Consumer packaged goods companies spend a significant proportion of their revenues on trade promotions but returns on that investment can be disappointing at times. This makes it imperative for businesses to consider trade promotion optimization solutions and close the gap between ambition and reality.
The Business Problem
The client is a leading consumer packaged goods company in the US that operates in a highly competitive market and relies heavily on effective planning and executing promotional and trade investment activities. However, their existing sales and marketing planning capabilities were proving inefficient for the organization. Most of their activities in the business were being planned and tracked through multiple tools, data was collected manually, and insights were inconsistently shared. As their trade investment levels rose steadily, they felt the need to improve the accuracy of their sales forecasting, establish baseline sales, and determine cannibalization within the brand portfolio. The realization that trade promotion can make or break the bottom lines of organizations compelled the client to engage with SpendEdge and leverage their services. The key challenges they were looking to address through this trade promotion optimization engagement were:
- Lost sales to forecast accuracy
- Inefficient trade spend
- Disconnected processes
- Lack of retailer collaboration.
Optimizing trade promotion is crucial for companies looking to reduce trade spend. Request a free proposal and access our service portfolio of procurement market intelligence solutions.
Solutions Offered and Client Journey
The experts at SpendEdge met with representatives from finance, trade, sales, and accounting teams to gain a better understanding of planning, forecasting, contracts, and deductions. They merged trade area data with retailer PoS data to get a retailer vs rest-of-market (RoM) view. This helped the client to create formal trade promotion policies and procedures using industry best practices while optimizing trade spend.
Implementing revised trade promotion policies helped the client to analyze their promotional spend and leverage it into something meaningful for their customers. They analyzed accumulated data and gained detailed insights about the money spent. This helped them to focus on streamlining promotional activities and understanding price elasticities in a better way. Moreover, using trade promotion and sales data allowed the client to estimate the net impact of promotions on consumption volume as well as sales revenues.
Key Finding & Outcomes
Improved Sales Revenues
Earlier, the client lacked direct control over how the goods flow through the distribution channel, which made it difficult for them to track the return on promotional investment. With trade promotion management, the company was able to promote specific items and customers. Also, they were able to offer additional discounts on different products. This helped the client to increase demand for products in retail stores and improve sales revenue by 12%.
Identified Key Customers
The trade promotion strategies enabled the client to integrate customer planning into the sales process and identify the most impactful customers from a profitability standpoint. This helped the company strategize their promotions accurately and push their products above competitors. Want to gain detailed insights, request for more information.
Types of Trade Promotion
What is Trade Promotion Optimization?
Trade Promotion Optimization (TPO) is the process of utilizing integrated goals, by factoring in promotion (e.g. price, duration) and supply constraints. It helps companies to achieve profitable growth for their brand and retail partners. Companies can follow a systemized approach for trade promotion optimization, which includes:
- Investing in integrated TPM and TPO: An integrated system allows companies to maximize usability for all potential users and strategically approach trade promotion activities.
- Building support for the shift to TPO: An algorithmically-generated forecasts and recommendations helps trade promotion professionals to devise strategies based on facts rather than instincts.
- Investing in training: Introducing TPO solutions and investing in a short period of upfront training provides professionals with guidance on how to use the new trade promotion system.
- Assessing data: Assessing data that is crucial for the business delivers greater insight for businesses.
- Testing each strategy: To get TPO solutions working effectively, test strategies based on market and industry to identify the best strategy.
- Setting realistic targets: TPO systems can help consumer goods companies to decide which promotions are effective and beneficial for uplifting the sales of the company.