With declining at-home media and Circulars delivered to homes our client had to determine the best way to spend advertising funds to impact the most geographies for the least possible spend. They were using one of the country’s leading Advertising Circular companies and the cost of this media was increasing making a reasonable return on investment virtually unattainable. The Marketing leaders determined that they would sunset the activity in specific geographies on both the East and West coasts to focus on those areas that responded best to home-delivered advertising.
Our client needed to determine the most optimal spend for the optimal geographies where customers would respond to the Circulars at a higher rate than average. At the same time, they needed to stabilize sales in strategic geographies to curtail competitive incursion to protect their base business while developing other tactics to reach their target shoppers.
By working with the business stakeholders, the leadership team determined the geographies that they wanted to continue to target to maximize their customer reach potential. Using this feedback and direction we positioned the strategy with the Advertising Circular provider such that they completed an analysis of the highest potential areas while eliminating those areas that were not strategically advantageous. Through this elimination of geographies and subsequent removal of advertising weeks (concentrating in holiday periods) our client was able to redirect a portion of those advertising funds to the high potential geographies to maximize customer acquisition and retention potential.
Approximately, 40% of the geographies were eliminated based on the analysis conducted, however, the sales increase in the remaining geographies increased by 20% which offset sales declines and reduced out client’s advertising expense ratio.
Ingenuity Sourcing Solutions negotiated with the Circular Advertising provider (who arranges media buys nationally) to reduce costs for the remaining geographies while orchestrating the termination of those Circulars on both the East Coast and the West Coast. We were successful in amending the contracts that were in place for each of the regions in reducing the media spending and eliminating some spends entirely.
In this case, there was an opportunity to deploy a renegotiation strategy with the incumbent to address a change in business climate as this scenario is complicated by the fact that very few players exist in the Circular Advertisement industry and still few others who can manage deliveries in a national geography. Knowing that the lack of competition was a hurdle and therefore the incumbent had the potential to endorse the tenets of the signed agreement Ingenuity Sourcing Solutions engaged in a direct negotiation.
As a first stage in our process, we reviewed the geographic analysis that we conducted and requested that the Provider compare it against their own data. After that review was completed, Ingenuity Sourcing Solutions structured a negotiation process whereby we calculated the return on investment required by our client supported by the need to reduce the geographies based upon reduced demand precipitated by reduced customer store count. After that discussion we provided feedback to our client to ensure that we were both aligned around what success looked like in this sourcing event. Ingenuity reviewed the current agreement and the changes that were necessary to “right size” the agreement with our client providing both trend and empirical data elements to support the case for a contract restructuring.
As a result of our involvement, our client amended the existing contract to reduce the length of the agreement and provide a month-to-month timeframe after the initial term had expired. This provided both parties with the flexibility to renegotiate terms as customer trends evolve. Additionally, the incumbent supplier reduced the number of Circular weeks such that our client could focus on the regions of the country that provided the highest financial potential for them to advertise. This was beneficial to both parties as the supplier could also report better response metrics as a result of this “right-sizing” for future business opportunities not only with our client, but in their ability to expand their retail network as well. Lastly, the supplier reduced the geographies based upon Ingenuity’s collaboration with our client to establish the best possible mix. At the end of this engagement, we were able to achieve sales growth from those targeted regions and focusing on the highest potential customers by 15% while reducing print and postage costs by 50%, The overall savings value derived from Ingenuity’s involvement provided $7.5M per year (approximately half of the annual spend) which included both hard and cost savings in addition sales growth.
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