collaborative promotion optimization

©2014 The LEGO Group

Promotion Optimization Institute • Fall Summit 2014 • Dallas, TX

TPM-TPO-

Collaborat ive

Market ing

is BIGGER

in Dallas!

Collaborat ive Promot ion Opt imizat ion & Cont inuous Improvement Summit

Moving Beyond Building Blocks to Achieve Sustainable TPM/TPE to Win in a Global Marketplace

November 3, 2014

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Promotion Optimization Institute ∙ Fall Summit 2014 ∙ Dallas, TX ©2014 The LEGO Group

Where have we been ...

What have we done ...

What have we learned.

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Promotion Optimization Institute ∙ Fall Summit 2014 ∙ Dallas, TX




2.55

2.86

1.09

0.78

4.70

4.42

8.02

11.93 6.31 5.78 0.18 0.37 5.98 6.49 12.13

7.33

6.21

6.73

8.83

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Do not cover the LEGO logo

Do not cover the graphic elements – pick a simple layout instead


4 things to know about the LEGO Group…


FAMILY-OWNED

NOT THE BIGGEST…BUT THE BEST GLOBAL ORIENTATION

Sold in 130+ countries Sales offices in 35 markets

Founded in Billund, Denmark (1932 ) Owned by 3rd generation Kirk Kristiansen

Top 10 global brand*

No. 2 manufacturer in traditional toys globally

*Source: 2014 RepTrak™

MONO-BRAND COMPANY

~600 active products in global assortment Grouped in 30 product themes

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Traditional toys are flat in most western markets – e.g., UK 0.2% CAGR ‘08-’13 No. of retailers generating 80% turnover

There are 4 main factors in the toy industry that effect our TPM/TPE journey


60%

0

5

10

15

20

25

30

35

40

Jan Feb Mar Apr Maj Jun Jul Aug Sep Okt Nov Dec

% o

f to

tal a

nn

ual

CS

RETAIL Consumer Sales

0

500

1000

1500

2000

2500

3000

3500

'08 '09 '10 '11 '12 '13

SEASONALITY

FRAGMENTATION STAGNATION

~50% of consumer sales happen in Q4

NOVELTY-DRIVEN

>60% of turnover in a given year from novelties

24

9 4

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The answer to some of our key challenges is a new Global Customer Planning System (GCPS)


OBJECTIVES SOLUTION

Strengthen relations with trade partners

1

Increase transparency of trade spend and improve ROI

3

Increase accuracy of forecast

2

Global Customer Planning Solution

Integrating Customer Planning with:

• Financial Planning

• Brand and Marketing Planning

• Demand & Supply Planning

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CROSS-FUNCTIONAL TEAM

LOCAL MARKET ENGAGEMENT

Resources dedicated from different parts of organization – workshops planned

locally in lead markets to involve broader team

Lead markets engaged on management and specialist level to ensure ’skin-in-the-

game’ and up-front alignment to key design choices

TOP MANAGEMENT SUPPORT

Scope signed off by all 3 regions with mandate for global alignment and funding

secured with sponsor in corporate

A key factor for long-term success was securing buy-in from the organization


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We secured funding and commitment to a 5-year program to build GCPS


We are here!

Build the Foundational Concept

Build the Basics (Pilot-UK)

Expand and Rollout

Phase 1 (2012/13) 9 months


Phase 3 (2014-16) 24 months

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2.55

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11.93 6.31 5.78 0.18 0.37 5.98 6.49 12.13

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6.73

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Overview of the 3 project phases


TPM Implement

ation • Global Alignment

–Processes

–Requirements

• Reports/KPIs

• SAP TPM prototype

• Excel mock-ups

• Master data

• Change mgmt.

• Pilot decisions

• Detailed blueprint

• SAP TPM and IP planning solution

• Integration with APO, Finical Forecasting, ECC

• Master data

• Pilot (incl. TPE)

• Rollout expansion (US, EUC, N/B)

• GAP analysis

• Change mgmt.

