Executive Briefings

Are Your Trade Promotions Pulling in Sales or Dragging Down Profits?

How much does your business spend on trade promotions to drive product sales? According to a recent Forrester report, the average for a CPG company is 20 percent of revenues, but the investment vs. return doesn't always add up. You already know that some of that money doesn't generate any return, but it gets worse: Forrester estimates that one-third of that spend – about seven percent of a typical company's revenues – actually generates negative returns, cannibalizing high-margin lines and encouraging "pantry loading."

Are Your Trade Promotions Pulling in Sales or Dragging Down Profits?

Promotional spend comes right out of your business's bottom line - and as the old adage has it, you know half your money is being wasted, but you don’t know which half. You don't want to take that hit unless you're absolutely sure you're getting something bigger back. Some trade promotions really do work, some make almost no difference, and others dent your profits, but all too often it's virtually impossible to tell the winners from the money-losers.

Businesses have been flying blind. Many are still using Excel spreadsheets to manage trade promotions. Others are better equipped, using anything from stand-alone point products to collaborative platforms and add-in modules of ERP systems. But most businesses are still not getting the full ROI on their trade promotion spend. The good news is, trade promotion management (TPM) tools are becoming more sophisticated. When empowered with real-time data and placed in the hands of field reps to finance departments to supply chain professionals, they can help you figure out what money you’re wasting (or worse). Better yet, they can help you transform your practices to maximize your return on all your trade promotion spending.

First, let's outline the TPM problem. Businesses need a way to track payments and match them with results, but most systems make it hard to follow up on discrepancies that businesses end up shrugging off as a certain level of loss. Claims management and chargeback are often complex processes, leading to incorrect payments or unprocessed rebates, all of which siphon profitability out of your promotional spend. Plus, it's a fast-moving world out there, and if you can't shift pricing and promotions rapidly, even in real time, you won't be able to match what your competitors are doing or take advantage of a late-breaking opportunity.

Now take a long, hard look at how your company's TPM system, however rudimentary or sophisticated it might be. Does it make it easy to manage launching, managing and quantifying the uplift from a complex portfolio of collaborative promotions and in-store activities? Can it support your planned growth, whether that’s globalization or customization to local requirements?  And can it deliver the real-time visibility and ease of discovery and execution that you need in order to adapt your promotions to changing conditions at the speed of business today?

If not, it's time for you to start looking for a better solution. There's no perfect, one-size-fits-every-business TPM approach out there, but given how competitive the retail goods and manufacturing sectors are, your company should almost certainly be looking for a SaaS solution, one that’s easy to use, highly customizable, easily integrated with your ERP system, and - of course - rapid to deploy.

Look for TPM with SaaS

If implementing on-premises, state-of-the-art TPM systems was quick and easy, you wouldn’t be reading this article now. Many companies that attempt to implement TPM applications in their data centers end up disappointed; they experience lengthy deployment cycles and high total cost of ownership.

SaaS is the only approach that makes sense in today's TPM environment. You've heard the generic case for SaaS many times before, so let's just get to the unique advantage SaaS can deliver to TPM: a cloud-based TPM solution is essential for real-time collaboration with a global network of suppliers and contract manufacturers. In addition, all the typical SaaS benefits are highly relevant to TPM, especially speed of implementation, flexibility to enable corporate agility, cost-effectiveness, mobility and global accessibility and visibility.

Make Complex Processes Easy

A TPM system is likely to be used by people with different levels of skill and commitment, from a convenience-store owner (if a customer portal is available) to the finance team to the CMO. Your TPM solution needs to be so easy that even a low-commitment user finds it worthwhile - and even satisfying - to interact with it.

Look for an intuitive user interface and tools that streamline workflows such as dashboards and easy-to-create reports. The system should make it simple to perform the full range of TPM tasks, including set baselines, specify promotion periods, define tactics, and generate reports by plan, account, region, or even quota. Your staff should be able to quickly measure promotion response rates and leverage past programs to create accurate and profitable future trade promotions. They should find it easy to create planning workflows and manage promotions as they move through trade promotion lifecycles, from initial planning, to getting customers to commit, and finally promotion execution and payments.

Customize to Compete

Because no two businesses are exactly alike, also factor in what is unique about your business that may extend past prepackaged functionality for typical TPM tasks. Business practices are changing rapidly, and your company should aim to be at the front of the pack - or even in the lead - which means you might need to do something differently from the standard. Don’t let a TPM system dictate or restrict the way your business approaches trade promotions.

