How AI is disrupting the CPG world and revolutionising Trade Promotion Optimisation
The consumer packaged goods (CPG) industry generates billions of data points every day, making it one of the most data-rich industries in the world. But while CPG companies have a wealth of information at their disposal, until recently, this data has been largely underutilised.
That is all changing thanks to the rise of artificial intelligence (AI). AI is rapidly transforming the CPG industry, and trade promotion optimisation is no exception. By harnessing the power of AI, CPG companies can gain unprecedented insights into their customers, markets, and competitors, and use these insights to develop more effective trade promotion campaigns that drive sales and improve profitability.
The Role of AI in CPG
So where exactly does AI fit into trade promotion management and optimisation (TPx)? The fact is, CPG manufacturers can incorporate AI into every key stage of the trade promotion process, from planning and execution to measurement and optimisation.
AI can analyse historical data to identify trends and patterns which can then be used for demand forecasting. This information can help determine the right time to launch a promotion, the right target audience, and the right promotional offer. It not only drives effectiveness, but also efficiency: no longer do teams spend time on manual data gathering, analysis and planning.
Tasks such as creating and distributing marketing materials, tracking sales performance, and managing budgets all lend themselves to automation using AI. This frees up human resources and time to focus on more strategic tasks.
AI can be used to measure the effectiveness of trade promotions by tracking sales data, customer sentiment, and competitor activity. This information can help CPG companies improve future promotions and get the most out of marketing budgets.
Optimising trade promotion campaigns by continuously adjusting the offer, target audience, and other parameters, based on real-time data, is far easier with AI. This ensures that campaigns are always as effective as possible.
The Benefits of AI in Trade Promotion
AI offers a range of benefits for CPG companies when it comes to trade promotion. There are plenty, and we highlight those we believe CPG organisations should give some thought.
CPG firms have access to vast amounts of data, including historical sales data, consumer behaviour, market trends, and competitor information. Using AI algorithms to analyse this data enables CPG companies to make more accurate and informed decisions about their trade promotion strategies. AI can identify patterns, correlations, and insights that humans may overlook, leading to improved promotional planning and execution.
Optimal Pricing and Promotional Strategies:
AI algorithms can optimise pricing and promotional strategies by considering a range of factors such as demand forecasting, competitor pricing, product lifecycle, and historical sales data. CPG companies can leverage AI to identify the most effective pricing and promotional tactics to maximise revenue, profit margins, and market share.
Improved ROI and reduced costs:
This all means AI can help CPG companies to reduce costs by improving the efficiency of trade promotion planning and execution, as well as by identifying opportunities to optimise promotion spending. Additionally, AI enables efficient trade spend allocation by analysing historical data, market dynamics, and consumer preferences. This optimisation process helps identify the most promising trade promotion opportunities, ensuring that resources are allocated efficiently and generating the highest return on investment for CPG companies.
Demand Forecasting and Inventory Management:
Applying AI algorithms to historical sales data, market trends, and external factors allows CPG firms to accurately forecast demand for their products. This helps in optimising inventory levels, minimising stockouts, and reducing excess inventory. By automating alignment of trade promotions with demand forecasts, CPG companies can improve working capital, ensure sufficient product availability during promotional periods and prevent lost sales or overstocking issues.
All in all, the application of AI to commercial processes can drive a competitive advantage. CPG firms can gain a competitive edge by incorporating AI into their trade promotion strategies. Companies that effectively leverage AI algorithms to optimise trade promotions, personalise offers, and make data-driven decisions can gain a significant advantage over competitors. AI helps in identifying untapped opportunities, improving customer engagement, and driving sales growth.
Other possibilities of AI
Besides the list above, which, we believe, delivers immediate results in CPG, AI has several other applications that may hold some relevance for CPG. Implementation of these applications depends on the commercial and logistical practices within the organisation.
Tailoring trade promotions to individual consumers based on their preferences, purchase history, and demographics, can improve the effectiveness of promotions and enhance the overall customer experience. AI algorithms can analyse consumer data and generate these personalised offers and recommendations, increasing the likelihood of conversion and customer loyalty. It requires direct communication with consumers, either through marketing channels or business-to-consumer route to market.
Real-Time Monitoring and Adjustment:
AI-powered systems can monitor trade promotion campaigns in real time and provide continuous feedback. By analysing data and performance metrics, AI algorithms can identify performance of promotions. This application of AI should be regarded with care, and only used when immediate action to optimise results is an option. In practice, response options can be limited. For example: if an instore promotion is underperforming, options to adjust the mechanism are limited as promotional communication is prepared well in advance and cannot be adjusted during a promotion. In such cases, real-time monitoring may give information, but would not drive useful action.
Empowering Effective Promotion Plans that fit consumer behaviour
AI can empower CPG companies to better define and target their core audience. This enables them to develop and execute more effective promotion plans. This is because AI can help companies to:
Identify key market segments:
AI can help companies to identify key market segments by analysing customer data and identifying trends and patterns. This information can be used to target promotions to the right customers.
Understand customer preferences:
Companies can gain a better understanding of customer preferences by using AI to analyse customer data and identify trends and patterns. This information can then be used to create promotions that appeal to customers.
Develop pricing strategies:
Companies can use AI to refine and develop their pricing strategies by analysing market data, competitor prices, and customer demand, and set prices that are competitive and profitable.
AI is transforming the CPG industry, and trade promotion is no exception. By harnessing the power of AI, CPG companies can gain unprecedented insights into their customers, markets, and competitors. This information can be used to develop more effective trade promotion campaigns that drive sales and improve profitability.
You can gain a deeper understanding of how AI can enhance your commercial processes, amongst which trade promotion results, by checking out our AI webinar series. We will provide you with valuable insights into how AI drives strategic revenue growth in the CPG industry across four in-depth episodes. From laying the AI Foundations to unlocking the power of Forecasting, Promotion Optimisation, and exploring The Future of AI, our deep dive into the potential of AI promises to be enlightening. If you want to discover new possibilities and uncover the profound impact of AI on trade promotion, book a demo with us.