TRADE PROMOTION
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Seven FAQs about Trade Promotion Management
Consumer Packaged Goods (CPG) manufacturers rely heavily on the use
of trade funds to proactively shape demand. The average shopper may not
be aware of it, but virtually every product placement, price reduction and
end-cap display has been funded by the manufacturer. The objective of
such programs is to influence both retailers and consumers. For example,
trade promotion remains a critical tactic for getting more shelf space and
helping retailers increase store traffic. It helps create product and brand
awareness among consumers and can stimulate trial purchase and switching behavior.
For the average CPG manufacturer, trade spending ranks second on the company’s P&L. And despite the recent recession, trade spending has not decreased at most companies.
Here are seven key FAQs about Trade Promotion Management (TPM):
What is Trade Promotion Management (TPM)?
Trade Promotion Management (TPM) is the management of the entire lifecycle of trade promotions and related spending between Consumer Packaged Goods (CPG) manufacturers and their customers. The lifecycle spans from annual planning to post-event analysis to settlement.
Why is TPM an important software category for CPG?
Trade promotions are expensive and difficult to track and measure. For most CPG manufacturers, trade spending represents the #2 line item on their P&L, often 10-30% of gross sales. This cost impacts every part of the organization from sales, marketing, manufacturing, finance, operations and supply chain. Using a manual process, manufacturers have difficulty measuring spend performance, determining promotion profitability, and reconciling deductions from retailers and distributors.
Why do I need software to solve these things?
Many companies don’t track their trade dollars or use inadequate tools. CPG companies still use desktop spreadsheets as the primary source to track promotion data. Without a single system of record for promotions, companies lack visibility up and down the organization or between departments, often resulting in frequent surprises and fire drills.
Why should I use a TPM solution?
A TPM Solution creates a single, centralized system of record for trade promotions and related spending. This gives common access to all departments, supplying them with consistent, accurate and current information to help make better business decisions. Sales managers can spend their time selling product, not compiling spreadsheets and reports. Corporate finance can immediately access the most up-to-date financial information about trade spending, enabling them to easily analyze the company’s current liability for trade. Administrators can easily reconcile and clear deductions without wasting time assembling backup documentation and chasing down sales people. Manufacturing gets a clear understanding of upcoming promotional activities to help make more informed decisions about production and distribution.
What is SaaS TPM?
Software-as-a-Service, or SaaS, is the hosted delivery of software, meaning customers subscribe to the solution and access it over the Internet rather than buying and installing a piece of software. SaaS is much more cost effective because it reduces IT burdens and implementation times, and eliminates manual upgrades.
What should I look for in a TPM Solution?
Look for the following:
- An application designed for simplicity for the end user
- Ability to plan at multiple product and market levels
- Highly intuitive application
- Relieving the need for an initial involved training session, or reoccurring training for new employees
- Encompassing the entire trade plan, from AOP to settlement and analysis.
Is TPO different from TPM?
In a word, yes. You can think of TPM as the heavy lifting involved with the day-to-day operations of planning, forecasting, executing, and reconciling promotions. Trade Promotion Optimization, or TPO, would complement TPM. It uses advanced modeling and predictive analytics to suggest optimized objectives, tactics, or pricing - essentially the coupling of consumption data to shipment data, which allows you to better understand pricing and activity in relation to the category. A good foundation of promotional data from a solid TPM system is a prerequisite to TPO.
This article was adapted from material provided by MEI. For more information: www.tradeinsight.com and 1(800) 463-6634.
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