Thomas Elliot, Senior Director, Business Development	John Kacedan, SVP, Client Sales and Insights

Table of Contents:

• How Do Retail Promotions and Pricing Changes Impact Consumer Demand?

• How Can Manufacturers and Retailers Share Price and Promotion Plans and Demand Forecasting Data?

• How Can Manufacturers and Retailers Improve Demand Forecasting Accuracy?

• What Are the Best Supply Chain Strategies for New Promotions?

• Accurately Manage Your Supply Chain with Circana’s Solutions

  
  

How Do Retail Promotions and Pricing Changes Impact Consumer Demand?

When promotions and pricing changes work as intended, many shoppers take advantage of the opportunity to buy something at a good deal. That said, such tactics can result in availability issues on the shelf for other customers. If a successful promotion leads to an empty shelf, many consumers can’t get the products they want, and both retailers and brands face consequences. Retailers lose sales and loyalty, while CPGs face eroded brand equity, especially if out-of-stocks become a frequent occurrence. 

Challenges arise with overstocked shelves as well. Too much product on a shelf can lead to diluted brand perception, when shelves are displayed in a messy or haphazard manner. Waste and financial losses happen, too, because overstocking ties up capital and may require more markdowns to clear excess inventory.  

Accurate forecasting has always been an important part of efficient supply chain management in minimizing understocked and overstocked shelves. However, it is helpful to differentiate between accuracy and precision: Chasing a perfect, hyper-precise forecast can lead to "analysis paralysis," where too much time is spent refining numbers instead of making timely decisions.

Instead, the goal is to be accurate enough to make an informed decision quickly. A consistent methodology is more valuable than a perfectly precise one. This approach avoids knee-jerk reactions to minor fluctuations and helps prevent the bullwhip effect in the supply chain. The focus should be on having sufficient data to act decisively, rather than waiting for flawless information.

How Can Manufacturers and Retailers Share Price and Promotion Plans and Demand Forecasting Data?

Retailers help manufacturers align production and supply by capturing and sharing data on planograms, purchase orders, shipment and receipt information, and inventory levels. Third-party data partners like Circana use rich, holistic datasets to help manufacturers plan for and react to constantly changing inventory conditions. 

Ultimately, having access to a shared, single source of truth enhances the speed to discovery and helps parties quickly address inventory issues. Instead of asking, "How much did you ship to stores?”, a manufacturer with access to retailer data can immediately see that although 10,000 cases were shipped to the distribution center, only 5,000 made it to the shelves. The manufacturer doesn’t have to ask the retailer more questions, and when urgency abates, can later engage in a substantive post-mortem discussion on the promotion’s performance. Better yet, when sales outperform expectations at the store, the manufacturer can alert the retailer during the sale window that the remaining 5,000 cases are already on hand and should be pushed to stores quickly to alleviate out of stocks.

How Can Manufacturers and Retailers Improve Demand Forecasting Accuracy? 

Today, manufacturers and retailers can go beyond traditional sales, demand, and order forecasts to get store-level and item-level information. Modern forecasting tools are capable of generating forecasts at the most granular level available, helping ease complexities that have been barriers previously. 

Traditional forecasting methods can be significantly enhanced by incorporating shelf-signal data. By comparing forecasted demand to actual shelf activity, companies can understand where their forecasts are leading to overstocked or understocked conditions and learn how promotional lifts are impacting days of supply. While some organizations do not consistently use this as part of their process, it offers a powerful way to refine demand projections based on real-world conditions.

Artificial intelligence (AI) is a game-changing addition to the forecasting toolbox. While human analysts can be overwhelmed by massive datasets, a machine can process vast amounts of information to identify patterns and generate more accurate forecasts. As AI becomes more integrated, analyzing expansive and highly detailed data will become more practical and valuable.

What Are the Best Supply Chain Strategies for New Promotions?

Adjusting the supply chain for pricing changes and new promotions requires a flexible strategy that can accommodate uncertainty. There is no single tried-and-true method, as the best approach depends on the duration and scale of the event.

For short-term promotions, a company’s existing safety stock should ideally be sufficient to cover any unexpected surge in demand. If performance exceeds expectations, the manufacturer can take action on the back end to replenish inventory levels without the retailer or consumer feeling the impact.

For longer, seasonal events, the strategy may change. It may not be necessary to build up the entire forecast volume before the promotion begins. Instead, a manufacturer might plan for a slightly heavier production schedule, possibly incorporating overtime, to keep up with demand as it materializes. This approach balances product availability with the risk of holding excess inventory. This is especially important for retailer-exclusive products to avoid building inventory that has no alternative home if the promotion underperforms.

Accurately Manage Your Supply Chain with Circana’s Solutions

Navigating the effects of pricing updates and promotions across the supply chain requires robust data, powerful analytics, and seamless collaboration. Circana’s supply chain solutions, such as Liquid Supply Chain™, provide the visibility and insights necessary to better manage your supply chain. With tools that offer a multi-retailer view and predictive out-of-stock capabilities, you can gain a clearer understanding of shelf-level activity and align your supply with true consumer demand. By turning complex data into clear, actionable insights, you can optimize your response to pricing and promotion strategies to keep more customers satisfied and maintain a competitive edge.