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R E A L I T Y
M Y T H
Year over year, trade promotion
management (TPM) is one of the
hottest topics covered by CGT. Yet
we had started to hear rumblings
that it wasn’t relevant, and that
the industry was saturated with
solutions to help extract value
from trade dollars. Myths about
how TPM should be a separate,
internal only silo abound, in-
cluding untruths about the
impact of big data. We have
gathered thought leaders to
help wade through these sto-
ries to assure you that TPM is
still thriving and providing im-
mense value, particularly when
an interdisciplinary approach is
implemented that integrates mul-
tiple sources of data.
TPM RealiTy CheCk
vs.
CGT Straight TalkIs TPM still relevant? Or has every company already
implemented technology to get the most out of
their trade spend?
Artwork provided. Please do not recreate.
Date : 31 I 01 I 2007Title : Tata and TCS Marks - Stacked with TaglineDesign Magger : Gargi SharmaProject Co- ordinator : Vishal JhunjhunwalaColour : Pantone 2427 CSoftware Formats : CorelDraw 11, Adobe Illustrator CS2
IMPORTANT : COLOURS USED TO CREATE THIS MECHANICAL ARE FOR VISUAL SUGGESTION ONLY. USE PANTONE COLOUR SWATCHES TO MATCH FOR CORRECT COLOURS. EVEN THOUGH THIS MECHANICAL HAS BEEN CHECKED FOR ACCURACY, PLEASE DOUBLE CHECK PRIOR TO RELEASE TO THE VENDOR. IF INSTRUCTIONS ARE FOUND DEFICIENT, PLEASE CONTACT corporate.o�[email protected]
Tata and TCS Marks - Stacled with TaglineFor use in 2D applications
Tata Consultancy Services Identity Guidelines I Jan 2007
Guide-sheet developed by Design Services, Corporate MarketingCopyright © 2007 Tata Consultancy Services Limited
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2 5 cgT | july/august 2014 | consuMergoods.coM
25.ST_Intro_v4.indd 25 8/12/14 3:30 PM
TPM RealiTy CheCk
Chris riCe sVP, industry strategy AFs Technologies, inc.
www.afsi.com
It’s no secret that consumer goods
companies operate in a very challenging, very
dynamic environment. Many manufacturers consistently struggle to make timely, accurate business decisions due to the lack of visibility into com-mitted and unused trade dollars as well as the in-ability to measure lift and return on investment (ROI).
Despite the challenges, total transparency and com-plete visibility into trade promotions are achievable. With trade spend being the second highest line item on the P&L, investing in the right tools and processes to eliminate guesswork in favor of a “single version of the truth” is a mission-critical objective. Fortunately, it’s never been easier to strategically manage trade promotions, centralize all promotions manage-ment systems and establish control over trade spend activities to drive competitive advantage and maximize ROI quickly.
Today’s technology, or more specifically a proven TPM tool or suite of solutions, can offer
manufacturers a new-found transparency into retailer fines, fees and late charges, and allow a company to track and manage the “nuisance fees” affecting its trade budget more quickly and accurately. As an added benefit, using a better technology tool gives the finance team the ability to more easily establish accruals
to fund future deductions and deliver more accurate “spend versus objectives” reports to the senior man-agement team.
TPM tools also enable a manufacturer to make con-cise trade spending deci-sions in a matter of days, not weeks. With forecasts and easy-to-access analyt-ics at their fingertips, man-ufacturers are now able to instantly access a snapshot
of trade spending commitments and deter-mine if a promotion proposed by a retailer can be executed and know whether or not it will be profitable — and shift spend accordingly.
The truth is, with intuitive TPM solutions, manufacturers are becoming more effective at improving visibility and, most impor-tantly, delivering results in very signifi-cant ways.
2 6 cgT | july/august 2014 | cOnsuMeRgOODs.cOM
CGT Straight TalkR E A L I T YM Y T H
With ever-changing promotion tactics and timing changes coupled
with the need to respond to compet-itor activities and retailer-specific
programs, it is very difficult to manage, let alone improve
visibility into trade spend.
“TPM tools also enable
a manufacturer to make
concise trade spending
decisions in a matter
of days, not weeks.”
26.ST_AFS_v5out.indd 26 8/12/14 3:31 PM
TPM RealiTy CheCk
RichaRd Nicholas sVP sales and consulting Exceedra.
www.exceedra.com
Trade Promotion Management (TPM)
is a fundamental part of realizing a company-wide
business plan. As a result, the planning process must start
well in advance of the declaration of the trade promotion budget. This practice reinforces the mind-set of dollar-in dollar-out and questions how trade promotions contribute to the strategic objectives. A mature TPM process is continuous and inputs into the Sales and Operational Planning (S&OP) process and wider strategic planning.
