Best TPM Practices Reap Big Rewards

Effective trade promotion boosts a product's success, but ensuring any particular campaign meets that goal can be a challenge. Leading-edge trade promotion managers overcome the considerable hurdles in two ways.

One, they amass accurate, near-real-time data that's readily accessible to key users, enabling salespeople and brokers to be as aggressive as possible with promotion dollars, since they don't have to hedge against budget uncertainties. Two, they analyze that data to ensure their dollars are being spent effectively.

They didn't get there overnight. Successful spenders have learned how to select and make effective use of trade promotion mana-gement software and services. For Barilla America and Eagle Family Foods, those hard-won best practices include: 4Know what you want the system to do before you buy.
4Understand the key measures that drive your business.
4Implement across business processes, and have a solid implementation plan.
4Make sure your system is easy to use for administrators.
4Work with good people.
4Ensure users are properly trained.
4Frequently confirm proper use, and let people know you're doing this.
4Incent people to continually enhance they way they use the system.

Focus on Effectiveness

For pasta maker Barilla, following these tenets has delivered real results. The company boasts one of the lowest deductible balances among consumer products manufacturers. "In the six years we've been using Adesso, while our business has more than doubled, our total dollars in deductions on a monthly basis has stayed pretty much the same," says Ed Schrass, VP Sales and Marketing for Barilla. Barilla also maintains a trade promotion management staff of two, compared to six to eight for similarly sized companies.

Key to the success of the Adesso Solutions application is its ease of use and Web-based access for administrators, which helped win brokers' attention when Barilla was starting to go national. That continues to help Barilla stay on budget and enable self-reimbursement and visibility. "We're able to reconcile spending versus budget, and it takes a lot of the workload off of administrators in the broker's office because all the work to clear deductions can be done online," Schrass explains.

The system automatically validates entered data against pre-set parameters, and flags exceptions. "That helps with post audit deductions," Schrass says. "We can go in quickly and understand the offer to the customer, and we're able to respond." The detail means Sarbanes-Oxley compliance is built in. Barilla downloads data into an in-house analysis tool. "We do customer-level P&Ls and analysis of trade promotion effectivness," he explains. Most of all, the Adesso application frees Barilla staff to focus on promotions themselves, not reconciling them. "It allows us to be aggressive in fielding trade funds," says Schrass. "It gives us absolute control over trade promotion budgets and absolute accountability, which gives us high confidence to be aggressive."

Smoother Planning = Effective Spend

Eagle Family Foods, maker of dry-grocery products such as Eagle Brand Sweetened Condensed Milk and Kava acid-neutralized coffee, is also applying best practices to trade promotion. Enhancing planning was the next frontier after gaining control of its accounting via Gelco TMS Enterprise. Its prior top-down/bottom-up planning process was spreadsheet-based.

"Typically after deductions came in, then [administrators] would put it in," says Harold Strunk, VP Sales for Eagle. "Therefore, we never had visibility to our true liability. We didn't know what was being offered to customers or any changes occurring on an on-going basis." Deductions cleared up to five to six months later. "We had a plan, but we didn't know our spend until after the plan."

The budgeting process itself didn't change much with implementation of a new Gelco planning solution for trade promotion and trade funds, which will be fully used beginning with fiscal 2006. But now data is entered once.

Administrators, account reps and area vice presidents can create plans right in the system, eliminating data entry lag time. Because plans are already there, it's easy to update, making it more likely that changes such as dropped commitments are recorded quickly and those funds made available for reallocation. "We get more efficiencies out of our dollars," says Strunk. Consolidating into one system also makes it clearer what pot of money is available to brokers to break out into deals customers want to see, which Strunk hopes will one day eliminate deductions.

With the tool's what-if scenarios, "we can put a plan into the system such as different retail price points and see what our trade spend total is on a case rate basis," says Strunk. Eagle has seen an 8 percent to 9 percent improvement in total case rate across its brands in fiscal 2005 over 2004, and plans another 5 percent to 8 percent this year. It also plans to use the tool's volume forecasting.

Not every successful trade pro-motion manager finds buying software the most efficient route. Use of spreadsheets has become untenable in the era of Sarbanes-Oxley and FASB regulations. That has made trade promotion service organizations a popular alternative, says Andy Hayman, CEO of CoAMS, a trade promotion management firm. Best practices honed across multiple clients, sophisticated tools, speed and flexibility are key advantages of this route, he notes. Such services "help increase efficiency and drive fact-based execution," as well as help optimize promotions. He estimates prior to Sarbanes-Oxley, 75 percent to 80 percent of CPG companies handled trade promotion manage--ment internally, and now 20 percent to 25 percent are outsourcing some part of it, and another 15 percent or so outsourcing all of it.