When you're evaluating what you need in a TPM system, start by asking some new questions. What information would help field reps or the finance team make better decisions when working with customers? How is the marketing team creating their plans about future promotions? Whatever you want to know about your promotional spend, your TPM system should help you get an answer. Want a scorecard comparison of volumes, promotional response rates, and incremental profit? A report on rebates claimed for products passing through a particular warehouse or sold by a particular retailer? Look for a solution that enables you to create your own dashboards and reports and quickly customize and extend your processes. When your executives want these reports or process changes, don't keep them waiting for IT to take action, or you could end up losing a window of opportunity to move into a new market or take advantage of new demand. Make sure that customization is so simple that your marketing or operations team can take action - without ever writing a line of code.

Go Straight to the Source: Integrate with ERP

Data integration is key to the success of TPM. According to research from the Aberdeen Group, almost 80 percent of companies lack sufficient data integration and analytics to even begin to figure out if their trade promotion programs are succeeding or failing.

Since ERP holds real-time data about demand, orders in process, and status of delivery, integration with ERP systems is vital to optimizing your trade promotion spend. It speeds investigation, reduces discrepancies, and delivers real-time visibility into your inventory, shipment volumes, and the promotion's level of success. It also improves your ability to capitalize on the success of a promotion: if a promotion is going to impact sales, your manufacturing department should be in the loop and prepared to produce more if needed. 

Get There Faster and You’ll Save More

It may seem obvious, but it's worth calling out: speed-to-deployment matters. The sooner you stop ineffective trade promotion spend and step up programs that can drive new revenues, the more you’ll save and the sooner you’ll start seeing the bottom-line impact of better TPM. And beyond the initial deployment, if a software update will bring down your TPM system for a day or week, it could result in a significant loss if an opportunity is missed. Systems that update in real time via the cloud and do not require more consultants and integrators will save money over the lifetime of the service – which should be long!

Commit to Getting Return on Every Dollar Spent on Trade Promotions

With trade promotions, every dollar you're spending on promotions or paying to settle claims is coming out of your profit - and more - by investing in a TPM solution that helps you increase effectiveness with better planning, easy execution, and real-time visibility of expenditures against trade promotions. With the solutions available today, you can receive alerts when a promotion is under-performing so that you can quickly fine-tune the program and get back on track. You can adjust strategies and programs that feed into next year's planning. And you can use in-depth analytics and historical promotion data to continually improve trade promotions and help you launch the right promotion at the right time, every time.

That old adage about wasting half your promotional spending has been true for too long. Start the process of identifying and implementing a state-of-the-art TPM solution now, and you can break that rule - and seize an advantage over competitors who haven’t yet adopted new TPM technologies.

Source: Kenandy

Promotional spend comes right out of your business's bottom line - and as the old adage has it, you know half your money is being wasted, but you don’t know which half. You don't want to take that hit unless you're absolutely sure you're getting something bigger back. Some trade promotions really do work, some make almost no difference, and others dent your profits, but all too often it's virtually impossible to tell the winners from the money-losers.

Businesses have been flying blind. Many are still using Excel spreadsheets to manage trade promotions. Others are better equipped, using anything from stand-alone point products to collaborative platforms and add-in modules of ERP systems. But most businesses are still not getting the full ROI on their trade promotion spend. The good news is, trade promotion management (TPM) tools are becoming more sophisticated. When empowered with real-time data and placed in the hands of field reps to finance departments to supply chain professionals, they can help you figure out what money you’re wasting (or worse). Better yet, they can help you transform your practices to maximize your return on all your trade promotion spending.

First, let's outline the TPM problem. Businesses need a way to track payments and match them with results, but most systems make it hard to follow up on discrepancies that businesses end up shrugging off as a certain level of loss. Claims management and chargeback are often complex processes, leading to incorrect payments or unprocessed rebates, all of which siphon profitability out of your promotional spend. Plus, it's a fast-moving world out there, and if you can't shift pricing and promotions rapidly, even in real time, you won't be able to match what your competitors are doing or take advantage of a late-breaking opportunity.

Now take a long, hard look at how your company's TPM system, however rudimentary or sophisticated it might be. Does it make it easy to manage launching, managing and quantifying the uplift from a complex portfolio of collaborative promotions and in-store activities? Can it support your planned growth, whether that’s globalization or customization to local requirements?  And can it deliver the real-time visibility and ease of discovery and execution that you need in order to adapt your promotions to changing conditions at the speed of business today?

If not, it's time for you to start looking for a better solution. There's no perfect, one-size-fits-every-business TPM approach out there, but given how competitive the retail goods and manufacturing sectors are, your company should almost certainly be looking for a SaaS solution, one that’s easy to use, highly customizable, easily integrated with your ERP system, and - of course - rapid to deploy.

