Use a weighted average to assess trade spend
It is about more than dollars and cents
Last week we shared some math and a process to assess the return on investment for your trade spend initiatives. So important for the people managing sales in your business to confirm you are getting a return for your trade spend investments.
We also said it is not just about the dollars. There are other factors to consider. You should assess three things when making the final decision about trade spend opportunities:
- Actual vs forecasted sales
- Return on the investment
- Qualitative input from stakeholders
It can be a challenge to combine numbers and opinions in a decision-making process. We have always believed a weighted average is a good method to use.
Actual vs. forecasted sales
To maximize trade spend opportunities, you need a good process to forecast sales. Two reasons to put the resources into forecasting:
- Get the right inventory into stores for the promotion
- A number to judge the success of the promotion
To develop the best forecast, you should start with your own data. If you have done the promotion before this is a great starting point. If you have not done this specific promotion then you will have to use other instances where you have participated in temporary price reductions.
To add more input you can talk to channel partners such as brokers and distributors. They should have some history and expertise to offer. People in stores also can have some valuable information. They see item movement every week.
The most valuable data you can get is from your customer. We believe you have a better chance to get the data from your customer is when you have your own forecast to start the conversation. You have a much better chance of your customer offering input when you can say, “we have a forecast of 1,000 cases, what do you think?” as opposed to saying “What do you think?” They like it when you have done some of the work.
Once you have a forecast, you need to ensure the right amount of inventory gets into the system. You also need to compare your actual sales to the forecast. We believe if you can be between 90%-110% (forecast divided by actual) you have done a good job.
Return on investment
Last week we provided the details to calculate the return on the investment. Anything over 1.00 and you are generating more dollars than you did prior to the investment, with the value of the investment factored in.
Input from stakeholders
There are always a few intangibles. Sometimes your broker will really want you to participate in a program. Other times, your distributor will tell you that by participating in a particular program you got a lot of incremental merchandising space that will help in the future.
Your customer will almost always want you to participate in programs. Some are more meaningful than others. Perhaps they need more suppliers participating in loyalty offers and you can leverage this into another opportunity in the future.
We have space in our weighted average for the qualitative input. You probably do not want to give it too much weight but it can help you compare one trade spend opportunity to another.
Using the weighted average
You can download our SKUFood weighted average template to use in your business.
To calculate the weighted average, you need to determine how much weight should be assigned to each attribute. This is your opportunity to put the most weight on the attributes you see as most important. If you believe the return on investment is the dominant attribute to rate the effectiveness then assign it a lot of weight. The numbers you assign need to add to 100.
Once you have assigned the weights for each attribute you need to rate them out of 10. If the return on investment is really good but not great you might assign it 8/10. Rate each attribute to complete the weighted average.
Our template will complete the calculations for you once you have assigned the weights and ranked each attribute.
You can use this template to compare one trade spend opportunity to another.
Peter
Thanksgiving prices in US market
Something has been bothering me. Although it really does not impact me, I had to do some investigating. There was a lot in the news about the price of a Thanksgiving dinner purchased at Walmart, this week in the US. It is so frustrating to me when price comparisons are not done properly.
Price comparisons are a valuable tool, but they need to be done properly to provide a fair comparison. We see this often where people do not do the work or do not do it properly. This example was getting a lot of attention. To illustrate what needs to be done, we invested some time to look up prices and provide you with the facts.
Any price comparison needs to have exactly the same items, brands and sizes. The numbers being shared in the US was a list of different items which eliminates the validity of any comparisons.
We used the 2024 Walmart Thanksgiving dinner item list with 2024 retails and compared them to the retails on exactly the same list, this week in 2025. In summary, the inflation is 6.02%. In other words, if a person bought this list of items the same week in 2024, they would have paid $49.48, compared to $52.46 this week in 2025.
We wanted to focus attention on this because price comparisons can be a valuable tool, when completed properly. If you are going to do price comparisons to share with customers or anyone else, please compare exactly the same items, year over year. Here are the facts:
You have probably been bombarded with Black Friday messages. Perhaps you have done some of your own promotions. A few years ago, we included this section in the newsletter. I was talking to a few people about Black Friday this week so I went back to find the history again.
Black Friday was not always about retail
Did you ever wonder where the term Black Friday comes from?
I thought I knew the answer, but it turns out I only knew part of the answer. After doing some research on history.com I can fill you in.
The first time the term was used was in 1869, when two Wall St. financiers tried to buy up all of the gold reserves. Their plan was to drive the price up and get rich. Unfortunately, the result was a stock market crash which bankrupted many business people and farmers.
The second iteration of Black Friday originates in Philadelphia. Police in this city used the term to describe the Friday of American Thanksgiving when there were many holiday shoppers and fans attending the annual Army-Navy football game in the city. The combination of the two was enough to cause traffic jams and prevent any police from getting the day off.
Finally, the definition I was familiar with started in the 80’s. General merchandise retailers were running deep discount ads and stated it was the time in the year when their bottom line finally went from red to black. The busy holiday shopping on the long weekend would put them into a profitable situation.
SKUFood Recipes for Success Podcast
In this episode of SKUFood Recipes for Success, we sit down with Pedja Radjenović, a CPG strategist who helps founders transform their brand stories into strategies that actually sell.
After building multi-million dollar brands at Molson Coors and Carlsberg, Pedja discovered that the difference between a good product and a great brand comes down to one thing, how well you tell your story. With experience leading brand growth across borders, he understands the nuances of positioning, messaging, and selling in different markets.
Today, Pedja works with food and beverage founders to sharpen their positioning, clarify their message, and stand out in the crowd. In this conversation, he shares what makes a story stick, the kind that consumers connect with and retailers rally behind.
This episode is a must-listen for founders ready to move beyond features and claims, and start building a brand narrative that opens doors and keeps shelves stocked.
Listen and subscribe wherever you get your podcasts.
If you would like to be a guest send us a note. We are always working on the upcoming episodes.
One of the best parts of my job is the opportunity to moderate peer groups for FCC. We meet once per month and discuss issues in the industry, challenges people have and opportunities. This is a great format for food and beverage entrepreneurs to talk with other people who are trying to accomplish similar goals. I have been fortunate to be part of the program since its inception. If you are interested give me a call or use this link to register.
Decreases in US tariffs will impact prices in Canada
Finally, the people making the decisions in the US have accepted that tariffs impact prices consumers pay. The changes implemented last week will impact prices in Canada as a significant portion of our food still comes through the US. Reductions in tariffs on countries like Brazil will impact prices here. Processors need to be on top of their suppliers for ingredient costs as these changes are implemented. Retailers and consumers will be expecting to see decreases in some items.
Where is Peter speaking?
With the focus on Canadian food and beverage we wanted to share a program we have developed with Alain Bosse, the Kilted Chef. We partner to share insights about Canadian food and beverage at conferences and events. We talk about where products come from, share insights about some hidden gems and of course Chef Alain has great tips for using the products at home. This is designed to be entertaining and engaging. Not just for food industry audiences, it works for everyone.
I do have travel coming up to Toronto and Fredericton so if you want to connect or have an event in any of these locations give me a call or send me an email.