“We only optimize our promotions once a year, during sales planning… so what’s the point of having an optimization tool?”
Well, if that’s how you’re planning, you’re probably leaving money on the table. A one-size-fits-all approach to sales planning, where you plan and never look back, that doesn’t work. It results in promotions that do not align with what’s actually happening in the store. Even when plans are optimized but only looked at during annual planning, they face issues.
💥 It’s time to modernize your approach to trade investments.
The first step: Have your trade promotion optimization (TPO) solution become part of the sales planning process.
Create a process, driven by your TPO tool, to see predictive outcomes of your investments, so you know what tactics, price points and customer plans will bring success.
Optimization > Planning
Understanding and analyzing price, profitability, expenses with retailer and manufacturer budgets, timing, and frequency constraints is nearly impossible manually. Visibility is limited. You might be making decisions on cases moved instead of execution.
Trade optimization software looks at the historical and predictive lift to identify the optimal event or promotional mix aligned with volume or revenue objectives.
“In retail, we’re always trying to get the most impact for the dollar spent,” says Sarika Sadarangani, Senior Business Development Manager at Ventura Foods. “The Master Calendar provides an easy-to-analyze snapshot of our past promotions. We can see what worked, what didn’t work, and the causes behind it — Did we get the price point we were paying for? Was a competitor on promotion at the same time? Has our baseline been declining? In addition, the What-If Event Scenario Report allows our sales team an opportunity to do the first round of validations prior to asking for an incremental promotion,” she adds. These optimization functionalities help the Ventura team be strong business partners.
Optimization added to your planning enables you to focus more on the combination of events that will have the greatest influence on your business objectives and KPIs – you can be confident that you’re positively effecting the volume, revenue and lift. Sadarangani says, “By optimizing our trade strategy, we were able to reduce our spends, grow our profit, and experience minimal volume declines.”
3 CPGs Share their Story of Optimization Success
① A Mid-Year U Turn
One customer, a fruit product manufacturer, realized via post-event analysis (PEA) that their competitors were drastically lower on price. Any time their competitor ran a promotion, it really hurt their sales and their own promotional effectiveness.
Armed with the PEA data, the company’s sales director showed the CFO, smack in the middle of the year, how much incremental profit and revenue could be made if they changed promotional tactics and expanded their investment.
Right then and there – the manufacturer pivoted its trade strategy.
Through TPO capabilities, the company optimized its next promotions in order to compete with its biggest competitor. Changing its tactic from TPR to BOGO turned profits up for year end and justified the additional spend.
② Better Partnership
When this customer, a CPG manufacturer, reviewed its Memorial Day promotions, and found they didn’t meet monetary expectations, the key account manager sat down with the retailer and the distributor to show them what had happened… and what needs to happen.
Here’s what happened: Using TPO analysis, the customer was able to say, “The distributor wrongly diverted our product – leaving us with out of stocks.” Using the TPO planning tool, the customer is able to predict a better plan with his partners, “Here’s exactly what we need. The distributor must distribute X.”
Without this common ground, viewable data of promotional performance, the manufacturer and retail partner would continue to place blame on one another for missed results instead of working collaboratively to solve the problem.
And, when the CPG works with the distributor to prevent out of stocks, all parties have more confidence in the promotional forecast and experience greater returns on that promotional event.
③ Course Correct
Through TPO post-event data analysis, this snack manufacturer, recognized that despite increases to trade spend, they weren’t gaining market share. Plus, their spend rate was way more than any of their competitors.
Using TPO functionality, the company concluded a harsh truth: trade investment was not driving the volume and revenue required to meet their business objectives. They looked back at their promotions and said, we’re spending too much, let’s course correct.
The manufacturer pulled back its unsuccessful promotions and used optimized planning to maximize the return on their spend while maintaining a retailer profitability that their customer would accept – they now have a mindset of how much can be gained, not how much is being spent.
Taking the revenue growth management approach, sales meets with trade marketing and finance – once a month or at the least quarterly – to review key promotions and impact that competition is having on their promotional effectiveness.
It’s not uncommon that many retailers have you submit an entire year’s plan upfront. But, with that said, your plan can evolve – especially if you can provide data-backed evidence that changing or replacing a promotion will be mutually beneficial. Take your information and use it as a weapon for profitability – optimize your promotions – discover actionable insights that will influence your bottom line.