• Extended functionality (e.g., advanced TPE)

Build the Foundational Concept

Build the Basics (Pilot-UK)

Expand and Rollout



Phase 3 (2014-16) 24 months

CRAWL WALK RUN

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Starting point based on external leading practices in TPM/TPE


PLAN EVALUATE

EXECUTE

Create BU Business Plan and Go-to-

Market Plan Develop Financial

Targets and Allocate Funds

Create Tactical

Plans and Events

Sell-in and Negotiate Customer Business

Plans

Authorize Payments /

Resolve Deductions

Track Actuals

Against Plan

Evaluate Promotion Effective-

ness

TPM/TPE LEADING PRACTICES CUSTOM MADE BLOCKS +

ACCOUNT PLANNING

Top-line Consumer Sales by account/theme/period

LAUNCH PLANNING

Plan launch volumes by SKU/ account/period

PRODUCT LISTING

Product listing by account/ store cluster/period

DEMAND PLANNING Baseline generation by

Account/SKU using history

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The result is an integrated workbench…


Flow planning

Promotion Planning

Execution

Reporting

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The result is an integrated workbench…


Promotion Planning

Flow planning Reporting

Execution

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Distributors

Improving Trade Promotions and planning has benefits to many stakeholders


Operations

Finance

Marketing

BU-LT

Stores

Distributors

Distributors Retailer HQ

KAM

Field Sales

Sales Reps

Sales Reps

Sales

Reps

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We went for global design – with local deployment

• 3 lead markets: US + Central Europe + Nordic/Benelux

• 1 Business owner per market to represent local requirements

• “Sprints” – 1 workshop week in each local market

• Alignment on business processes & requirements

• Mock-ups/prototypes to visualise processes in tool

• Heavy change management focus

–Top-level support (BU Managers, SLTs)

–BU representative to ‘sell back’ final solution to local market

–Early engagement from stakeholders


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Before deploying the TPM pilot in UK, a TPE study was done to create a starting point for uplift estimation


• Heavy NAM involvement to tailor results and generate actionable changes to future account plans

• Opportunities identified to enhance future promotion plans through improved price points, tactics, timing, location, etc. (across retailers and promoted groups)

• 4% overall margin improvement and 5X project ROI

• Combination of data sources to perform promotional analytics and optimization

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TPM pilot has been live for 10 months in UK with strong traction


• “Go Live” January 2014

• Over 60 Users in system

• 30 Planning Customers

• 20+ Promoted Product Groups

• 15 Standard Reports

LEGO-UK

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2.55

2.86

1.09

0.78

4.70

4.42

8.02

11.93 6.31 5.78 0.18 0.37 5.98 6.49 12.13

7.33

6.21

6.73

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9.1 9.6 11.36





What have we learned?

19

Process Alignment

Local Involvement

Middle Management Engagement

User-Friendly Platform

Local Presence Top Management Buy-In

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What are our immediate wins? (the beauty)


TRANSPARENCY OF VOLUME Number of Promotions Planned

Trade Spend (₤) by Promotion

TRANSPARENCY OF VALUE

• Improved forecast accuracy in the UK

–Transparency of promotion volumes

–Longer time horizon

• Stronger financial / strategic planning

–Ability to allocate trade spend to individual promotions

–Ability to closely monitor and follow-up on our planned spend

–Ability to evaluate individual promotions

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What are our main struggles? (the beast)


BASELINE

UPLIFT FACTORS

• It is complex to create baseline

–Due to seasonality

–Due to novelty rate

• How are we handling complexity?

–Minimum full-year volume

–Grouping products with similar price / seasonality to create benchmark / “anchor” products

–Create sales history / statistical baseline forecast

• It is complex to create uplift factors

–It takes time to get solid uplift factors

–We want to isolate different drivers

• How are we handling complexity?

–Used a field study to have a starting point

–3 accounts 8 themes -> Proxy

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Our focus is to convert insights to actions

22

Governance Meetings

Leadership Meetings

Planning Meetings

Sales Meetings

Sales & Marketing Meetings

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Next step: Phase 3 – U.S. & Canada Rollout

• Kick-off Sept. 1, 2014

• Planned “Go Live” Jan ‘15

• Target Users: 150+

• 25 Planning Customers

• 20+ Promoted Product Groups

• Currently in Detailed Design Phase

• All major GAPs are system enhancements (one exception)

LEGO-US

collaborative promotion optimization

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