Expert Insights: Mistakes in Trade Promotion
In our prior expert insights series, we asked industry gurus to provide their input on the disruptions impacting the food and beverage industry in 2018.
In this post, we ask, “What mistakes do food manufacturers make in trade promotion?” Trade promotion is a very complicated process, and some manufacturers excel in their trade spend processes while others drown.
Food manufacturers face plenty of pain when it comes to managing trade spend:
Manufacturers are spending a significant portion of their budgets on trade promotions that aren’t effective. Research from Consumer Goods Technology suggests that there is only a 50/50 chance that any given trade promotion will be successful.
Most companies surveyed by CGT figure that their trade promotions are effective less than half of the time – likely because many appear to be missing out on innovative trade management technology opportunities. According to the POI, only 21 percent of consumer goods manufacturers are truly satisfied with their ability to manage promotions.
Yikes! Only a 50/50 chance that any given trade promotion will be successful? That’s a tough pill to swallow. Unfortunately, many manufacturers do not take time to step back and look at what areas they may need to improve. Or maybe they don’t realize they have issues or know how to identify the issues.
Bringing us to the questions:
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What’s the single biggest mistake most food manufacturers make in managing their trade promotions?
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How do you solve it?
Here’s what they said:
Jim Klass, MarketIntelligence Solutions
“In foodservice, unlike retail, manufacturers lack the ability to measure the impact of their trade. The three-tiered model creates a visibility issue. So the key is to have the ability to get as near as possible real-time data down to the unit level.
Creating contracts that reward customers that provide the correct data and “punishing” those who won’t cooperate is critical. Now, having the data is one thing… analyzing and acting on the results is another.”
“Always important, but never more so than now, manufacturers must work to build trade (and related revenue growth management disciplines) as a strategic capability, aligned to their strategic priorities and coordinated across various internal stakeholder groups.
By investing in technology, process, and policy capabilities organizations can support their vision of successfully competing in the changing industry landscape in 2019 and beyond.”
David Thorne, Blacksmith Applications
“Manufacturers need to move from trade management toward revenue management. Rather than looking solely at the impact of trade spend (discounts), they should focus on the larger revenue stream and optimizing it.
Leverage analytics to determine sub-optimal pricing by program, customer or category. Focus on the impact of pricing on driving growth vs. on discounting to get volume. It may sound only subtly different, but revenue management has a broader lens and is more analytically focused.”
Final Thoughts
There you have it. One of the resounding themes across each of these is that manufacturers need to be utilizing data. Every manufacturer’s data tells a story.
The question is whether or not manufacturers are reading the story. Give your trade data a voice and become more strategic about trade spend activities.
Watch our webinar, Advanced Analytics Reporting Dashboards, to learn how we solve this problem for Blacksmith customers.
