Sales & Marketing Study 2018: Trade Promotion Management

Taking the First Step 
It’s hard to imagine full commercial alignment anytime soon, however, when most companies still aren’t even doing a good job uniting shopper and trade.

Despite widespread acknowledgment of the need, some standard industry issues have kept this from happening. The first is the aforementioned siloed nature of business functions at most CGs. Trade is a sales activity, and shopper does have “marketing” in its name. Different departments and separate budgets don’t lend themselves to easy alignment. Another issue is the fact, despite the many similarities, the shopper and trade practices aren’t quite apples to apples — maybe more like oranges to tangerines, with somewhat different objectives and KPIs.

For one, the short-term analysis typically used to measure trade programs “isn’t going to be effective for shopper marketing,” DeSimone says. And the longer-term measurement needed to prove out shopper is often more difficult and, therefore, more expensive, to obtain. Marketing mix analysis tools, meanwhile, “only get at shopper a little bit” because of the narrow scope of most programs, he says.

At an even more basic level, many organizations haven’t even adopted good processes for managing shopper marketing itself, let alone take steps to align it. As a discipline, shopper hasn’t quite refined itself to the level of trade, partly because it’s a newer but also because it is nowhere near as big a cost center for CGs.

Trade promotion spending, the second largest line item at most consumer goods companies (after cost of goods sold), represents somewhere between 16% to 25% of gross sales. It’s been a necessary evil of the CG industry since the early 1970s.

With that much money at stake (about $500 billion worldwide, according to some estimates), it’s become imperative for CGs to track their spending as efficiently as possible. Not that the eff ort always works: For all the sophisticated management and optimization tools now available, a fair number of companies are still emailing spreadsheets from one department to another.

Shopper marketing as a distinct discipline of the CG organization isn’t as old (roughly 12 years, give or take), or as costly (about 2% of sales, according to Path to Purchase Institute). So the impetus to build systems and processes to manage shopper activity hasn’t been as strong.

But this obstacle, at least, is being addressed, thanks to the arrival of solutions that can help manage shopper. In addition to the aforementioned Foresight ROI, companies like Cierant and Shopperations are providing tools to help CGs gain greater transparency into their activity.

“There is room for us to be more like scientists and not just artists,” says Olga Yurovski, who left  her job as a shopper marketing director at what was then ConAgra Foods several years ago to launch Shopperations. “I always felt jealous about not having a system like the salespeople had. They were always so buttoned up with their financial reporting.”

The need is understood: According to the aforementioned CGT/Cierant study, 84% of companies believe that improving shopper marketing agility and cost-effectiveness has become more critical in the last two years.

Finding Common Ground
Aligning shopper and trade activity “is absolutely our goal” at Conagra Brands, according to Bob Waibel, the company’s senior director of shopper marketing. “We work very hard to make sure that we’re aligned with a holistic plan.”

The CG operates primarily as a field-based organization, with shopper marketers embedded within the customer sales teams at key accounts like Walmart and Kroger. So shopper isn’t so much a separate discipline as the bridge between brand and sales, a mechanism for “bringing the brand plan into the retail environment,” he explains.

Conagra currently uses separate tools to manage trade (Blacksmith Applications) and shopper (Shopperations) activity. So the next step will be to gain more detailed clarity by aligning the solutions “sooner, rather than later,” Waibel says. 

“We are reasonably well aligned with our funding,” with trade and shopper activity managed largely from the same budget, says John Clement, director of sales planning & innovation at Welch Foods. The two activities also are considered together during the annual planning process for retail accounts, he says.

“Some of it is just a function of our size and the way we’re set up. We don’t have a 10-person shopper marketing department that’s located somewhere else,” because shopper sits within the sales department, Clement notes. “We’re a team that’s working together consistently throughout the week” and in constant contact with field teams. “So we’re not disconnected.”

The company uses TPO software from T-Pro Solutions (and other tools) to keep the activity adequately aligned. “We’re getting better at it,” Clement says.

In general, then, the industry does seem to be heading in the right direction. Wayne Spencer, president of T-Pro Solutions, thinks shopper marketing management/ optimization tools will be adopted faster than their trade promotion counterparts were. “You need to merge the two silos to optimize the two investments,” he says. “It’s a natural progression.”

The first thing companies must do is “realize what the opportunity is,” says Rick Abens, chief executive officer and founder of Foresight ROI (and another ConAgra veteran). Abens believes that most CGs are working to align the two functions. “It’s just a matter of degree and the level of success.”

Increasingly, the level of overall success for CGs will depend on how well they do in aligning their commercial spend.