The Consumer Goods sector is a space where large investments and high volatility often result in grand shifts in the name of effectiveness and profitability. Industry giants like Unilever, Coca-Cola, and Nestle have recently announced reorganization and re-strategizing to spur growth and cost savings, while smaller consumer goods manufacturers are being hailed as agile, innovative party crashers experiencing significant success and acquisition attention. As a result, investment in revenue management strategies that can impact bottom-line growth is readily prioritized.
Nowhere is the scrutiny greater than on trade marketing where consumer goods companies invest more than 20 percent of their revenue only to see over 59 percent of promotions be ineffective according to Nielsen. Furthermore, the Promotion Optimization Institute estimates:
Satisfaction around the ability to manage trade promotions and to execute at retail has declined and now stands at 14% and 19%, respectively in their 2016-17 TPx and Retail Execution Report.
With such alarming results, one might suspect that trade marketing is susceptible to the next sweeping change in CPG companies, but the reality is that improving trade promotion performance should not require the monumental process, people and product overhauls required by other cost-improving measures. Instead, the path to trade promotion optimization is paved with small changes that can have a significant and sustainable impact.
Commit to Better
In a world where companies are investing millions of dollars in ineffective promotions, even a small percentage improvement will add significantly to the bottom line. Unfortunately, many organizations have written off-trade promotions as an area of necessary expense instead of asking itself one simple question –
What if I made one change to one promotion at one retailer?
With the help of a comprehensive trade promotion optimization solution, the answer is minutes away with quantifiable predictive KPIs including profit, volume, revenue and ROI for the manufacturer and retailer. For example, if product A has been running on promotion at 2 for $5, what would be the impact if this promotion was run at 2 for $6? The ability to apply predictive analytics to create a library of these “what-if” scenarios with quantified results eliminates the guesswork behind promotions planning and instead capitalizes on strategic insight to calculate a BETTER outcome.
Don’t Take “I don’t know” for an Answer
Did this promotion run? Was this promotion effective? Will this customer plan meet budget?
These are just a few questions that consumer goods companies struggle to find the answers to due to incomplete, inaccurate or incomprehensible data. However, timely and reliable post-event analytics are a cornerstone of data-driven decision making which is guiding trade promotion strategy.
To achieve this, organizations must eliminate error-prone manual spreadsheets as a tool for compiling and analyzing data. Instead, organizations need to look to a trade promotion optimization solution that delivers an intelligence center providing a single version of the truth when it comes to visualizing and calculating trade promotion ROI. With this, companies will refocus their attention spent searching for information to actively analyzing performance and trends to improve outcomes. The adage, you can’t fix what you can’t see, is not only true when it comes to trade promotions, but it is also costly.
Remember, It Is Personal
One of the greatest obstacles to trade marketing improvement is combatting the we’ve always done it this way mentality. Even the smallest shifts to processes in the name of improvement have the potential to be difficult and even threatening when they are not clearly aligned with both organizational and personal objectives. In the Market Guide for Trade Promotion Management and Optimization for the Consumer Goods Industry, Gartner analysts Ellen Eichorn and Stephen E. Smith recommend:
Be prepared for change management to require a significant effort. Motivate the behaviors that you want to execute by realigning incentives and processes, which may be the biggest part of your implementation.
On the one hand, it may seem counter-intuitive to suggest that implementing a trade promotion optimization solution is a small change. However, unlike other technology investments, implementing and seeing benefits from a Trade Promotion Optimization (TPO) solution should occur within 8-12 weeks. Furthermore, by nature, a TPO solution is only as valuable as the organization’s ability to measurably and sustainably impact the bottom line thus offsetting the investment multiple times over.
The real difference when it comes to improving trade promotions, that separates it from other corporate initiatives, is that it’s not about bringing on something new, but about investing in better. Better promotions, better practices, better results.