Marketing and Category teams must look to their own strategic objectives when deciding on which products are most suitable for promotion and why. Commercial teams must have an up-to-date understanding of the financial DNA of these products when segmenting their accounts based on a positive contribution to the company’s performance and formulating key customer business plans.
Providing integrated visibility of these plans internally becomes a key connecting step between business strategy and execution.
The trade promotion and customer business plans must be translated into multiple internal stakeholder views such as Category, Supply Chain and Finance, which can be assessed in context alongside broader business objectives.
Best practice dictates the trade promotion plans should be translated into the retailers view, taking into account their own promotional
calendar and financial year. Joint Business Planning is pivotal to ensuring that both manufacturers and retailers agree and that decision making is collab-orative. Joint planning also reduces the uncertainty in promotional performance.
Internal incentives are an important part of how
trade promotions are executed. For maximum ROI, Sales teams’ incentives should be aligned to promotional success criteria.
However, the concept of measuring promotional success is often confused with the need to create historical insight. Tracking and adjusting based on results must be a continuous process and technology is a powerful enabler in connecting functions and processes. The resulting insights enable Sales, Category, Supply Chain and Finance teams to plan more effectively and efficiently.
2 7 CgT | july/august 2014 | CONSuMeRgOODS.COM
CGT Straight TalkR E A L I T YM Y T H
trade Promotion Planning
is an internal process that
begins with the allocation of
the trade promotion budget. “A mature TPM process
is continuous and inputs into
the S&OP process and wider
strategic planning.”
27.ST_Exceedra_v6out.indd 27 8/12/14 3:32 PM
TPM RealiTy CheCk
Mike Ridgway CeO Flintfox international
www.flintfox.com/trm
N e a r l y e v e r y C P G m a n u f a c -
turer would tell you that a closed loop TPM
solution is important to effectively create profitable promotions and manage trade spend dollars. That same manufacturer would also likely say that a robust CRM solution is vital to managing the selling and collaborative relationship across the supply chain. TPM and CRM solutions a re o f ten v iewed as disparate entities that do not share the same data sets. Manufacturers frequently use a TPM solution as a “behind the scenes” tool in order to track trade spend liability and prevent spurious deductions. CRM tools may be used to manage contacts, track potential leads and opportunities, as well as handle service and product complaints.
In reality, TPM and CRM solutions not only function on the same data sets, such as accounts, products and invoiced orders, but also utilize many of the same KPI’s such as gross and net profit; estimates vs. actuals; period vs.
period analysis, etc. CRM specific marketing campaigns should flow right into TPM deals. Configurable, real-time trade spend metrics should be visible in account dashboards inside CRM. TPM solutions should not be simply used to fight your retailers. Rather, TPM solutions should work in concert with
CRM systems to enhance profits and sales for both manufacturers and retailers.
Large manufacturers may be able to afford the training, software, and human expertise required to run separate CRM, ERP, TPM, BI and sales forecasting systems. Small and medium-sized (SMB) companies are o f ten constrained by a lack of
resources. For SMB companies, the benefit of TPM inside CRM is especially compelling. Seamless ly embedding TPM ins ide CRM provides a single, fully integrated, revenue management solution. The result? Sales professionals not only work more efficiently, but have better visibil ity and insight into their clients, resulting in a more responsive and profitable trade promotion lifecycle.
2 8 CGT | july/august 2014 | CoNSuMERGoodS.CoM
CGT Straight TalkR E A L I T YM Y T H
Even though trade Promotion Management (tPM) and Customer
Relationship Management (CRM) tools are accessed by many of the same sales, financial, and executive personnel, they are separate business processes with
unique challenges and reporting requirements and should be
handled separately.
“TPM solutions should work
in concert with CRM systems
to enhance profits and sales
for both manufacturers
and retailers.”
28.ST_Flintfox_v9out.indd 28 8/12/14 3:33 PM
TPM RealiTy CheCk
Radha R EVP and Industry head, Retail, CPG and Manufacturing Mindtree
www.mindtree.com
We’re constantly reminded that the
age of “big data” is upon us, yet many CPGs
are doing little to integrate the deluge of data available to them.
With limited tools come limited insights, leading to trade promo-tion plans created without knowledge of past perfor-mance or reliable indica-tors of future success.
But all the talk about big data isn’t just wishful think-ing — its time is truly here. With robust tools for trade promotion optimization (TPO) and trade promotion analytics (TPA), consumer goods companies can harness the wealth of data available and use it to make fast, smart decisions that drive profitable growth.
A unified data store can remove guesswork and help CPGs plan their trade spend correctly from the start, significantly speed up their abil-ity to react to changes in the marketplace, and help them cut through promotional “noise” and reach individual shoppers.