Look for TPM with SaaS

If implementing on-premises, state-of-the-art TPM systems was quick and easy, you wouldn’t be reading this article now. Many companies that attempt to implement TPM applications in their data centers end up disappointed; they experience lengthy deployment cycles and high total cost of ownership.

SaaS is the only approach that makes sense in today's TPM environment. You've heard the generic case for SaaS many times before, so let's just get to the unique advantage SaaS can deliver to TPM: a cloud-based TPM solution is essential for real-time collaboration with a global network of suppliers and contract manufacturers. In addition, all the typical SaaS benefits are highly relevant to TPM, especially speed of implementation, flexibility to enable corporate agility, cost-effectiveness, mobility and global accessibility and visibility.

Make Complex Processes Easy

A TPM system is likely to be used by people with different levels of skill and commitment, from a convenience-store owner (if a customer portal is available) to the finance team to the CMO. Your TPM solution needs to be so easy that even a low-commitment user finds it worthwhile - and even satisfying - to interact with it.

Look for an intuitive user interface and tools that streamline workflows such as dashboards and easy-to-create reports. The system should make it simple to perform the full range of TPM tasks, including set baselines, specify promotion periods, define tactics, and generate reports by plan, account, region, or even quota. Your staff should be able to quickly measure promotion response rates and leverage past programs to create accurate and profitable future trade promotions. They should find it easy to create planning workflows and manage promotions as they move through trade promotion lifecycles, from initial planning, to getting customers to commit, and finally promotion execution and payments.

Customize to Compete

Because no two businesses are exactly alike, also factor in what is unique about your business that may extend past prepackaged functionality for typical TPM tasks. Business practices are changing rapidly, and your company should aim to be at the front of the pack - or even in the lead - which means you might need to do something differently from the standard. Don’t let a TPM system dictate or restrict the way your business approaches trade promotions.

When you're evaluating what you need in a TPM system, start by asking some new questions. What information would help field reps or the finance team make better decisions when working with customers? How is the marketing team creating their plans about future promotions? Whatever you want to know about your promotional spend, your TPM system should help you get an answer. Want a scorecard comparison of volumes, promotional response rates, and incremental profit? A report on rebates claimed for products passing through a particular warehouse or sold by a particular retailer? Look for a solution that enables you to create your own dashboards and reports and quickly customize and extend your processes. When your executives want these reports or process changes, don't keep them waiting for IT to take action, or you could end up losing a window of opportunity to move into a new market or take advantage of new demand. Make sure that customization is so simple that your marketing or operations team can take action - without ever writing a line of code.

Go Straight to the Source: Integrate with ERP

Data integration is key to the success of TPM. According to research from the Aberdeen Group, almost 80 percent of companies lack sufficient data integration and analytics to even begin to figure out if their trade promotion programs are succeeding or failing.

Since ERP holds real-time data about demand, orders in process, and status of delivery, integration with ERP systems is vital to optimizing your trade promotion spend. It speeds investigation, reduces discrepancies, and delivers real-time visibility into your inventory, shipment volumes, and the promotion's level of success. It also improves your ability to capitalize on the success of a promotion: if a promotion is going to impact sales, your manufacturing department should be in the loop and prepared to produce more if needed. 

Get There Faster and You’ll Save More

It may seem obvious, but it's worth calling out: speed-to-deployment matters. The sooner you stop ineffective trade promotion spend and step up programs that can drive new revenues, the more you’ll save and the sooner you’ll start seeing the bottom-line impact of better TPM. And beyond the initial deployment, if a software update will bring down your TPM system for a day or week, it could result in a significant loss if an opportunity is missed. Systems that update in real time via the cloud and do not require more consultants and integrators will save money over the lifetime of the service – which should be long!

Commit to Getting Return on Every Dollar Spent on Trade Promotions

With trade promotions, every dollar you're spending on promotions or paying to settle claims is coming out of your profit - and more - by investing in a TPM solution that helps you increase effectiveness with better planning, easy execution, and real-time visibility of expenditures against trade promotions. With the solutions available today, you can receive alerts when a promotion is under-performing so that you can quickly fine-tune the program and get back on track. You can adjust strategies and programs that feed into next year's planning. And you can use in-depth analytics and historical promotion data to continually improve trade promotions and help you launch the right promotion at the right time, every time.

That old adage about wasting half your promotional spending has been true for too long. Start the process of identifying and implementing a state-of-the-art TPM solution now, and you can break that rule - and seize an advantage over competitors who haven’t yet adopted new TPM technologies.

Source: Kenandy

Are Your Trade Promotions Pulling in Sales or Dragging Down Profits?