Moving Beyond the Tactic:

A Retail Trade Strategy Blueprint

Retail Trade Strategy

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At a recent CPG sales training and planning meeting, one message that resonated was “get to yes”.

Get to “yes” with plan approval.
Get to “yes” with retail partners.
Get to “yes” with internal executives about budget allocation.
Get to “yes” with brand and category managers.

During a conversation around the tactical approach to managing trade promotions, one thing was clear: The overarching need for strategic optimization.

In other words, CPGs need a common element to rally around to enact lasting and impactful progress.

The reality is that consumer goods companies have operated with limited capabilities for years…. Which raises the question… Why change now?

Many CPGs are stuck managing trade promotion tactics without data-driven intelligence because:

  1. It is difficult to organize and visually track trade data in a way that is timely, accurate and quantifiable.
  2. They don’t have a means to predictively plan and calculate what-if KPIs to align tactics with strategic objectives.

The Circumstances for Change


85 Percent Unsatisfied


85% of respondents are unsatisfied with their ability to manage promotions. Furthermore, 5% say that they are extremely dissatisfied and 44% are dissatisfied.

However, dissatisfaction alone is not enough to act as a catalyst for change.

When we combine this dissatisfaction metric with Gartner’s observation that consumer goods manufacturers continue to spend a significant portion of their budgets managing promotions and price reductions as a part of collaborative efforts with retail partners, we see that much of the need for change is driven by the fact that trade spending is an area of high investment and low or unknown return.

Again, this is nothing new…

CPG companies have long accepted trade promotions as a necessary expense instead of an investment with the ability to contribute revenue to the bottom-line.


Opportunity for Change

As analytics-rich solutions provide more quantifiable intelligence and alternative recommendations, increased insight and predictability to optimize promotional planning results.

Now, as consumer behavior changes and pressure from physical and online retailers increases, manufacturers are able to be proactive in how they address these challenges.

Retail partners rely on data to drive decisions and revenue.

As a result, manufacturers who are not bringing analytical insight to the relationship are either subject to the retailer’s perspective alone or are simply not invited to participate.


Optimization is Not a Product.
Optimization is a Process.

Optimizing your strategy is not as quick as clicking a button, but there are 4 key areas where an analytical approach to trade strategy will promote an optimization mindset.


4 Ways To Optimization Mindset


    1. Process Optimization
    2. Define and measure analytical KPIs
    3. Planning optimization to drive results
    4. Organization optimization through data-driven leadership

We see companies achieving efficiency and performance improvements with this method.


#1: Process Optimization

What percentage of your trade promotion program is being analyzed on a regular basis? How long does this take?

Most CPGs only evaluate a handful of their retail partners, a few times a year.

The obstacle in improving post-event analysis that informs business decisions is not in  the availability of data, but rather in the ability to compile and analyze it effectively. You need a way to look at more data, more frequently, with greater organization and automation.

….Sounds like an overwhelming task. And in many cases, trade promotion management and optimization projects grind to a halt.

💡 The automated data harmonization of key data silos (specifically POS,  spending and shipment data) is a key component of a trade promotion optimization solution’s ability to calculate ROI.

This eliminates the manually-intensive and error-prone dependency on spreadsheets that is common among CPG companies.

David Ahuja

“Our biggest problem is data. Not creating data but working with it. If you are not paying attention to governance, on how you make decision models, you will need to do it. If you do not get the data right, you cannot do the analytics effectively.”

—David Ahuja, Senior Director of Walmart Technology

As we refocus the responsibilities of qualified employees whose day-to-day activity has been taken over by a  less than effective process, we begin to build processes around desired outcomes rather than redundant tasks.

David Ahuja of Walmart advises, We all hired a bunch of people with the title of data scientist and told  them to go do data science. They were all over the company doing great work but it was not very organized.”

The fact that trade promotions and revenue growth management are cross-functional responsibilities makes the need to unify siloed departments with a common view of business performance even more  critical.

A TPO solution simplifies the flow of information and improves the usability of analytical intelligence. With this, all intelligence available during post-event analysis is applied in real-time during planning.

For example, a sales person planning a promotional event will have immediate visibility to the historical  performance of similar events. The TPO will use the information to calculate the projected ROI  and KPIs for retailer and manufacturer. Again, putting data intelligence at the forefront of the decision-  making progress.


#2: Defining Analytical KPIs

Determining what metrics to pay attention to depends on what objective you are trying to reach.

One of the realizations that trade promotion teams experience upon  implementing a TPO solution is the visibility to a wide range of metrics that were not possible before.


