Executive Insight
CGT: How has the amount of money spent on trade promotion changed over the last few years?
BOEVER: Both manufacturers and retailers have increased sophistication, leveraging information and technology to drive improved execution of trade promotions. In addition, the impact of EDLP (everyday low price) operators and alternative channels has affected brand strategies and tactics. Our goal is not to reduce trade spending, but to deliver efficiency through improved effectiveness.
HUGHES: Our amount spent as a percent of gross revenue remains steady. We are focused through our "Integrated Sales Management" initiative to improve spend effectiveness and efficiency. So the results have been similar dollars, better performance.
CGT: What is the largest obstacle to adopting technology in this area?
BOEVER: Cost and complexity are the largest obstacles to deploying effective TPM strategies. The technology providers need to keep the sophistication in the background while focusing on simplicity for the end user.
HUGHES: From conversations I have had with companies, I would say company culture is the most significant barrier. Trade fund managers may have a very clear vision and desire to improve their technology, but they may be wary about or unable to get management buy-in on "another IT project." The other significant issue is that the change is often much more about the business process change required to best utilize the new technology. As that business process change typically reaches well beyond just the trade promotion group, there can be a lot of additional resistance to the proposed changes.
O'SULLIVAN: The biggest inhibitor to technology in this area is complexity and the skill sets of those called on to build trade plans and evaluate performance. Trade spending over the years has taken many forms and become very complex. Different customers want to manage deductions or trade funds differently and the sales force, in a "can do" spirit, would make things happen for their customers. This has driven complexity in transactions that are very difficult to efficiently manage and plan in any available technology. The first step is bringing discipline to the trade spending process. People need to change the way that they do things to make effective use of the new tools. The next challenge is providing the sales force with a new skill set that includes an analytical mind set. This is in addition to all the customer relationship skills that have been the hallmark of a successful sales force. At the end of the day, companies need to drive efficiency and equip people in those organizations with the tools and the skills to work effectively.
CGT: In your opinion, have consumer goods companies become better at tracking trade spend and understanding its effectiveness? If not, how can they improve?
BOEVER: Yes, systems have improved and consumer goods companies have placed emphasis against it. In order to track the effectiveness, robust post event analysis is required. In addition, providing our sales executives and customers the ability to plan the business in a collaborative environment supported by predictive modeling capabilities enhances category, brand and event performance.
HUGHES: I can't speak to other companies, but we certainly have. And I know from watching all of the new purchasers of the Oracle Demantra Trade Promotion Management solution, a lot of companies are taking that step. Again, it is not about more spending, but better spending.
O'SULLIVAN: I believe that consumer goods companies have gotten better at tracking trade spending and understanding the effectiveness. Having gone after savings and efficiency in supply chain since the early 90's and after attacking direct and indirect procurement spending from the late 90's to today, there is little left of the low hanging fruit. Taking another look at where money is spent in big chunks, gross to net spending is a big number in consumer goods companies, and until recently, driving efficiency and effectiveness of that spend wasn't a focus. Going forward, it's not about spending less in GTN, but getting more for the same investment. At first, improvements came through putting together post analysis teams to evaluate performance of GTN spending. The solution is to build the post analysis parameters into the event planning process and review performance both before and after the event. That's the big opportunity. CG