Why CPGs Need Promotion Optimization Software
Trade promotion optimization maximizes your trade investments through data analysis. Through trade promotion optimization software, you have the analytical ability to deliver insights and enhance future outcomes.
All CPGs want to better align event promotions with quantifiable returns but aren’t clear on what benefits a trade promotion optimization (TPO) solution can bring to their organization… especially in conjunction with a trade promotion management (TPM) solution. Integrating TPM and TPO software gives you the power to move beyond a transactional, event-based view of trade spend to an analytical, performance-based approach that effectively improves your trade investments.
Trade promotion optimization is the next innovation in trade promotion management process.
With optimization at your fingertips, CPG manufacturers can bring together spend analysis and planning that make an impact on performance outcomes.
True TPO Solutions Have 3 Components
Post-Event Analytics
TPO software boosts your bottom line.
Automated post-event analytics harmonizes your data and instantly quantifies ROI and KPIs. Historical data provides you with the ability to share fact-based data with your retail partners.
Planning
Historical and predictive lift coefficients will calculate manufacturer and retailer KPIs at event and plan levels.
Constraint-Based Modeling
Run through the multitude of promotional mixes to determine the optimal event or promotional plan to align with revenue, profit, or volume objectives for both a merchandising tactic and an annual customer plan.
Without all post-event, planning, and constraint-based modeling, you may wind up in a situation where you have insight but can’t act. Or worse yet, you lack an accurate view of promotional performance so that your predictive planning is nothing more than a misinformed guess.
McKinsey & Co. says that CPG winners “differentiate trade investments using metrics that cover both outcomes (such as net sales) and activities (such as placement of promotional displays). CPG winners track a comprehensive set of key performance indicators and conduct formal reviews, paying special attention to deviations from trade-investment guidelines and imposing more stringent consequences for overspending.”
This winning mindset, as I’ve described above, is a reality with a TPO solution in your tech stack.
You should see real-time performance measures in order to explain the impact of promotions on category, brand, and overall business performance.
Promotion Optimization Functionality
As an ANALYSIS tool, a TPO solution should allow CPGs to:
- See consumption, shipment and spending data
- Monitor baseline trends over time
- Account for inconsistencies in syndicated performance data and correct data anomalies
- Monitor the effects of competitor and consumer events
As a PLANNING tool, a TPO solution should allow CPGs to:
- Eliminate redundant entry with tight integration into TPM system
- Conduct unlimited what-if scenarios
- Create a library of approved plans
- Calculate predictive KPIs (for you and your retail partners)
- Determine top performing events and plans at the product and customer level
- Compare annual plans optimized for profit, revenue, and volume
Common Concerns
Even with a better understanding of TPO system functionality, the concern of implementing yet another software system, with even more functionality, can be daunting.
Consider This:
Data
By the time you manually analyze your data, it’s too late to inform sales planning or to allow your leadership team to really understand the picture of overall business.
TPO automatically generates detailed data from all of your customers – making your work more efficient, more accurate. and most importantly… more profitable. 🤑
Implementation
Trade promotion optimization software implementation takes between 8-14 weeks and there’s minimal involvement from your IT team.
TPO should seamlessly integrate with your company’s ERP system, TPM system, and any other trade data provider with read and write capabilities. 🔗
Effectiveness
Without centralized and easily visualized data, you’re at the mercy of the retailer when it comes to promotional compliance and supplier issues.
Showing retailers your ROI data to improve collaboration. As you bring raw data and predictive analytics to the table, you open up conversations with your retail customers about creating mutually beneficial promotional events. 🛒
Return on Investment
What if you could tell your boss that you’re quantifying a more than 5% return of your annual trade investment?
And all it took was a single change to one customer plan (and you already paid for the tool that helped you get there?).
TPO supports your historical data and builds predictive what-if scenarios, enabling accurate and optimized customer plans. 📅
Advantages of Trade Promotion Optimization
There are plenty of advantages to trade promotion optimization. You can quickly learn:
- What happened the last time your plan ran
- What to expect if you run a promotion again
- What factors might influence a promotional event’s success
- What tweaks will make the plan more effective
Optimize your trade investments for volume, profit and revenue. This information is invaluable!
“Always recognize that software is not the automatic answer to a problem. Instead, it is the enablement of an underlying business process with appropriate technology that can deliver results. Merely buying some software package and installing it is not the answer, despite all the marketing hype to the contrary.”
–2015 POI TPx and Retail Execution Survey
TPO strengthens your trade process. It creates a central intelligence center for a complete and accurate post-event analysis. It helps you compare shipment data, trade spending metrics, consumption information, consumer marketing, and competitive activity.
How to Prepare
Once you’ve decided that trade promotion optimization is a process you want to include in your trade marketing program, it’s time to evaluate your needs and the solutions available.
- Undergo an internal evaluation and organize your team.
- Identify pain points with your trade processes.
- Research solution providers and evaluate!
- Develop an evaluation and implementation timeline.
Your company needs a TPO solution for a competitive edge.
The Questions CPGs Should Ask Before Implementing TPO Software
- What are our trade promotion goals?
- What do we hope we can see from our post-event analysis?
- How are we measuring the results of our promotions?
- What would make our analysis and planning more efficient?
- What information would make our planning easier?
- How would visibility to ROI affect our work?
- What do we hope would be gained with the addition of a TPO solution?
- What do we fear would be lost without the addition of a TPO solution?
- Do you have syndicated or DSD data?
- Are you managing, analyzing and planning promotions using spreadsheets?
- Are you or your team spending more time compiling data than analyzing it?
- Are you struggling to provide timely and accurate KPI measurements to management?
- Would your sales and/or planning team benefit from having more information on future promotions?
- Are you looking to improve your relationship with your retail partners?
- Would your organization benefit from a quantified return on its annual trade promotion investment?