Bar Chart IconFor Growth Objectives:
Incremental Revenue, Volume, Profit
Historical and Predictive Lift Indexes

For Health Objectives:
Baseline Threshold
Planned vs Actual

For Collaboration Objectives:
Manufacturer and Retailer Data
CPI / Forward Buy


Growth Objectives

Incremental Revenue, Volume, Profit

Most experts agree that incremental revenue and profit is the greatest indicator of trade promotion spending success.

When a TPO calculates the ROI of promotional events, you can determine profitability and lift. The ability to monitor base volume over time and deliver real-time, organization-specific KPIs, as well as incremental revenue, volume and profit,  serve as a barometer for long-term growth.

Couple this with overlays of consumer spending and competitive events, and you have both a measure of event success and an indication of the factors that influence it.

Historical and Predictive Lift Indexes

Growth is not just an outcome of analysis, it’s a  primary consideration during planning.

Have you ever wondered what the results would be if you could make one change to one promotion for one customer?

Visibility to historical and predictive lift indexes creates the opportunity to consider projected  growth during the planning process.

With this ability, you can put growth measures at the  center of your planning by making adjustments  to an event to optimize for revenue, profit or volume.

Health Objectives

BaMaster Calendar Blacksmith TPOseline Thresholds

Monitoring when baselines fall outside of user-defined thresholds is necessary when evaluating brand/SKU health.

Get a notification when a baseline shows unusual fluctuation.

Determine whether the cause of the discrepancy is data anomaly, category volatility or brand erosion, and take the  corrective action.

Monitoring baselines for  stagnancy as well as fluctuation is equally  important. Promotional activity is designed to drive incremental volume and contribute to an increase in base volume over time.

Planned vs. Actual Trade Metrics

Visualizing planned vs actual promotional  activity separates what you think is happening  from what is actually happening in the store.

The health of your entire trade program can be assessed based on real – not projected – data.

Similarly, analysts can scrutinize instances where a planned promotion and an actual event don’t match; identifying operational and/or  retailer disconnects.

Missed opportunity and/or misinformation based on incorrect data can damage the health of your trade program.

Collaboration Objectives

Manufacturer and Retailer Metrics

“How does this affect me?” This question often puts stress on retailer and manufacturer relations.

With a trade promotion optimization application,  calculating retailer and manufacturer revenue,  profit margin and profit dollars are part of the planning process.

This information opens the door for better professional  relationships and for the foundation of joint business planning that’s mutually beneficial to each party.

CPI / Forward Buy

A commonly cited unknown in trade promotion  planning is calculating forward buy when running  a promotion.

This leads to miscalculations of lift,  inaccuracies in plan forecasting, and deficits in  supply, creating tension between the retailer and manufacturer.

Promotion optimization should include a  consumption to purchase index (CPI) that calculates forward buy based on the retailer’s past invoice promotional purchases versus what was purchased by the consumer.


#3: Planning Optimization 

Turn optimization ideas into manageable actions by adopting these best practices.

Build a Library of Approved Scenarios

Drive Growth by aligning tactical promotional events and plans with the strategic initiative.

Building a library of approved scenarios is important because it provides the space to compare tactics.

What is the difference if a promotion that is typically a 2 for $5 is run at 2 for $6?

What if the corresponding merchandising  condition and timing were adjusted?

The most common response from sales professionals who are presented with this  concept is, “But my retail partner will never agree to the change!”

Don’t forget, a TPO solution will calculate the KPIs for retail partners as part of the scenario creation and annual calendar building process arming the sales team with the data to collaborate with the retailer for mutual benefit.

Compare Annual Plans Before Submitting Them

When it comes to customer planning, the ability to compare multiple plans and their corresponding roll ups, brings a company’s intelligence and experience together.

Customarily a single annual plan is created for a retail partner and hopefully the trade marketing, sales planning, and field sales  teams can see the roll up of the plan to compare to budget.

The problem is that even with this forecasted plan, there is no  assurance or even question of whether there is a better plan.

When it comes to adopting an analytical approach to trade promotion investment, there is no differentiation in the math behind  the results.

However, the ability to quickly and accurately apply the insight revealed from the math to change the outcome is  where the strategy competition is won.

With the assistance of a comprehensive TPO Solution, these predictive event outcomes can be placed side-by-side to compare to each other and with company objectives to determine the best option.

Doing so empowers your planning team to do more than go through the task-focused motions of completing a plan, but rather to make choices and strategize how to maximize results.