For one thing, smart TPO/TPA tools can put the power of real-time data to use company-
wide — including into handheld devices that sales reps can use during store visits — for pro-motion compliance audits, to improve predict-ability of success, drive effective negotiations, and provide a single integrated view of data across Customer Relationship Management/Trade Promotion Management and other back-
end systems.But this kind of frame-
work can also be further layered with application programming interfaces that provide actionable 360-degree information about shoppers. Using consumer data from multi-ple sources (social, demo-graphic and transactional), custom-built algorithms
based on specific business goals can allow CPGs to present targeted offers to shoppers at various touch points, including while they are inside a retail store.
This new capability — context aware of-fers — can revitalize retail selling because it can reach the individual shopper right where the decision is being made, in real time, with offers that are interesting to that person. Rather than “noise,” they will hear you loud and clear.
2 9 CGT | july/august 2014 | COnsUMeRGOOds.COM
CGT Straight TalkR E A L I T YM Y T H
Cutting through the “noise” that individual shoppers experience is beyond the scope of trade promotions.
“smart TPO/TPA tools
can put the power
of real-time data to use
company-wide…”
29.ST_Mindtree_v4out.indd 29 8/12/14 3:34 PM
TPM RealiTy CheCk
Rick Hall SVP, Trade Promotions Nielsen
www.nielsen.com
While we all rec-ognize that pro-
motional programs are a key element of the retail
landscape, there are differing views on the performance of these programs. To understand what really happens with pro-motions — how much they generate in sales and their ROI for both manufacturers and retailers — Nielsen has conducted the first com-prehensive market-wide promotional benchmark-ing study. Starting with the United States and ultimate-ly spreading to modern trade markets worldwide, we are looking at all trade promotion events, aligning them by category and chan-nel, and measuring their performance.
In the United States to date we have ana-lyzed 39 million promotions from the top 150 retailers. Our analysis has revealed a wide variation in performance results. Across near-ly every category, we have found the leaders (best-in-class) are generating profits from their promotions. In a typical category as many as 90 percent of promotions are losing money,
and the worst 20 percent do not even return enough sales to make up for the discounts passed on to the consumer. As a result, the best-in-class performers generate as much as 25 percent profit on their trade investment while the average performers lose 50 percent of their spend. This represents an enormous
impact on the bottom-line.While there are clearly
winners and losers in trade marketing, there is not a one-size-fits-all strategy for success. Depending on the unique loyalty of the products, the category’s responsiveness to promo-tions and overall trends in the category, what works in one category does not necessarily work in an-other. A clear difference
is the best-in-class providers are conducting broad-based program analysis, developing trade strategies based on that analysis, and then successfully driving these strategies through execution with their retail partners.
To find out where you stand relative to your peers, contact your local Nielsen ana-lytics team or [email protected].
3 0 cgT | july/august 2014 | cONSUmeRgOODS.cOm
CGT Straight TalkR E A L I T YM Y T H
Promotions are just the cost of doing business. I really do not have any control over how much
I spend or the return I am getting.
“The best-in-class
performers generate
as much as 25 percent
profit on their trade
investment.”
30.ST_Nielsen_v4out.indd 30 8/12/14 3:35 PM
TPM RealiTy CheCk
Rob YoRk President Relational Solutions, Inc.
www.relationalsolutions.com
While syndicated data suppliers pro-
vide valuable data and insights into consumer
behavior, it is only one of sev-eral sources required in order to understand true trade promotion ROI. The problem with using only syndicated data is that at best it will yield trade promotion ROI at retail, not at the manufac-turer. Let me explain using a simple example.
Let’s say a retailer forward buys 700 units shipped at a cost to retailer of $2.00 for a total cost to retail of $1,400 (Retail Cost). The consumption quantity during the hypothetical promotion period is 500 units. Thus consumption cost is $1,000 (500 units x $2.00). The list price to consumer is $4.50 but the promoted price is $3.75. Thus, total consumption dollars on pro-motion is $1,875 = 500 units x $3.75 promo price (promo dollars). Cost of Goods Sold (COGS) is $1,000 and trade spend is $500.
Using only syndicated data, the ROI at re-tail is 87.5% ($1,875 promo dollars - $1,000
consumption cost/ $1,000 consumption cost). This is inaccurate. The true ROI at retail is only 33.93% ($1,875 promo dollars - $1,400 retail cost/ $1,400 retail cost).
Likewise, internal ROI for the CG manu-facturer cannot be calculated at all using only syndicated data because both shipments
and cost-of-goods-sold are required. Thus, the internal ROI of the pro-motion is -6.67%! This is calculated: (Retail Cost-(COGS+Trade Spend))/(COGS+Trade Spend) or ($1,400-($1,000+$500))/($1,000+$500).
