For many CPG companies, next year’s sales planning is already a hot topic. The unavoidable conversations about budgeting, past performance and (hopefully) predictions for growth arise. Since many sales planning teams are misinformed, it becomes a race to get plans submitted and approved so everyone can get back to analyzing, negotiating, reconciling, and justifying trade programs. If this sounds counter-intuitive – it’s because it is. CPG companies spend significant time, resources and dollars trying to understand and make up for poor performing promotions. Throughout the year, circumstances and opportunities emerge that leave teams scrambling to make-up for its well-intended, but poorly executed customer plans.
Address these topics during the sales planning process:
1) What happened vs what we think happened?
Closing the books on last year and never looking back is a dangerous practice that puts CPG companies at risk of repeating last year’s mistakes. With the influx of available data and the technology available to aggregate, harmonize and analyze promotional performance, post-event analysis is a necessary step to a profitable trade promotion strategy. With this intelligence, conversations surrounding base trends and promotional ROI are possible. Additionally, a thorough reflection on plan vs actual KPIs and promotional execution can influence and optimize the planning decisions of the coming year.
2) What if and what else?
Discovering promotional possibilities creates better planning. It starts by making one change to one promotional event for one retail customer. What if you change the percent discount? What if you change the bill back to and off invoice? What if you try a TPR instead of an ad and display?
The Value of TPO
These initial considerations, made possible with predictive planning capabilities, open the door to a more strategic conversation about promotional mix and ways to align predicted customer plans to your objectives.
A TPO solution will compare annual optimized customer plans with predicatively calculated KPIs including:
- plan vs budget
- retailer profitability
- manufacturer profitability
- trade spend rate
Using the constraint-based modeling optimization engine allows the consideration on what else your organization can do to achieve its objectives. Optimize the revenue, profit or volume of promotional tactics and promotional mixes to drive improved results within budgetary limits.
Sales and finance should work collaboratively to create a plan that is financially feasible and executed with retail customers.
Previously, sales planning was a process filled with finger-pointing and wishful thinking.
Plan with a data-driven optimization strategy that aligns expectation, reality and possibilities positions organizations for calculated and sustainable growth. With increased competition and tight margins, CPGs need plans that maximize results while limiting spend. In other words, no longer can we rely only on what we have always done as good enough. It’s long overdue that we start creating better – better practices, better intelligence, better collaboration, and better results.