Trade Promotion Optimization: Drawing a winning CPG strategy roadmap
Trade promotion and trade promotion optimization are key to fostering the long-term success of a consumer-packaged goods brand. Innovative promotion strategies can keep customers in love with a product and retailers committed to its success.
But if developing a trade promotion strategy or preparing for a retailer meeting means your account team turns to spreadsheets full of cut and pasted data and reworked promotion plans, you might already be on the wrong track.
Legacy approaches – and legacy technology – can mean account professionals spend too much time pulling data from disparate legacy systems or cutting and pasting information into spreadsheets.
What little time is left is spent simply going through the motions of planning trade promotions each year. Haggling over a fraction of a percent here, a placement there.
This means it’s easy to miss the bigger picture. The one that includes looking for new ways to reach customers with promotions that will delight them. The one that shows account teams drilling down into data and creating reliable forecasts, to create and share value in partnership with retailers, and to strengthen brands and products for the long-term.
That is why account managers with an eye on the future shouldn’t be thinking about trade promotion management alone, but include trade promotion optimization (TPO) to their repertoire.
Rather than hoping for a few points of growth from the same promotions every year, the emphasis should be on developing strategies that will maximize promotional return on investment (ROI), improve trade spend efficiency and nurture collaboration with retailers.
How Trade promotion optimization transforms strategies
Trade promotion optimization begins with pulling together historic data, along with consumer insights, market and syndicated data, and subjecting them to advanced analytics and AI. This will uncover historical patterns, which become the starting point for much more accurate forecasts.
This in turn allows account managers to take a more holistic approach to planning. It means they can model the impact of different promotions, and incorporate other types of information, such as behavioral and lifestyle data, or even seasonal patterns. This encompasses the full gamut of metrics, such as sales, profit, and market share.
With the right data, and the right platform, planners can better plan their strategies and optimize them as they’re developing them. This can inform a more innovative approach to trade promotion, spanning pricing, bundles, placements, and broader marketing.
And because the world changes quickly, a true TPO strategy should be able to incorporate new data while promotions are in progress. This allows account managers to see the effect their promotions are having, allowing them to tweak future events, even halting them if necessary, making trade promotion optimization a continuous process.
The result is better return on trade investments, both for the manufacturer and retailer, AND better value for consumers.
Common challenges moving to TPO
Account managers, in theory, have a wealth of data they can draw on to plan their strategies, from their own ERP and other systems, to market and third-party data.
But drawing all this together in a coherent manner is often a challenge. Data might be in different formats, or incomplete. Even if they can pull together reasonably clean data, too often account teams must use homegrown, spreadsheet-based tooling to analyze it and produce their forecasts. These can leave professionals bogged down in manual tasks such as pulling and cleansing data, only to produce insights that say more about the past than the future.
Alternatively, they may be stuck with nominally integrated, but still clunky suites, often derived from a series of point products. These may force them to switch between different views depending on whether they’re forecasting, planning, or looking to see how their promotions are panning out.
In the absence of a holistic view across all brands, and all promotions, it’s all too easy for account managers to default to a “this is how we’ve always done things round here” approach.
This can mean repeating strategies that worked in the past, cutting and pasting in plans from the previous year even as they’re cutting and pasting in incomplete data. It becomes easier to haggle over placements or fractions of a percent of trade spend, rather than evolving new strategies or promotional techniques to replace those which are no longer delivering.
And while trade promotion specialists play a crucial role in their company’s success, there are other parties involved too. Siloed systems make it harder to coordinate and collaborate with colleagues within the organization, and partners and suppliers outside.
Either way, precious time and energy is eaten up before any forecasts or insights are even developed, or negotiations can begin.
This further reduces the bandwidth which professionals can apply to modelling alternative scenarios, developing, and testing new approaches, and, crucially, sharing their insights with their colleagues and their retail partners.
So, trade promotion optimization can require a cultural change, as well as a technological one. But the benefits can be truly transformative.
Some benefits of TPx
Perhaps a more appropriate abbreviation is TPx, or the combination of trade promotion management and trade promotion optimization, all within a single software solution.
The benefits of such an approach are substantial. A broader range of more reliable data, together with cutting-edge analysis, results in more reliable forecasts and more focused planning.
Account managers, and their colleagues and collaborators, gain better visibility across their operations, spotting underperforming promotions and identifying and highlighting new opportunities.
Immediate benefits include improved return on investment on trade promotions and investment in general, and ultimately increased sales growth and profits growth.
Longer term, account managers can develop deeper, more collaborative relationships with retailers, and can refine their go to market strategies, optimizing market position, and increasing market penetration.
Winning with Trade Promotion optimization – Your path forward
Trade promotion is central to ensuring the success of a CPG portfolio, whether the team is looking at the year ahead, or taking a longer-term view.
Trade promotion optimization means account teams can develop more accurate forecasts, which means better planning. They can gain full visibility into their strategies, both at the planning and execution stage. The result is a more agile, more efficient approach that leads to better performing promotions, improved revenue and profitability, and deeper relationships with retailers and consumers.
But achieving this means giving account teams tools that enable them to apply their expertise to the most pressing challenges, rather than trapping them in legacy processes.