From TPM to TPO: Six Pillars for Success
Consumer goods companies spend a significant proportion of revenues on trade promotion, but returns on that investment can be disappointing.
Leaders in the industry are therefore considering trade promotion optimization (TPO) solutions, which take data from the TPM system to conduct post-event analytics that will generate performance-enhancing insights. The goal is a clear view of volume components such as baseline, promotional uplifts and sales cannibalization, enabling firms to improve the effectiveness and efficiency of their promotions and plan more accurately.
So, how do you build a successful TPO?
1. Invest in integration: A solid, widely used TPM system is essential if consumer goods brands are going to approach their trade promotion activities more strategically and with greater rigor. Without the crucial data and intelligence that it generates, a TPO solution will have nothing to work with and the investment will be wasted. With TPM in place, move on to TPO: The ideal option is a single system that integrates both, maximizing usability for all potential users and preventing the need to input data twice.
2. Build support for the shift: Moving to TPO represents a fundamental mind-set shift for trade promotion professionals who’ve long relied on instinct and will have to adjust to algorithmically generated forecasts and recommendations. Their successful adjustment will depend on the leadership and support of senior managers to drive through change and offer encouragement during the potentially uncomfortable transition period. This support and awareness will need to flow down through the organization and across different functions, so everyone understands that TPM systems now incorporate TPO functionality.
3. Invest in training: To ensure the business fully exploits TPO, training is key. Ideally, start with a proof-of-concept exercise to identify likely business scenarios where TPO will prove valuable given the data available; use these scenarios to train key users who then can share their learning with colleagues; finally, roll out the training to all other users. Training should be ongoing, with key users developing a “community of practice” to address issues as they come up.
4. Avoid garbage in-garbage out: Unless you properly assess the business's trade promotion data, you won’t know where you’re starting — and you’ll find it much harder to give meaningful information to your TPO solution. Assessing the data is a crucial task that is too often overlooked. When TPO solutions are fed inaccurate or incomplete data and “garbage” comes out the other end, people start to question the whole project.
Assess data by market, by product category and by account, based on customer and product requirements. Look for as many different data sources as possible, both internally and externally — richer data, ranging from macro-economic inputs to weather information, will deliver greater insight than internal sell-in data alone.
5. Test each model: Analytics modeling is an art as well as a science, with no single formula that guarantees success. There will be differences by market and industry; in some cases, there will be more (and better) data available than in others, and you may need to access third-party data. To get TPO solutions working effectively, it will be necessary to use a set of models, automatically testing and retesting until the best fit is identified; the fine-tuning will then continue to maximize accuracy.
6. Set realistic targets and measure progress: Set up your TPO solutions to achieve your business’s specific goals and targets. Your TPO activities should supplement and support TPM processes, not operate in isolation.
Measurement is key to the process. Measure what you’re achieving today with existing TPM activities, then add further gains as they’re generated by TPO activities. Results will vary from company to company and account to account, but measuring progress carefully will help build the case for moving to the next step. A shift from a 10% sales upli to 20%, say, makes the case for exploring further functionality.
Given the right data, TPO systems can help CPGs sell more volume, more profitably by helping planners more efficiently and effectively conduct account and promotion planning and post-event analysis.
Dr. Martin Burgard is Software Product Manager TPM/TPO at Accenture Solutions for Consumer Goods