As you can see in this example, using only syn-dicated data yields wildly inaccurate results and in-ternal ROI cannot be mea-sured at all. To truly have
effective joint business planning sessions (JBPS) with retailers, shipments, COGS and trade spend dollars are required to accurately calculate ROI for both the retailer and manu-facturer. In addition, Relational Solutions recommends aligning tactics to the actual consumer event at retail to gain even greater accuracy.
3 1 CGT | july/august 2014 | COnSUmeRGOOdS.COm
CGT Straight TalkR E A L I T YM Y T H
the measurement of trade spend ROI is easy because
it only requires consumption and baseline data from
syndicated data suppliers such as IRI
and Nielsen.
“Using only syndicated
data yields wildly
inaccurate results and
internal ROI cannot
be measured at all.“
31.ST_RelationalSolutions_v4out.indd 31 8/12/14 3:36 PM
TPM RealiTy CheCk
Rajesh WR solution Lead - sales & Marketing Consumer Packaged Goods
Tata Consultancy services Limited
www.tcs.com/consumerproducts
A well-defined TPM system is
equally relevant and pivotal for tier 2 and 3
CPG manufacturers as it is to a large manufacturer.
In the CPG space, with the low cost of switching between products, very often con-sumers end up buying products based on Retailer Promotional Execution. The intrusion of private label products from retailers poses a serious threat resulting in a reduction of the shelf space and the resources available for CPG brands. ‘Winning at the shelf’ holds the key for CPG brands to grow and outperform the competition. Most of the large manufactur-ers have countered these challenges by adopt-ing suitable TPM systems and are making headway with advanced promotion systems such as predictive and prescriptive analytics for trade promotions.
Given this situation, mid-sized manufactur-ers have to compete with both large manufac-turers and private labels at the store shelf to gain the consumer’s mind share. Without a suitable TPM system in place, it is difficult to reduce the unexpected deductions, monitor retailer promotion compliance, follow indus-try best practices and implement one version of truth in the planning and decision-making
process. This would result in widening of the already existing gap between them and the large players in the trade space.
The two major barriers, for mid-sized manu-facturers, to adopt a TPM system are ‘Cost of Im-plementation’ and ‘Organizational Readiness ’.
They can overcome the cost barrier by capi-talizing on SaaS-based TPM solutions avail-able on a pay per use basis, which reduces the cost of implementation substantially. This gives them an opportunity to try out the TPM system and continue using this system only if they find it beneficial.
Organizations may conduct an internal readiness assessment to understand the current process maturity, ascertain the com-plexity of implementation and reluctance to change the entrenched behaviors in evolving a roadmap for implementing a TPM solution.
On overcoming the initial barriers and adopting the TPM systems, an organization can move from an operational TPM system to optimizing trade investments by implement-ing advanced analytical capabilities that drive insights to action.
Implementing a TPM system is just the be-ginning in managing the trade investments scientifically and benefits outweigh cost and internal challenges that organiza-tions need to overcome.
Artwork provided. Please do not recreate.
Date : 31 I 01 I 2007Title : Tata and TCS Marks - Stacked with TaglineDesign Magger : Gargi SharmaProject Co- ordinator : Vishal JhunjhunwalaColour : Pantone 2427 CSoftware Formats : CorelDraw 11, Adobe Illustrator CS2
IMPORTANT : COLOURS USED TO CREATE THIS MECHANICAL ARE FOR VISUAL SUGGESTION ONLY. USE PANTONE COLOUR SWATCHES TO MATCH FOR CORRECT COLOURS. EVEN THOUGH THIS MECHANICAL HAS BEEN CHECKED FOR ACCURACY, PLEASE DOUBLE CHECK PRIOR TO RELEASE TO THE VENDOR. IF INSTRUCTIONS ARE FOUND DEFICIENT, PLEASE CONTACT corporate.o�[email protected]
Tata and TCS Marks - Stacled with TaglineFor use in 2D applications
Tata Consultancy Services Identity Guidelines I Jan 2007
Guide-sheet developed by Design Services, Corporate MarketingCopyright © 2007 Tata Consultancy Services Limited
X X
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.75X
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.5X
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3 2 CGT | july/august 2014 | COnSuMERGOOdS.COM
CGT Straight TalkR E A L I T YM Y T H
a well-defined tPM system is more relevant to only tier 1
(large) consumer packaged goods (CPg) manufacturers; whereas, for tier 2 and 3 (mid-sized) manufac-
turers, it does not make sense considering the cost of
implementation.
32.ST_TCS_v3out.indd 32 8/12/14 3:36 PM
