Are you experiencing challenges around trade promotion investment and results? Let’s work together to turn these challenges into opportunities. The solution is trade promotion execution (TPx).
What is TPx?
According to the Promotion Optimization Institute (POI), TPx is inclusive of trade promotion management, trade promotion optimization, trade promotion effectiveness and trade promotion analytics. For CPGs, trade promotion refers to the marketing events that are executed at the retail level.
The “x” signals the expansive actions that are required for CPG manufacturers to ensure profitable promotions, effective sales planning, and success in reference to trade spending.
TPx and Revenue Growth Management
TPx is becoming a subset of emerging revenue growth management (RGM) initiatives. In the 2019 POI survey, 45+% of companies will be advancing their RGM practices. 28% of these companies will be adding personnel and nearly 35% will be advancing technical resources with tools and advanced capabilities.
Common Trade Management Challenges
- Nearly 76% of the companies continue to have foundational data challenges. 2019 Vendor Panorama
- 70% agree that their companies are struggling to have retailer aligned promotions executed at the store level. 2019 Vendor Panorama
- 81% noted that their company is struggling with how to manage modern trade. 2019 Vendor Panorama
- Only 17% have predictive models in the hands of field users for optimizing promotions where they actually get planned. POI Focal Points
- 90% of companies have challenges moving from transactional to analytical [trade strategy]. 2018 Vendor Panorama
- 63% still don’t have post-event capabilities. 2018 Vendor Panorama
If you’re facing these paralyzing business situations, it’s important to
Know • Predict • Improve
The need to know:
What you’re dealing with if knowledge is the challenge
1. Data quality and disparate data make accurate and timely analysis an impossible
2. Inexact syndicated baselines or manually calculated baselines and lifts
3. Limited and error-prone post-event analysis on a small number of accounts and frequency
4. Inability to quantify ROI of promotions or customer plans
5. Lack of visibility to competitor promotions or complementary consumer marketing activity
The need to predict:
What you’re dealing with if you can’t predict promotional outcomes
1. Inadequate application of performance data to event and customer plans
2. Inability to account for anticipated market or distribution changes during planning
3. Cumbersome and non-repeatable processes to achieve “what-if” event and customer scenarios
4. Poor visibility to manufacturer and/or retailer predictive KPIs
5. Lack of easy access to plan vs budget metrics and comparisons
The need to improve:
What you’re dealing with if performance improvement is paralyzing
1. Limited automation of data flows, data cleansing, lift calculations and application, and other manual-intensive processes
2. Lack of constraint-based modeling to identify the optimal promotional event or mix
4. Inability to apply machine learning to optimize ROI or other objectives of promotional activity
5. Failure to institute and automate guardrails aligned to trade investment and growth strategy
As more and more organizations prioritize data-driven spending, adopting a revenue growth management (RGM) mindset is imperative to successfully addressing these challenges. In the 2019 POI survey:
- 45+% of companies will be advancing their RGM practices
- 28% of these companies will be adding personnel
- Nearly 35% will be advancing technical resources with tools and advanced capabilities
The RGM team’s own enterprise short-term and long-term pricing road maps, own retailer trade allocation and balance the trade funding needs across channels and accounts. Proper allocation, planning, and monitoring of trade spend is critical.
Solutions for Trade Challenges
Identifying your biggest trade challenges and agreeing what to do about them is often where organizations get stuck. There’s a lot of confusion about the trade promotion technology options that will help achieve definite trade objectives.
To address trade challenges – a comprehensive trade promotion management, optimization and analytical solution are the foundation of trade promotion excellence.
However, it’s paramount for the long-term of success of the organizations investing in TPx solutions that there is a clear understanding of what the solutions do, what they can help you with, and the best practices in selecting the correct one for your organization.
Define TPM and TPO
To start, let’s address the unique functionalities of trade promotion management (TPM) and trade promotion optimization (TPO) solutions. In fact, many mistake these solutions as the same, when in reality they complement each other. TPM provides tactical management for trade promotions and TPO provides a strategic analytical approach to trade investments.
Trade Promotion Management (TPM) – A TPM software application is best used to manage the execution of trade events and finances. In this way, it can help manage the transactional activity of an event by settling claims, clearing deductions and creating accruals. It will also facilitate limited post-event analysis using a comparison from planned spending and volume vs actual.
