Why Manufacturers Seek Out Trade Promotion Optimization Solutions
The most common frustrations that lead CPGs to seek out a TPO solution are:
- Better post-event analysis
- Ability to quantify promotional ROI
- Structured and controlled planning processes
- Baseline volume confidence
Most CPG companies rely on syndicated baselines to measure promotional performance.
These can often be inaccurate for various reasons.
Syndicated providers’ baselines in many cases go up dramatically during a promotion, projecting what a loyal consumer would have purchased at full retail.
Syndicated data can also be contaminated by various data anomalies that impact the accuracy of a baseline for an unknown amount of time before being detected by either the syndicated supplier or the CPG manufacturer.
What is Baseline Volume?
Baselines refer to the volume that consumers purchase in the absence of a promotion.
It’s those loyal brand and product consumers who buy the same items week in and week out whether there is a promotion or not.
Baselines should provide the best understanding to the underlying health and trends of a brand.
How Can CPGs Maintain Accurate Baselines?
To maintain accurate baselines, it’s essential to have a monitoring system that can identify data anomalies. Without that detection, you’ll miss out on the ability to see true baselines for accurate post promotion analysis and future planning.
Blacksmith TPO software is that monitoring system!
Start with an 8- or 13-week baseline as the default. If you have very seasonal products, we recommend a 4-week baseline.
Let’s take a look into the Blacksmith TPO solution (image above).
Within the baseline comparison module, we see the differences between how syndicated baselines can look versus modeled baselines.
In this example, we’re looking at a specific account and product group for the last two years.
The dotted line represents the modeled base provided by Blacksmith TPO. By adding in the imported baseline (indicated by the dark solid line from the syndicated data), you quickly see the difference. The dotted, modeled base provides a smoother and more accurate indication of base.
This is how a baseline should look — smooth — not like a roller coaster.
Post-Event Analysis with the Master Calendar
Now, let’s dig deeper into base volume through Blacksmith’s master calendar (image above). Now, we can see every aspect of how the brand did over a period of time.
Look at the bottom half of the calendar. You’ll see a week-by-week view of sales and how those sales break out by base and incremental volume. For the most part, base volume is smooth, but you might notice a slight increase around the weeks of September 16 and 23. Why?
There are very few instances that would cause base volume to go up or down…
💲 Regular price increase or decrease
📈 Increase or decrease in the distribution
📺 Consumer events like podcast, television, or billboard advertising
🏷️ Special coupons
🍩 In-store demonstrations
When those types of instances are present, base volume can increase. If these instances aren’t captured in your data, it can lead to questions and inaccurate assessments of your business. Using Blacksmith TPO you can load any consumer events that would drive volume changes.
In our example, we notice a base increase during the week of September 23.
Now, glance at the top half of the master calendar. You see key information pertaining to this account, product, and timeline selection. This makes it easy for your team to see when consumer events are taking place as well as other important factors affecting your business.
See that orange cell – during the week of September 16 – indicating the presence of a consumer event? There was a special consumer coupon that ran, which drove base volume up at the retail level, even though the specific event wasn’t tied to any kind of specific promotion at this retailer.
Trade promotion optimization software provides CPGs with a clearer understanding of base volumes and promotional activities.