TRADE PROMOTION
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SECTION TWO
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Five Reasons Why Managing Trade Spend
Won’t Excel with Excel
Fast Moving Consumer Goods (FMCG) manufacturers typically
spend between 10 and 20% of their gross sales on trade promotions
with wholesalers, distributors and retailers. Trade spending represents
the best lever a FMCG firm has to effectively shape demand at the
shelf and through the demand chain.
Despite the billions spent on trade, over half of FMCG firms still rely on spreadsheets and manual processes to manage their trade promotion planning, execution and reconciliation. While using programs like Excel to manage trade spending may seem “free,” it could actually be costing your company a lot more than you know.
Most consumer products companies gravitate toward Excel for managing trade promotions early on, but quickly outgrow it. Those that wait too long to consider specialized software solutions become nearly paralyzed by spreadsheet volumes and manual process.
Here are five tasks where Excel falls short:
Measuring Promotion Effectiveness
Critical downstream data sources all come in different formats, and are stored in different locations. Sales data is locked away in the ERP system, while external data might live in a portal or sit on a server in raw flat file form.
Companies managing their promotions through Excel have no quick or easy way to import these data sources to match against the promotion plans. As a result, these valuable information stores often go unused.
Monitoring Trade Spending
When promotion plans and sales forecasts reside on local spreadsheets, there is no easy way to link the two together. If an individual sales manager increases a forecast number, or changes the terms of a promotion, Excel has no mechanism for automatically calculating and then communicating the spend liability back to finance, leaving them blind to outstanding spend liability.
Accurately Reconciling Deductions and Bill-Backs
Manufacturers that store their promotion plans in Excel create a real challenge in relating a deduction back to the right tactic. As a result, many FMCG firms simply clear deductions below a certain threshold without performing validation. The time and effort to actually perform the research eclipses the value of the deduction. These firms could be losing millions of dollars over time simply because spreadsheets don’t allow automatic matching of deductions to promotions.
Promotion Profitability
Promotion profitability requires good data to calculate. Cost of Goods Sold (COGS) and
downstream data both need to be assembled to determine all the costs associated with product sales, while downstream data is needed to track actual prices at the point of sale. Since this information is dynamic and often inconsistent, it can be very difficult to manually assemble in Excel on a regular basis. This is one of the leading reasons that promotion profitability is the most important but least used metric by FMCG companies today.
Reporting and Business Intelligence
Excel is wonderful for dissecting a known data set, but falls short of being a true business intelligence tool. While pivot tables can assist with multiple dimensions of data, Excel doesn’t handle data integration, transformation, consolidation or hierarchical relationships well. Unfortunately, these are all critical requirements for effectively managing trade promotions making Excel ill-suited to perform the job.
This article was adapted from material provided by MEI. For more information: www.tradeinsight.com and 1(800) 463-6634.
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SECTION THREE
