Share of Voice will help you read your competitors' promotional strategies like a book

30 June 2014

In a never-ending battle for bigger sales and a larger market share, marketers and retailers keep on thinking what strategy to adopt to boost their brands. Times are tough and retailers are desperate for tips to spend their limited resources in the most effective manner. That is especially true when it comes to a key element in any retailer's array of tools designed to drive customer traffic, otherwise known as promotions.

Promotions vital for retailers who need to communicate to consumers when new products are available, or when they are offering discounts to shoppers. Marketers avail themselves of a many tactics to make sure that the impact of marketing communications, including promotions, is as strong as possible. One of tools that help retailers assess the effectiveness of their rivals' promotions is the Share of Voice, or SOV. Increasing share of voice may help you capture market share from your weaker competitors. But first you need to find out how your strategy compares to theirs.

Metrics make a difference

Today's retail environment is highly competitive, as reflected in a growing number of promotions offered by retailers. Aggressive promotional strategies lead to a greater complexity in the promotions mix and a lack of trade ROI. Poor promotion visibility, which makes it impossible to capture marketing and promotion expenses at the retail store or channel-level, is a main reason for a soaring complexity and nonexistent trade ROI. Clearly, it is worth investing in a better promotion visibility. Suffice it to say that thirty-three percent of best-in-class firms use performance management criteria for capturing effectiveness in trade promotion execution, compared to just 19 percent of all others. Best-in-class companies are also more likely to have the visibility of trade promotion program progress and results. They also create an environment where whole team has visibility into the trade promotion planning, execution, and analysis process. If you want to follow the best practice, start from the development of standardized metrics to measure trade promotion effectiveness. As much as 90 percent of laggard businesses are deficient in setting up processes for business data gathering and analysis, choice of the most appropriate metrics, as well as reporting granular and actionable information. In other words, successful firms invest in business analytics tools and metrics to get the most accurate insights. SOV is one of such metrics.

See through your rivals' promo plans

We are all familiar with SOV in online advertising, but how to interpret Share of Voice in the context of retailers' promotions? To put it simply, SOV reflects the visibility of promotion of a brand or retailer on the market. In other words, it demonstrates a market share of promotion. SOV can be calculated in a number of ways, depending on retailer's particular circumstances; in general terms, share of voice for a retailer translates into a number of his promotions, compared to promotions of the rest of the market. In the simplest scenario, all it takes is analyzing the total number of promo leaflets, issues by all market players. However, other factors come into play. Leaflets may differ from each other as regard the number of pages. Consequently, it is crucial to compare number of pictures or Stock Keeping Units (SKU) or Special Needs Units (SNU) to get a complete picture. The calculation of SOV should only take into account stores where promotion actually takes place. Size matters, too. Big stores naturally have more foot traffic, so promotion in a large store has a bigger catchment area. Therefore, commercial square metres must be taken into consideration to fully account for differences between stores as regards catchment area. Duration of a promotion is another significant variable. Again, it may be different for each retailer, so it should be considered in the analysis (See the video below for more details).

Sources: www.carat.ie; http://www.nielsen.com; https://www.hiper-com.com; http://www.slideshare.net; http://risnews.edgl.com