Times are unprecedented. CPG companies need an unprecedented level of collaboration with retailers to continue to be relevant, and more importantly, grow. We’ve discussed how Private Label Threats to Shelf Space Require Stronger Retailer Collaboration, and now we’ll take a look at trade promotion solutions that can help you build stronger bonds between retailers and manufacturers.
How Can a Trade Promotion Solution Help?
Confusion abounds in the consumer goods and trade promotions space around software solutions. Today’s Consumer Product Goods (CPG) companies spend 15%–25% of revenue on trade promotions. It is critical to understand the difference in solutions and what's necessary to reduce these costs. In addition, these solutions can help drive better collaboration between retailers and manufacturers, with benefits for all.
Currently, many companies have, or are looking at getting, a Trade Promotion Management (TPM) solution. Those that have a TPM solution are starting to consider a Trade Promotion Optimization (TPO) solution. TPO solutions generally provide reports based on the information in the TPM software. What’s typically needed is a Trade Promotion Intelligence (TPI) or Trade Promotion Analytics (TPA) solution. TPI and TPA generally refer to the same thing – they both provide companies with an architecture that helps integrate data from outside their TPM systems.
What is preventing companies from implementing solutions? Obstacles for implementing a full TPM, TPI, TPO solution can include a company’s lack of understanding of the importance of an integrated infrastructure that provides an automated and easy-to-manage solution for integrating required data sources. Other obstacles include the lack of trading partner collaboration and a shortage of resources with analytic skills. However, these are obstacles that can be overcome.
What Are the Options?
How can CPG companies demonstrate their worth to retailers and drive better collaboration? One way is to demonstrate profitability through Joint Business Planning Sessions (JBPS) focusing on trade spend programs that will benefit both teams.
Normal trade promotion reports from TPM solutions do not necessarily deliver the full story to both the retailer and manufacturers. However, by integrating plan data with Cost of Goods Sold (COGS), shipments and Point of Sale (POS) data, we can more accurately determine profit for both the retailer and the manufacturer. The proper TPI architecture drives accuracy and, depending on the data integrated, Mindtree can help CPG companies calculate accuracy right down to the store and item level.
Below is a quick summary of what each solution offers.
TPM solutions help companies manage and control trade funds. They offer their own reports, but these reports are specific to the TPM solution and the data encapsulated in the solution. They do not provide reports that include data from outside the TPM system. However, there are benefits with a TPM solution. You can:
- Create a promotional strategy
- Develop promotional budgets and target pricing
- Determine product placement
- Control funds and authorize payments
- Use spreadsheets or TPM applications to track funds
- Focus on reducing deductions and managing budgets
- Run your promotions
TPI/TPA solutions take companies to the next level. TPI solutions provide insights that help you to understand promotions while they are underway and to analyze the results. The TPI infrastructure leverages your enterprise infrastructure, which has all your syndicated data and POS data integrated with your internal master data. With this infrastructure in place, your TPM solution becomes another data source where plan data can be fed into the enterprise infrastructure along with COGS, forecasts and shipment information. Your TPI solution should be implemented before a TPO solution. A TPI solution often provides about 80% of what companies are looking for in a TPO solution. Benefits of a TPI solution include the following:
- Provides store-level analysis
- Automates the integration of data sources including POS, syndicated, plan, COGS and forecasts
- Provides return on investment (ROI) visibility and analysis capabilities
- Understands lift and cannibalization
- Shows competitor impact
- Leverages POS, shipments and syndicated data
- Requires less time integrating data, and uses more time analyzing data
- Allows for historical analysis
- Provides consistency in reporting and applied business rules
- Has some level of predictive analytics
- Analyzes promotion effectiveness and makes adjustments to maximize promotional profits
TPO solutions leverage the enterprise demand signal repository and/or data warehouse infrastructure. This infrastructure uses the knowledge gleaned from TPI to take your learnings to the next level and perform predictive analytics and machine learning. With these new, predictive insights, you can correct and modify plans to truly optimize trade. Benefits of a TPO solution include the following:
- “What-if” analysis of trade scenarios for predictive analysis
- Ability to incorporate new tactics
- Pre-event and post-event what-if analysis
- Causal analysis
- An integrated platform for collaborative planning between retailer and manufacturer
- Aligns shopper behavior and loyalty integration
- Machine learning
Start by getting the underlying architecture in place. We believe companies should be able to integrate a few key POS and syndicated data sources in a few months, and that these data sources will begin providing value to retail teams and executives in a short period. When you see the benefits from this initial integration, it’s easy to justify the integration of other retail data sources. With key retailers integrated, you can begin integrating plan data along with COGS to start providing new trade insights.
To start with this architecture, Mindtree provides an “Architecture Review” and “Trade Roadmap.” We review your existing infrastructure as well as business users’ current and required analytic needs, and put together a go-forward plan to help you accomplish both the short- and long-term goals of the business.
About the author
Janet Ann Dorenkott
Janet Dorenkott is co-founder of Relational Solutions, Inc a Mindtree Company. She founded RSI in January of 1996 and was the acting COO and VP of Sales. Relational Solutions specialized in data integration, business intelligence, analytics, data science and big data for their clients. Prior to founding RSI, Janet worked for the business intelligence group of Sybase and was responsible for business development at Network General. Janet has been a contributing author in the Shopper Technology Institute and has been published in four of their books. She and her company have had published success stories in DM Review, B-eye Network, Consumer Good’s Technology News and others. Her company has been involved in over 200 data integration and analytics projects including for Energizer, Chrysler, Chase Manhattan Bank, Xerox, Timken Industries, GlaxoSmithKline and Well’s Enterprises. Janet is also a member of the “Brain Trust Panelist” for “Retailwire” and manages of “The Demand Signal Repository Institute” on LinkedIn.