CPG companies approaching trade spend with an analytical approach have found that the centralized intelligence enables its finance and sales teams to pursue a common objective – more revenue for sustainable growth.
Too often, the relationship between sales and finance is adversarial. The CPG companies that realize improvements in promotional performance have invested in trade promotion optimization technology that generates timely, analytical insights – so they can invest their time sharing the data.
We’ve identified 5 tips from successful finance leaders who regularly interact with their sales teams to establish more profitable outcomes.
1) Meet regularly
Scheduling recurring post-event analytics (PEA) meetings between finance and sales, where the departments review promotional performance and execution.
Once the promotion is evaluated, the sales team is able to focus on 2-3 key insights to bring back to their retail partners – instead of wading through the overwhelming data points, only to have no new information. Meanwhile, the finance team can see the bigger picture of trade spend performance as they pull post-event analytics from all accounts.
These meetings aren’t designed to highlight what went wrong in the past, but instead focus on execution issues, competitive and category trends, and future opportunities.
2) Measure effectiveness
TPO solutions harmonize POS, shipment and spending data, providing finance teams with immediate access to promotional ROI at the event and customer level. The availability of blended data changes the conversation between sales and finance from what was spent to how well was it spent.
Additionally, finance can easily share important KPIs such as incremental revenue, incremental profit and incremental volume to further paint a picture of the event’s effectiveness. For example, a promotion might show negative ROI, but has significant incremental volume gains which align with a corporate objective.
3) Talk about base volume
When it comes to promotional investment, measuring the incremental impact is extremely important.
If we accept the premise that promotions are designed to entice incremental sales and build a loyal base, then we must look at the impact of promotions on the base. Finance can work with the sales team to monitor and adjust for growth or erosion of base volume as a response to promotional activity.
4) Set guardrails that guide planning
The beauty of predictive planning is that the art of the possibility to improve results is available to every sales person.
Of course, what’s possible is not always what’s best.
Finance can place guardrails to not only protect their organizations from deep discounting that jeopardizes promotional return, but also to stop the sales team from wasting valuable time creating promotional plans that don’t get approved. Guardrails such as max spend rate or min net unit price can guide planning (without frustration).
5) Build optimal outcomes for incremental funding
Position your sales team to optimize volume, revenue or profit of an incremental promotional opportunity using a TPO application’s constraint-based modeling capabilities quantify the optimal predictive result. The finance team’s ability to use predictive KPIs to work with the sales team to understand the impact on budget and the potential return makes the entire process smoother, more informed and ultimately more effective.
Simply stated, when finance and sales can work collaboratively with real-time access to information, a CPGs trade investment can transform – driving revenue and profitability. Using a trade promotion software, CPGs gain an end-to-end, singular view of the understanding of trade spend effectiveness. Will these tips mean it’s time to consider a new way of doing things? They definitely will bring you to a new path that establishes better outcomes.