Trade Promotion Optimization (TPO) – A TPO solution is an analytics and predictive planning tool used to perform comprehensive post-event analysis that includes baseline visualizations, quantifiable KPIs and brings together POS, shipment and spending data to measure the ROI of a promotion. Furthermore, the inclusion of predictive and prescriptive analytics creates a future planning capability for testing event scenarios and calendar building. True optimization occurs by applying constraint-based modeling to define the criteria and then letting the solution run through various possibilities to determine an optimal event or promotional mix.
What Functionality Should I Look for in a TPO Solution?
TPO must have 3 components:
1) Data Cleansing and Harmonization
• Automated harmonization of POS, Shipment and Spending Data
• Elimination of error-prone spreadsheets
2) Accurate, Real-Time Post-Event Analytics
• Accurate baseline calculation and visualization
• Automated calculation of event and plan ROI, KPIs, and lift coefficients
• Planned vs Actual metrics
• Data-anomaly correction
• Competitive and consumer marketing impact
3) Predictive and Optimized Planning
• What-if scenario predictive event and customer planning utilizing constraint based modeling
• Calculation of manufacturer and retailer KPIs during the planning process
• Annual optimized customer planning including plan comparison, optimal promotional mix, and plan vs budget capabilities.
Without all three components, CPGs may find themselves in a situation where they gain insight but cannot turn it into action. Or worse yet, lack the accuracy and holistic view of promotions performance making any predictive planning nothing more than a misinformed guess.
Synergizing TPM and TPO capabilities creates a single TPx environment presenting organizations with the best opportunity to achieve measurable and sustainable success.
The Lasting Value of TPx
In the chase for elusive profitability, we have over complicated trade promotion management and optimization with situation-specific spreadsheets, manual intensive processes, costly software customizations, and ongoing consultative relationships.
The result may be incremental progress (if we’re lucky) but more often, companies never see measurable results from these initiatives and abandon difficult-to-sustain practices in favor of doing what they did the year before with the same, or even worse, results.
Because trade promotion spending will remain a significant investment for CPG companies, innovation becomes key.
This process-efficient, revenue-generation focused innovation needs to be built on 4 key principles
- Simplicity – make the complex, simple. Easy to implement. Easy to use. Easy to adjust.
- Sustainability – evolve with the company and industry. Address today’s challenges with an eye toward tomorrow.
- Repeatability – trade in the mundane and manual in favor of integrated systems, automated intelligence and predictable outcomes.
- Measurability – know what you did, how it worked, what you could do differently, and what would be the results in real-time.
In reality, TPM and TPO share data bidirectionally.
This eliminates much of the redundant entry and poor data management obstacles. Your teams can move beyond challenges to focus on using the TPO solution’s capabilities to drive better business results. Furthermore, putting the integration and product enhancement responsibility on your solution partner infuses industry best practices with your organization’s current processes to collectively and regularly improve. Companies need to focus on the seamless integration between their TPM and TPO solutions. This integration is known as TPx.
Demand Simple. Expect Powerful.
Your TPx environment must make the creation of events and plans, the calculation of historical and predictive KPIs, and the reporting of planned and executed performance easy for your teams to access, execute and share. While the process should be simple, the outcomes should be powerful enough to make an impact. Ask yourself:
• Is the data accurate?
• Can you compare multiple events or plans?
• Are you able to show your retail partner the advantages of shifting promotional strategy?
• Do you have the intelligence to build a better revenue growth management strategy for your business?
• Can you easily optimize an event or plan within constraints to align with the revenue, profit or volume objectives of the organization and your retail partners?
Combining simple usability with powerful insight and predictability results in a proven path to overcoming stagnant trade promotion management practices.
Companies continue to struggle with making their trade investment the revenue growth contributor it needs to be. To address this, we must be careful that we do not over complicate the potential for change to a point where actions with quantifiable impact are perceived as too good to be true, leaving companies to fill gaps with unnecessary customization and costly status quo thinking.
The industry must try a TPx solution to completely understand the ability to simplify processes while delivering meaningful returns. Only then can companies innovate beyond transactional trade promotion management to be more competitive, more intelligent, more agile and ultimately more profitable.