There’s a lot of confusion in the CPG, trade space these days. Many companies have, or are looking at getting, a TPM, Trade Promotion Management solution. Those that have a TPM solution are starting to consider TPO, Trade Promotion Optimization. But to do that would be to skip a very necessary step, TPI, Trade Promotion Intelligence.
Today’s consumer goods companies spend 15-25% of revenue on Trade Promotions. So it is critical to understand the difference and understand what's necessary in order to reduce those costs.
TPM solutions help companies manage & 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 would include data outside of the TPM. Benefits of a TPM solution include the following:
- They allow you to create a promotion strategy
- Develop promotional budgets and target pricing
- Determine Placement
- Controlling the funds & authorize payments
- Uses spreadsheets or TPM applications to track funds
- Focused on reducing deductions & managing budget
TPI takes TPM to the next level. Trade Promotion Intelligence provide insights to understand promotion results post and during promotion execution. A TPI infrastructure leverages an enterprise DSR which has all your syndicated data and point of sale 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 in to the enterprise infrastructure along with COGS, cost of goods sold, forecasts and shipment information. A TPI solution often provides about 80% of what people are looking for out of a TPO solution. Benefits of a TPI solution include the following:
- Provides Store level analysis
- Automates the integration of needed data sources including POS, syndicated, plan, COGS & forecasts
- Should be implemented before a TPO solution
- Provides ROI visibility & analysis capabilities
- Understands lift & cannibalization
- Shows competitor impact
- Leverages POS, shipments and syndicated data
- Architecture that allows less time integrating and more time analyzing
- Allows for historical analysis
- Provides consistency in reporting & applied business rules
- Has some level of predictive analytics
TPO takes TPI to the next level. Trade Promotion Intelligence leverages the enterprise DSR infrastructure and the knowledge gleaned from trade promotion intelligence to do predictive analytics. With these new, predictive insights companies can modify plans and correct ineffective plans. Benefits of a TPO include the following:
- What if analysis of trade scenarios for predictive analysis
- Ability to incorporate new tactics
- Pre-event & Post-event “what if” analysis
- Causal Analysis
- Provides an integrated platform for collaborative planning between retailer & Manufacturer
- Aligns shopper behavior & loyalty integration
- Requires Trade Promotion Intelligence (TPI) first!
Obstacles for implementing a full TPM, TPI, TPO Solution includes companies lack of understanding of the importance of an integrated infrastructure that provides an automated and easy to manage solution for integrating required data sources. Another obstacle includes lack of trading partner collaboration. Lastly, the shortage of resources with analytic skills.
Recommendation, start with getting the underlying architecture in place first. We believe companies should be able to integrate a few key, POS and syndicated data sources in a few months that will begin providing value to retail teams and executives in a short timeframe. Once benefits are seen from this initial integration, it’s easy to justify the integration of other retail data sources. With key retailers integrated, companies can begin integrating plan data along with COGS to start providing new trade insights.
To start with this architecture, Relational Solutions provides an “Architecture Review” and “Trade Roadmap.” These services can be combined. Many companies are strictly focused on the enterprise DSR. In this case, 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 short and long term needs of the business. Click here to request your free consultation.