distributors, permanent POS materials are only very loosely organized in the warehouse and are rarely ordered by, accounted for, verified, valued, measured and managed by a dedicated permanent POS tracking system.
Permanent POS Tracking System
Unless you use a permanent POS tracking system, your retail execution will suffer.
With a tracking system you will be to:
- Monitor — by customer — permanent POS costs vs. sales
- Determine the ROI of your campaigns
- Record, report and visually verify for suppliers your investment in POS
- Claim marketing bill-back allowances and participate in suppliers’ other incentives requiring proof-of-performance
Without a tracking system, expensive POS capital assets — such as clocks, mirrors, neon signs, tap-pulls and TV’s — are impossible to be found and returned. Add to that any fines levied by many state Alcohol Beverage Control Boards for violation of local compliance guidelines.
Beyond the Cost of Permanent POS
Knowing where permanent POS items are located, what they cost you to purchase, repair or repurchase if lost or stolen is very important. But there’s a better reason for having a permanent POS tracking system. Consider the following question:
How did the placement of permanent POS in our on-premise accounts impact or improve sales?
Only when armed with the data collected by a permanent POS tracking system, it is possible to answer this question. In addition, this data allows you to spot opportunities for improvement in your displays and negotiate for the most effective POS display positions at your customer locations.
We’ve been working with beverage alcohol distributors for over ten years, and it seems that quite often distributors see the tracking and management of their permanent POS investment almost as an afterthought — Typically when there is an un-accountable, sharp uptick in costs.
But sometime during 2016, it became apparent to many beer distributor executives that their point-of-sale marketing expenses had reached a critical stage. They took a close look at their income statements and balance sheets and noticed just how much money was being spent on POS marketing each year and how large their “POS assets” had grown. These executives began asking questions about the numbers, but they found very little information or data about what sales return they were getting for the increasing investment in POS.
It’s Not Too Late
Perhaps you are one of the 424 beer distributors who responded to 2016 Beer Business Daily survey asking you to list your top-five “cost improvement” initiatives for 2017. If so, you understand the problem.
If you were not one of the 424 distributors who were interviewed, then we would suggest that you take a closer look at your marketing costs for your custom, temporary and permanent POS.
Then if you are concerned, now might be the time take steps to get it under control.
Don’t worry! There is a solution for all of you. To check out our portfolio of POS Tracking Solutions Click here >> Software