A Guide to Trade Promotion Technology: What is TPx?

Are you experiencing challenges around trade promotion investment and results? Let’s turn your challenges into opportunities with trade promotion software. Effective trade promotion execution is referred to as TPx.

What is TPx?

The acronym TPx has been floating around lately. But, what is it? According to the Promotion Optimization Institute (POI), TPx is inclusive of trade promotion management, trade promotion optimization, trade promotion effectiveness and analytics. For CPGs, trade promotion refers to the marketing events that are executed at the retail level.

The “x” in TPx 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 an emerging subset of revenue growth management (RGM) initiatives. RGM teams ask important questions about trade investments. Questions like “What promotions have we run and how do we know it worked?”.

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% are 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, and improve.

Know

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

Predict

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

Improve

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 CPGs prioritize data-driven spending, an RGM mindset is imperative to successfully address trade investment challenges. Your RGM team can own enterprise short-term and long-term pricing road maps, retailer trade allocation, and can balance trade funding needs across channels and accounts. Proper allocation, planning, and monitoring of promotional dollars is critical.

Solutions for Trade Challenges

Identify your biggest trade challenges. Maybe it’s too difficult to capture promotional ROI. Maybe your metrics are incomplete. Maybe it’s the manual processes. To address your key trade challenges, an analytical trade promotion management and optimization solution will provide a foundation for trade promotion excellence. But there’s a lot of confusion about the trade promotion technology. There’s often confusion about what trade solutions do and what they can automate. Implement the best practices for your organization.

Define TPM and TPO

Let’s start by addressing the unique functionalities of trade promotion management (TPM) and trade promotion optimization (TPO) solutions.

It’s not unusual for folks to 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.

TPM and TPO software share data bidirectionally. This eliminates redundant entry and timely data management. Move away from your challenges by using a TPO solution’s capabilities.

Your trade promotion solutions environment must create events and plans, calculate historical and predictive KPIs, and report on planned and executed performance. While the process should be simple, the outcomes should be powerful enough to make an impact.

Combining simple usability with powerful insights is a proven path to overcoming stagnant trade promotion management practices. Don’t struggle making your trade investment the revenue growth contributor it needs to be. The industry is moving toward trade promotion execution – to understand and simplify processes while delivering meaningful returns.

…Only then can you innovate beyond transactional trade promotion management to be more competitive, more intelligent, more agile and ultimately more profitable.

Synergize TPM and TPO capabilities to create a single trade promotion environment.

What Functionality Should I Look for in a TPO Solution?

Decide on a promotion optimization solution that creates value for your whole organization. Brand managers, sales, pricing managers, and the promotional approval team will all benefit from trade system implementation. Blacksmith’s Director of Presales explains, “In my past, both working for a CPG manufacturer and working with CPGs on the software side, I can tell you that TPO can and should touch as many departments as possible.”

Look for TPO Software With These 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 3 of these system components, CPGs might gain insight but can’t turn it into action. Or worse yet, lack the accuracy and holistic view of a promotions performance – making any predictive planning nothing more than a misinformed guess.

The Lasting Value of Trade Promotion Execution

In the chase for elusive profitability, we have over complicated trade promotion strategies 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 is key.

Build Your Innovation on These 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.

You should have the tools to achieve measurable and sustainable success. »» Let’s talk!