Today’s vehicles have enhanced safety features that alert you when you make a driving decision that puts you in jeopardy. The logic is that to increase safety we must eliminate vulnerability, specifically in our blind spots. In business, we also have blind spots – areas of assumed stability that can quickly lead to susceptibility. For consumer goods companies, few blind spots are as great or as preventable as their trade marketing investment.
The lack of intelligence, clarity and predictability in trade investment, that for most CPG companies reaches upwards of 23% of annual revenue, exposes a revenue-threatening risk.
In fact, many CPG executives cannot answer basic questions about their investment such as:
How much are we spending on trade promotions?
How have our top 5 accounts contributing to revenue generation over the last 6 months?
How will we invest differently in the next year to meet our company’s growth targets?
How does our promotional plan account for new product innovation, distribution changes, and other disruptions?
How does our promotional plan optimize our individual brands and our company portfolio?
Accessing trade-specific information should be accessible, but unfortunately, this too is not an attribute available for most CPGs.
Trade Spend vs Trade Strategy
If you’re repeating last year’s plans hoping for different results, like many finance and revenue management teams are, you build your investment strategies on hunches and historical inaccuracies. As a result, in-store spending, intended to drive volume, improve incremental profit and grow revenue, is reduced to just another expense.
This story is nothing new for CPGs who face accountability of their spending and pressure from retail partners to do more to earn their category share. The inability to leverage the intelligence (through technology) leaves organizations exposed to unanticipated competitive threats, lost market share, and even unwelcome acquisition.
It is long overdue: CPG executives must recognize the blind spot that they have with their trade investment and prioritize putting a strategy into place to solidify a commitment to data-driven trade investments with quantified and predictable ROI.
With these actions, executives can not only prevent decisions that veer them into unforeseen danger, but also steer the organization towards more profitable destinations.