The five levers to boost trade promotion effectiveness
Measuring and managing your trade spend is one thing. Measuring your trade promotion effectiveness is a far more complex undertaking.
True promotion management means moving beyond just tweaking whatever you think worked last year. It means the ability to pull together meaningful data, both internal and external, spanning the entire product range, and the ability to analyze that data, gaining and sharing insights.
But gaining an insight into trade promotion effectiveness and leveraging that insight for the future is even more challenging.
Put simply, trade promotion effectiveness is the extra volume and/or revenue and profits a promotion delivers. That and/or alone indicates how complex it is to measure. And that’s before we consider the range of tools a CPG can deploy as part of their trade promotion strategy, from deals and discounts, rebates, special bundles, and more.
Account managers need to grasp what they’re spending and investing, they need to define measurable objectives, and they need to be able to measure progress and results.
Afterall, even a promotion that doesn’t return a profit can still serve a purpose, if the objective is taking market share or establishing a new brand.
Legacy tooling, limited data resources, and largely manual processes, might have been enough to manage this in the past. However, an increasingly volatile market and rapidly improving technology has changed the context dramatically.
Nevertheless, the fundamental principles underpinning trade promotion effectiveness – what we might call the key levers – remain the same. This article will discuss what they are, and how technology can allow you to exploit them far more effectively.
Improve Trade Promotion Effectiveness
So, what are the five key levers? And how exactly do they interact?
Data cleanliness and management
Trade promotions need to be planned and optimized, and they need to deliver measurable results. This means data, and data management, underpin the entire trade promotion lifecycle.
From the outset, account managers need reliable data covering previous activity, to establish a baseline, and to measure progress and results against it. Sources can include the manufacturer’s own data, from an ERP system for example, but also, potentially from other functional teams in the organization. Third-party data and syndicated data also play an important role, particularly when it comes to measuring sell-out or consumption.
Pulling this together manually would be a tortuous process, particularly if data is in multiple, incompatible formats. Data can become trapped in silos, particularly if individual teams are using bespoke tools or even spreadsheets.
But if trade promotion professionals can pull clean data from multiple sources, without manual intervention, things look very different. They can construct more sophisticated models, free up time to analyze the outliers, evolve and test innovative approaches, and optimize their plans to become more effective.
Accurate Volume Planning
How can you understand how effective a promotion is, without a good idea what would have happened otherwise? This applies whether the objective is to generate profit, increase revenue, or drive up volume.
Whatever the objective is, achieving it will require the appropriate level of stock on hand, at the right time. Stockouts will lead to disappointed customers and partners and wasted opportunities. Overstocking will undermine profitability.
So, volume planning accuracy is critical, and having the right baseline from the outset is essential. This provides the basis for understanding previous periods, and in turn, generates the insight needed for developing new promotions, in terms of ROI and profitability. Without that reliable baseline, scenario planning becomes moot, and trade promotion effectiveness is impossible to measure.
Promotion planning and optimization
Promotion planning is a highly complex task, potentially spanning a range of multiple individual products and retail partners, over varied periods of time.
Experience is a great teacher – but it is also an expensive one. And if a big promotion misfires, a CPG might not be in a position to apply those lessons in the future.
So, when it comes to establishing ROI and trade promotion effectiveness, it makes far more sense to run “what ifs” across multiple scenarios. That requires a solid baseline, the right forecasting tools, and of course, the right data. But it also requires a platform that allows CPG professionals to easily pull all these together, allowing them to optimize as they plan.
This doesn’t just mean that promotions teams can choose the scenario that suits them best. It means they can present internal stakeholders and retail partners with multiple tempting scenarios – finetuning them as negotiations progress.
Post event analysis
Working towards trade promotion effectiveness needs focus, time, and the right tooling. But CPG is an incredibly fast-moving world. As the end of a promotion or quarter looms, it’s all too easy to get swept up in planning for the next burst of activity.
This means that post event analysis can be neglected. At best this means valuable insight into key KPIs such as lift, incremental sales, and ROI, is left on the table. At worst, it means promotion professionals are at risk of repeating strategies that are not effectively contributing to, or even undermining, their business.
Post event analysis then can be a valuable lever in ratcheting up trade promotion effectiveness. But, as always, this requires accurate, up to date data. And it requires tooling that will allow CPG to pull this together, analyze it, and swiftly generate insights that be shared, discussed, and critically, applied to upcoming promotion planning.
Pricing is, of course, central to Consumer Packaged Good strategies. But economic volatility and the cost-of-living crisis means price decisions have become ever more fraught in recent years.
When setting the optimal price for a product or promotion account teams must balance the demands of senior management and finance, the needs of their retail partners, and the real-world experience and desires of consumers.
Being able to optimize pricing and model its interplay with trade promotion activities is an important lever. It can smooth the path for mutually beneficial negotiations about prices based on data, analytics, and the ability to compare multiple scenarios/what-ifs.
Two minimal requirements
Each of these levers is fundamental to improving trade promotion effectiveness. But there are two additional factors – levers in their own right – that influence them all.
Automation ties them all together. It ensures that the required data is integrated from multiple systems, smoothly and in a timely manner. Automation also means that events, insights, results and KPIs, can be shared, ensuring all teams work with a single, accurate, up-to-date view of the truth.
Likewise, integrated analytics are crucial to ensuring that data yields accurate forecasts and insights. This can make all the difference as professionals consider multiple scenarios and optimize their plans in flight. This can’t be a one-off exercise. The world is moving too quickly for that.
Integrated approach to trade promotion effectiveness
It’s clear that the ability to manipulate each of these levers contributes to improving trade promotion effectiveness. But being able to use all of them in concert takes CPG professionals’ ability to plan and optimize for trade promotion effectiveness to the next level.
To do this effectively, and repeatedly, in a highly volatile market requires a software platform that encompasses all these disciplines. Moreover, it requires the ability to smoothly ingest and integrate all the relevant data sources – both internal and external – so that every employee is working with the same, up to date information.
This platform also needs sophisticated analytics, so that baselines can be reliably calculated, paving the way for ROI and other key metrics to be analyzed, and multiple possible scenarios planned and optimized.
Visaulfabriq’s platform features cutting edge AI to produce accurate forecasts and a high-level of automation, to allow CPG professionals to make full use of all five levers when planning, optimizing, running, and analyzing their promotions.
This high degree of integration and built-in intelligence makes the end-to-end process easier to manage, achieving gains and targets in the short term.
But it also allows team members and senior managers to move to a more optimized, holistic approach in steering the company. One where investments are smarter, optimized, and feed into more sustained, predictable growth benefiting the company, its partners, and customers.
There are five key levers CPG professionals can use to maximize trade promotion effectiveness. But doing so effectively and repeatedly requires effective automation and cutting-edge analytics capabilities.
Visualfabriq’s Trade Promotion software allows CPG professionals to pull together the required data, analyze and interrogate it, and use it to plan and optimize trade promotions that will deliver on their objectives. Effectively, and repeatedly.
This enables a shift from short-term thinking with limited objectives to more holistic programs which remove toil and benefit manufacturers, retailers, and consumers.
It also allows other stakeholders to build on this, helping the entire organization move towards a more sustainable approach to growth for the long term. To see what this would look like for your company, get in touch here to arrange a demo.