This post is part 2 of a series that I'm writing with Sandra at Distro Talk. She's a Sales & Distribution Manager in NYC that runs an amazing course, Distro 101, to teach food founders all about Sales.
In Part 1 of this series (What's Your Deal? Placements & Promotions), Sandra taught you the 101 on all things promotion. Now, let’s talk about how to use that information to create a strategic plan for supporting your in-store distribution with marketing and sales. In addition to talking about how to think budgeting, planning, and prioritizing your sales and marketing, I'll address the most popular marketing support options.
Stores expect you to invest in promotions and marketing to support your product and drive products off shelves. Remember, getting your product to move off of shelves is your job, not the retailer’s job! So, how do you actually stand out on a crowded shelf?
Here's a break-down of the marketing tactics you should consider for supporting your products on-shelf:
Trial driving tactics (otherwise known as Shopper Marketing) help get your products into consumer’s hands in-store. A typical consumer makes a purchasing decision in 4-6 seconds - what can you do to inspire them to choose your product? Tactics in this category include COVID-safe sampling, coupons (eg, traditional Instant Redeemable Coupons, digital coupons, or Ibotta rebates), hang tags/shelf talkers, and demos (in a non-COVID world).
Awareness driving tactics help to get the word out about your products. A consumer typically has to see your brand 5-7 times before they look for your products in-store.
Tactics that require working media budget (otherwise known as pay-to-play) are geo-targeted Facebook/Google ads, giveaway partnerships with the retailer’s social media, and some influencer partnerships.
Tactics that do not require a working media budget (but of course require investment - you may need to invest time and money to write a press release but you don’t need to pay the journalist to write the magazine article) include social media campaigns, newsletter announcements of distribution and promotions at a particular retailer, your website, PR, and some influencer partnerships.
Building a Sales and Marketing Budget
Before you build a Sales and Marketing budget, please determine your Business Objectives first! This will help you determine tactic prioritization and budget allocation. You can read more about setting Business Objectives and Key Results in my Definitive Guide to Creating a Marketing Strategy.
How much you should spend on sales and marketing isn’t a set % of revenue. It depends on:
- Your business: how are you planning to grow? What do your investors expect in terms of revenue and profit? How much money do you make per product and how much can you afford to spend on sales and marketing?
- Your category: are you in a category that is high promotion (eg, chips)? If one of your competitors is always on sale, you probably need to run promotions.
- Your retail distribution: If you’re in an EveryDay Low Price (EDLP) retailer like Walmart and Wegmans, they don’t have promotions and you have to focus on marketing support.
- Your results: do your sales tactics perform better or do your marketing tactics perform better?
- Your team: are you best set-up to most efficiently and effectively deploy sales or marketing tactics?
That being said, here are the general budget ranges that we’ve seen in the food and beverage industry. For trade support, 20-30% of revenue. For marketing support, 10-30% of revenue.
Prioritizing Your Sales & Marketing Tactics
A question that I hear a lot is, well, how much should I spend on Sales versus Marketing? Let's reframe that question - sales and marketing have the same business objectives (to sell your product!!) and the right question is: "How should I spend my budget to best achieve my business objective?"
Budgets for small brands aren't set in stone but you should have an idea of how much you can afford to spend from a cash and margin perspective from your sales forecast. This budget can flex up or down as your sales numbers roll in.
Then, you should allocate money to the sales or marketing tactic that best meets your business objective from both a cost and effectiveness standpoint. Place small bets on tactics, learn from them, and then double down on the tactics that help you meet your business objective and key results. You should compare tactics on an apples-to-apples basis:
- Track how much it costs you to move a unit with a promo and compare it to a couponing program (increasing velocities)
- Compare how much digital marketing increases velocities compared to an retailer ad (increase brand awareness)
- Measure how much it costs you to sample your product via a consumer sampling program like PinchMe and a retailer e-sampling program (drive trial)
As you decide how much to allocate to your sales and marketing budgets, first decide on your business objectives and your sales and marketing objectives. Then, look to your past tactic performance and industry benchmarks to figure out how you should best spend your dollars (and don't forget to ask your fellow founders on groups like OMGCPG or StartUpCPG!).
Top 6 Considerations When Developing Your Support Plan
In addition to the factors we mentioned above, there are strategic differences between sales and marketing tactics that are important to consider.
- PERFORMANCE REPORTING: You may not get data to measure the performance of your sales support tactics. It depends on the retailer, buyer, broker, and distributor of each program. Similarly, marketing tactics, aside from couponing, can be difficult to attribute to sales (ie, how much $ sales did a marketing dollar drive?). Instead, you would track leading indicator metrics that tell you how well your marketing programs are performing, such as number of engagements of a social media post, number of visitors to your website, and click-through-rate of a digital marketing campaign.
- FLEXIBILITY: It’s harder to increase or decrease your sales promo budgets quickly because it requires retailer coordination. Promo calendars are typically planned out months in advance. Marketing campaigns are much easier to dial up or dial back depending on your company financials and program performance.
- BRAND EQUITY: If you are on promo half the year, you train consumers to purchase your product when it’s on sale (see Sweet Baby Ray’s BBQ Sauce). Marketing builds your brand equity so consumers see the value of your product at full price.
- RESOURCING: For most small brand founders,, it’s easier to manage sales tactics without specialized knowledge. Marketing typically requires an investment to find an external resource with the know-how to confidently develop a marketing strategy and execute on it (like me!).
- LONG-TERM RAMIFICATIONS: Retailers typically expect promos to happen year-after-year once you commit. You can change the timing and add more funds to your programs, but expect a conversation with your buyer if you decide to decrease your annual promotions.
- FINANCIALS: Sales and marketing costs are typically treated differently by Finance. Sales costs are typically “above the line” and included as part of COGS (included in gross margin). Marketing costs are typically “below the line” and included as a SG&A expense (included in net margin).
As you develop your 2021 sales and marketing plan, know that it’s not set in stone. It should change as you get new information: how your sales are doing in year two of a global pandemic, performance results of your tactics, and new opportunities. You’ll need to demonstrate to retailers that you will support your product through sales and marketing support but how you do it is up to you.