Prioritize Balance for Accelerated CPG Growth

Posted on April 5, 2019 by Erin Crist under Retail

Budget vs. Strategy. Past vs. Future. Expense vs. Investment.

 

Because there are different ways to look at trade investments, finance and revenue management teams within CPG companies can face unclear priorities. As a result, there is a focus on reconciling expenses and minimizing spend but less concentration on optimizing the trade investment for a better return.

When a company’s focus is on what is spend, there is only a need to monitor the impact on budget rather than monitor the impact on the positive organic growth of the business.

As is the case in many CPG companies, when this happens trade spending becomes a sunk cost.

Without quantified performance metrics guiding trade promotion planning, taking a revenue management approach is close to impossible. In other words, you only execute the same unproven tactics as last year. This is partially due to the fact that performance metrics through conventional post-event analysis have historically been difficult to obtain in a timely manner.

This standard practice no longer has to be the norm. It’s time to adopt an analytical approach to trade investment.

Aligning the finance and revenue management around data-driven business metrics, you can move past a mindset of “what are we spending?” to a more strategic mindset of “what is the optimal return?”.

Optimize Trade Spend

 

Predictive analytics quantifies KPIs during post-event analysis and planning.

This TPO functionality allows companies to accurately and effectively follow the performance and health of their business in real-time, and thus plan more judiciously. In addition, the ability to compare historical planned to actual metrics of trade events and plans allows CPG finance teams to identify opportunities to meet future objectives. Similarly, the ability to compare multiple promotional plans prior to execution provides an aerial view for teams to identify the plan that best meets corporate objectives while staying within budgetary constraints.

The ability to optimize promotional outcomes using constraint-based modeling takes the uncertainty away from planning.

A trade promotion optimization solution provides the ability to define an event or promotional mix that meets the financial constraints of a budget while optimizing for revenue, profit or volume to achieve revenue management goals.

In doing so, you position your company to reconcile the competing priorities of financial efficacy and revenue management strategy.

Taking a balanced approach led by a greater understanding of a company’s trade promotion performance and potential is leveling the playing field to allow companies of all sizes to align their spending decisions with their growth strategy to optimize the financial health of their business today and in the future.