What are some of the best practices for managing trade investments? Handling trade investments requires ROI analysis to evaluate the many retail outlets in the current omnichannel evironment, proper evaluation of vendors, and a strategy to integrate demand planning and trade planning.
Earlier this year, Paul Wietecha, Blacksmith Applications President and CEO, sat down for Consumer Goods Technology annual Trade Promotion Management Tech Solutions Guide.
Wietecha’s outlook on the future of trade promotion management practices, how vendors like Blacksmith Applications are addressing challenges, and how consumer goods companies can become more strategic:
Q1: How has the move to omnichannel retailing changed traditional trade promotion management practices at consumer goods companies?
WIETECHA: The need for nuanced post-event analysis is more important than ever in our current omnichannel environment. Formulas with margin averages or estimates won’t do either. You should be getting down to your true profit. Deals that impact one another are critical assessment criteria in evaluating final post-event ROI. Customers want more dollars for more channel promotions these days. Unfortunately, the total size of the pie for CGs doesn’t seem to be increasing. They can’t afford to increase spend three-fold just because retailers want to add social, e-commerce and other omnichannel promotions into the mix. So, what can CGs afford to do and, more importantly, what should they choose to do? This is where intelligent TPM/O comes in. Choose promotions that work. End promotions that don’t deliver win/win results. Make sure you have the right technology partners to help deliver reliable performance assessments and make more profitable decisions going forward.
Q2: Are TPM vendors helping CPGs address these new challenges?
WIETECHA: I think the most helpful role a vendor can play is that of trusted industry advisor. Sure, the application has to stack up, but that’s table stakes; innovative functionality and planning tools are expected. CGs need to evaluate the industry expertise of software providers as critically as they evaluate the software functionality. Without trade expertise, you’re in a heap of trouble. This is where real vendor value comes into play. Regardless of the promotional channels under scrutiny, an industry expert should be able to help navigate the post-promotion performance of a complicated landscape. The right vendor supports continued progress toward promotion optimization and arms CGs with the right strategic and financial data to go to bat for their brands when conversations are tough and customers are demanding.
Q3: What must consumer goods companies do to move beyond isolated TPM and take a more integrated, more strategic view of their commercial investments? How can TPM vendors help them achieve this?
WIETECHA: Consumer goods need to make sure they’re integrating demand planning and trade planning. Many companies aren’t doing this today, due either to technology limitations or manual processes. Integrating all volume planning is a really smart tactical move to go beyond isolated TPM. Many businesses are trying to do TPO, but you can’t if you don’t first do TPM really well. Integration also prevents pitfalls due to over-forecasted volume in trade systems and under-forecasted volume in the demand plan. This can happen in attempts to get more trade dollars into a budget, and it has a negative ripple effect. Having all plans in sync for real-time inventory communication allows demand planning to know when trade promotions get moved around (and we know that timing changes frequently). This prevents costly issues with inventory and the mistiming of production. Vendors should be helping customers establish solid TPM foundations before launching into TPO territory.