The Future of Trade Promotion
When TPM was still in its infancy back in 2006, Forrester Research reported, “Many consumer products companies are struggling with how to track, report and execute trade promotions effectively internally and … need to master that before figuring out how to manage it with their channel partners. Adding to that is a fundamental question of who owns the money. That makes TPM an extremely difficult conversation for retailers and manufacturers to have.”
Fast-forward to 2019, and not much has changed. Trade promotion is still a very difficult process to manage. So what does the future of trade promotion look like?
First off, “It’s no longer cool to call it TPM,” according to Blue Buffalo’s Gamage. The more in-the-moment practice is revenue growth management, which “encompasses more than just trade” and will be a “highly integrated process and system,” he says. [Editor’s note: See Path to Purchase IQ’s August issue for more on RGM.]
Elsewhere, some companies are infusing TPM into their supply chains and other business functions to do a better job getting product to the right place at the right time. That trend will continue to grow, Gamage predicts.
“Advanced analytics, supported by efficient data integration and machine learning capabilities, can really facilitate CPG companies rolling out revenue management best practices at scale,” adds UpClear’s Soudee. “The ability to quickly establish data connections is key to building fresh insights and communicating them across the organization.”
As for the future of trade promotion, Soudee predicts that the design and execution of marketing initiatives overall will evolve. “Drivers of successful promotions and marketing activities will become more and more related to penetration [mental and physical availability] rather than brand awareness or ‘trade up’ mechanics,” he says. “With the growth of online channels and the ability of manufacturers to directly reach consumers with personalized offers (thanks to AI), trade activities will become less and less relevant — shifting the execution from the store to the consumer.”
“It is likely AI/machine learning for TPM systems will be available sooner (in the next few years),” says that anonymous household products company VP. He also envisions voice-activated commands; requesting scenarios to maximize a prescribed metric (revenue, incremental sales, ROI); and automated systems that optimize products, time periods, competitive recommendations, brand/category impacts, consumer impact and potential ROIs. “This could likely be maintained entirely in an ERP [enterprise resource planning] system,” he predicts.
The omnichannel marketplace also demands change, suggests Rich Products’ Joiner. “It will probably start to include all spending to drive sales — marketing, warehousing, shipping — as well as traditional trade expenses,” he says. And while it may not be on the horizon just yet, “from what we have seen in our search for a new tool, AI and machine learning with forecasting and promotion optimization is something that would be game-changing,” he says.
“Trade spending will be managed through an integrated content management system that blends personalization, A/B testing and automation to allow a much more segmented view of personalized promotions,” suggests Eversight’s Moran. “It will become ‘programmatic’ just like marketing has, and funding investments will dynamically move between ‘mass’ and ‘personalized’ offers.”
“We will need to capture and make sense of all sorts of digital promotions, loyalty programs, digital price matching, etc. It will need to be meaningfully segmented to retail accounts and consumers,” says Taylor. “Promotions will become smarter — but to do so, we’ll need to ingest large amounts of data, make sense of it, and segment it usefully. Ultimately, promotions should be close to real time and based on consumer needs.”
Finally, moving beyond isolated trade promotion planning to take a more integrated, strategic view of commercial investments is the ultimate goal for all practitioners.
And while it may have been coincidental that everyone interviewed for this report is currently working toward a new TPx solution, it seems more likely that many CPGs have realized the need to review their existing tools and strategies — whether that entails a simple refresh or a complete restart.
Whatever the case may be, it’s apparent that executives are assertively articulating their TPx wants and needs, and hoping solutions and service providers are taking note.