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3 Reasons Not to Cut Your Trade Promotion Investment

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CPG companies will once again invest upwards of $200 billion on in-store promotions despite the fact that many of these same companies are shredding marketing budgets and searching for cost-saving measures.

POI says that 84% of its respondents are dissatisfied with their ability to manage trade promotions. That’s a big number.

The 3 possible reasons for consumer goods companies to stick with their high-investment approach?

  1. Their competitors are doing it

  2. Their retail partners are demanding it

  3. They just might work

 

For better or worse, these motivators are enough to keep investing in trade promotions.

There’s an even greater need to turn trade spend management into more than “the entire process of creating a promotional plan, from budgeting to planning to execution to settlement to post-event analytics, which takes a burdensome amount of time.”

Make peace with the fact that trade promotions aren’t going anywhere. The good news is: There are trade technologies to give you analytical insights, predictive planning capabilities, and a quantified ROI on trade investments, that effectively address all of the motivating factors listed above.

 

⭐ Competing Brands Have Active Trade Promotions

Maybe one day we’ll be writing about the technology that can predict which promotions your competition will run before they actually run… but today we rely on the fact that history often repeats itself.

This is especially true when it comes to trade promotions.

Most CPGs simply run the same promotions they ran last year and hope for different results. How does this help you?

You gain visibility with post-event analysis capabilities. Post-event analysis includes a competitive view of trade promotion activity – you can quickly view the historical description of your competition’s promotional events and corresponding pricing.

It doesn’t stop there. With PEA, you have a holistic analysis of promotional activity to reveal trends. Use this trend analysis to understand what strategy will likely be the foundation of next year’s plans.

Since you’re taking a more data-driven approach to trade investment (using a TPO solution), this intelligence can be used in your own planning and collaboration with retail partners.

 

⭐ Retail Partners Dismiss Cuts to Trade Spend

This is no surprise. Manufacturers are justified in their concerns that a cut in trade spend could mean a reduction in SKU assortment or shelf space.

It’s possible that retailers look to cut the center store and are not interested in the “do more with less” mantra.

Instead, you should approach your retail customers with data – encouraging them to invest more intelligently for mutual benefit.

Start by fostering this relationship with more than “trust me” promises where both sides hope everything turns out well. Instead, manufacturers can use the power of predictive modeling to develop promotional events and plans that clearly quantify retailer KPIs.

Use your TPO solution enable optimized promotional planning in consideration of retailer constraints such as minimum retailer profit margin or discount bracket.

Armed with intelligence, it’s likely you’ll have conversations with retailers about how to use data and see better, more profitable results. You’ve shifted the conversation from trade promotions being a “must-have” in order to stay on the shelf to a wanting the promotion because it is in both parties’ best interest.

 

⭐ Promotions Just Might Work

It doesn’t take an algorithm to see that consumers are influenced by price.

However, for too long manufacturers have blindly offered deep discounts to both consumers and retail partners in exchange for the opportunity to drive volume. These educated guesses often relied on perfect execution and loyal customers to come close to breaking event.

As a result, trade promotions have gained the reputation as sunk cost of doing business. 👎

Trade promotion management solutions are sufficient in managing the transactional processes of in-store promotions. As CPGs place more scrutiny on trade investment, the historical and predictive intelligence gained with a TPO solution can potentially reposition trade investment as a sustainable contribution to your revenue growth management strategy.

 

Confidence Replaces Cuts

As the #2 line item on many P&Ls, the decision to cut trade spending seems like an easy win. Unfortunately, swift, miscalculated cuts can result in the same losses that unsuccessful trade plans have brought to your organization for years. Instead, rediscover confidence in your trade investment by reducing costs associated with under performing events and reinvest in proven, more profitable promotional strategies.

With better intelligence, better accountability and better predictability, companies will start to see the strong performance in making their trade investments work again.