Use Predictive and Prescriptive Functionality

Turn optimization ideas into manageable actions

A TPO solution should apply predictive constraint-based modeling to improve the accuracy of future planning.

Applying predictive analytics to the planning process takes the user inputs such as trade tactic, promotional details, and promotion duration and uses algorithms to determine the lift for the planned event and corresponding  manufacturer and retailer KPIs.

This same process can be applied to calendar planning where rollups of planned events are calculated based on the tactic and  frequency defined and then can compare outcomes to budget.

Prescriptive or optimized planning – This capability takes the  concept of predicting outcomes one step further to determine the optimal event or promotional mix based on user defined  constraints.

In this case, a user can specify retailer limitation such as minimum profit percent or corporate guiderails such as  adhering to budgeted spend and with the click of button the solution should run through the various events or promotional  mixes to determine the best outcome optimized for revenue, profit or volume.

Using the predictive and prescriptive  functionality speeds up the planning process, eliminates uncertainty and helps move toward better performing trade  investments.

Of course, the final plan submitted should also consider the human strategic component and can be altered  based on user intelligence.


#4: Organizational Optimization

Approaching technology from a strategic investment position means that CPG leaders need to be the champions for these initiatives to ensure that they have the intended  impact on the company’s bottom line.

In the Wall Street Journal’s CFO Journal, Deloitte CEO, Cathy Englebert states, “There’s an even more fundamental differentiator that will play a critical role in how companies effectively compete in the decade to come: getting the right data, extracting insights from that data, and identifying the platforms on which data can be used strategically.”

Approaching technology from a strategic investment position means that CPG leaders need to be the champions for these initiatives to ensure that they have the intended  impact on the company’s bottom line.

As whispers of change begin to swirl, it’s critical for organizations to clarify that investing time in communicating the vision, finding as many  opportunities as possible to make clear connections between vision and mission of a company, and the role data and technology play to support its ambitions, advises Mars CIO Vittorio Cretella.

Of course, leading the change also means that some CPGs need to evolve their thinking on the approach to technology investment. Do not assume that deploying a single global solution means you have achieved optimization.

With the plethora of SaaS solutions, cost of ownership is minimal.

Getting accurate results of promotion tracking and effectiveness is better than deploying one solution to achieve a small portfolio, according to the Gartner Market Guide for Trade Promotion Management and  Optimization for the Consumer Goods Industry.

The  shift toward strategic technology investment signals a  prioritization by executives toward organizational revenue management.

Addressing these process and performance deficits with a C-level supported technology investment, such as a trade promotion optimization solution, encourages data-driven decision making toward  bottom-line growth while organizationally aligning sales, marketing, finance and IT toward common objectives.


Trade Promotion Technology

With good reason, CPG companies are turning to technology to improve the management and performance of their trade investment.

Simply relying on the manual compiling and analysis of data is error-prone and ineffective.

Even when done on  spreadsheets or with custom calculators, processes are often redundant, non-repeatable, and unfortunately inaccurate.

According to the Gartner Market Guide:

“The quality and capabilities of today’s TPx solutions are at a level that there is really no reason for CPG  manufacturers to either work from spreadsheets or build their own solutions. Despite this level of solution maturity, a  substantial number of companies still have not fully deployed a TPx solution.”

This costly hesitancy is in part due to a lack of understanding about the unique functionality of a trade promotion management  (TPM) and a trade promotion optimization (TPO) solution.

In fact, many folks mistake that these solutions are the same — when in  reality they complement each other to provide both a tactical management and strategic analytical approach to trade investment.

McKinsey notes that all winners (in CPG) use both trade promotion management and trade promotion optimization tools.

Here, success is attributed to both tools.

In this way, it is important to differentiate that a TPM solution will help you answer how you are  spending your trade investment while a TPO solution allows you to answer how effectively you are investing in trade and how you  can do it better.

Key Functionality of TPM & TPO Software:

Trade Promotion Management (TPM)

✨ Manage all planning and events

  • Wholesaler
  • Retailer
  • Banner and indirect
  • Accrual tracking
  • EDLP & OI
  • Scan, in-store & end-aisle

✨ Approve contracts

✨ Process claims and match deductions

✨ Measure performance

Trade Promotion Optimization (TPO)

Comprehensive post-event analysis:

  • Baseline visualizations
  • Quantifiable KPIs
  • Harmonizing POS, shipment and spending data to measure ROI of a promotion

✨ Future planning for testing event scenarios and calendar building

✨ Constraint-based modeling to determine the optimal event or promotional mix

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