Consumer goods companies are looking for that winning-edge, and want to take action on their data. Having accurate trade promotion management (TPM) is no longer enough; industry leaders are pushing towards trade promotion optimization (TPO).
When set up well, TPO systems allow companies to sell higher volumes with larger profit margins through efficient promotion planning and post-event analysis. A recent study from the Promotion Optimization Institute revealed that 67% of consumer goods companies can’t simulate promotional outcomes, meaning those who can will eliminate inefficiencies and maximize profit.
To create better promotions, first CPGs must harmonize their data. Syndicated data, trade spend management data, ERP data, are all fundamental elements on the journey to achieve TPO. Everyone involved in the promotional decisions, should feel confident in the one view of the data. Download the Data Harmonization eBook to find out the best practices in data harmonization.
The question is, how do you achieve TPO?
Doing TPM Well
Just as you can’t build a house on a shaky foundation, you can’t optimize something that is inaccurate or unreliable. To do TPO well you must first do TPM well.
90% of consumer goods professionals still have issues trusting the numbers or other aspects of what they see in trade management systems. That means the underlying data needs to be fixed first. This can be resolved by investing in the right technology and building a groundswell of support for its use throughout the organization.
Only when you trust the data going into a TPO system will you also trust the recommendations it provides, so take the time to ensure your TPM tools can deliver strong promotion data.
Challenge#1: TPO is time consuming
- Most of the CPG companies that the Promotion Optimization Institute interviewed felt weighed down by the time demands of their TPM. In fact, 93% said their users see trade management systems as requiring a “burdensome amount of time” to manage the entire process.
How to resolve it
Streamlining your process. Reduce command and control behavior that’s more about oversight than adding value. Trust the tool and its users, and work to eliminate micromanagement habits that aren’t delivering results.
You can also get comfortable with asking, “Why?” with the goal of eliminating time-consuming practices. Consider, for instance, why weekly forecasting by SKU is necessary, and whether it really needs to continue.
Challenge#2: There’s no business case for TPO
- POI found that over two-thirds of their respondents (68%) were struggling to make an effective business case for investing in TPO.
How to resolve it
Set up a low-risk, controlled experiment. In many cases this is as simple as managing a handful of brands or customers through TPO for a few cycles and comparing their results to those managed outside of the system.
Challenge#3: External data isn’t reliable
- 85% of the CPG companies surveyed by POI said their external data had problems.
How to resolve it
Most data issues are tied to point of sale (POS) data. The accuracy of this data has long been suspect, but there are several companies that help you acquire and clean POS information.
A successful TPO system can deliver a huge advantage to companies that employ it successfully. By starting with a strong TPM foundation and working to overcome these common hurdles, you’ll be set up to pull ahead in the competitive CPG race.
Data sourced from the Promotion Optimization Institute’s white paper “Overcoming the biggest hurdles in moving from TPM to TPO: It’s not all about the technology!”