Trade Promotion Management Solutions Guide 2018
Download the attached file below to view an accompanying chart of 22 solution providers for trade promotion management and optimization.
Q1: How has the move to omnichannel retailing changed traditional trade promotion management practices at consumer goods companies?
MURPHY: Changes have been significant for organizations succeeding well with their omnichannel strategy, although we still expect it to take more time before there is a maturity of approach across geographies and sectors — particularly within the food and beverage space. The most notable changes we’ve observed have been an increased focus on trade investments and pricing strategies to appeal to the e-consumer and shopper, as well as increased marketing spend within the e-commerce channel.
CARTWRIGHT: Our clients are seeing the anticipated shift from point-of-sale display activity to online-exclusive pricing incentives and cross-manufacturer bundling of associated products for volume incentives — like spaghetti with sauce. There’s a noticeable difference in relation to expanding the grocery cart. Products that are more often purchased via different channels are consolidating to one. As the grocery cart is now virtual and not physical, items that were often purchased as club packs in the club channel — like tissue, rolled products and other paper items — are now being purchased via the virtual grocery cart for convenience. Consumers are trading the bulk-pack pricing for the convenience of single or no-trip shopping. Coinciding with the shift to price-reduction tactics, event-specific digital couponing is giving rise to expanding traffic to the virtual retailer as well as expanding the virtual cart.
WIETECHA: The need for nuanced post-event analysis is more important than ever in our current omnichannel environment. Formulas with margin averages or estimates won’t do either. You should be getting down to your true profit. Deals that impact one another are critical assessment criteria in evaluating final post-event ROI. Customers want more dollars for more channel promotions these days. Unfortunately, the total size of the pie for CGs doesn’t seem to be increasing. They can’t afford to increase spend three-fold just because retailers want to add social, e-commerce and other omnichannel promotions into the mix. So, what can CGs afford to do and, more importantly, what should they choose to do? This is where intelligent TPM/O comes in. Choose promotions that work. End promotions that don’t deliver win/win results. Make sure you have the right technology partners to help deliver reliable performance assessments and make more profitable decisions going forward.
PENSA: I think omnichannel retailing has forced companies to really re-think their go-to-market strategies. The path to purchase is hardly a straight line anymore. Traditional opportunities such as store circulars and display programs are still important and still effective among certain customer sets, but there are new vehicles to integrate and measure. The TPM playbook manufacturers have relied upon for decades has to change. When it comes to Amazon, it’s impossible to manage that partnership using spreadsheets — there’s too much big data. Yet companies insist they can push a square peg through a round hole. Omnichannel retailing is forcing manufacturers to integrate digital and traditional promotions to fully understand ROI, but that’s a challenge if your company is still relying on spreadsheets. Consumers are tech-savvy, so I’m always baffled as to why so many CG manufacturers are slow to adopt technology.
SPENCER: It has placed increased pressure on developing fair and equitable promotions to meet the needs of both brick-and-mortar retailers and internet retailers. A one-week promotion at a brick-and-mortar retailer could take a much shorter or potentially longer period of time to deliver the same promotional financial liability to both retailer formats. Sophisticated, real-time post-event analysis solutions will be necessary to monitor and manage the equitability of these different promotion investments.
SOUDEE: Among positive impacts, CG companies can tailor promotions by channel, like single-unit purchases in convenience stores and bulk buys for home delivery. And growth in online retailing provides the opportunity for a wider range of products: more focused bespoke packs, trialing new items, and different or exclusive mechanics. Negatively, aligning activity across channels and managing trade investment has become more complex, with ever-increasing amounts of data. What’s more, online creates high visibility for pricing, easy reckoning of total spending and high comparability across retailers, so delivering a strong value message for shoppers is vital.
JOHNSON: Omnichannel retailing and mobile have disrupted what once was a very linear path to purchase, and there is now more transparency — price, content, reviews — than ever before. Our annual “Digital Divide” study found that more than 50% of all consumer transactions are now influenced somehow by digital. This is a much higher percentage than what’s purchased online, obviously, but it underscores the need for consistent brand messaging, aligned pricing and promotion strategies across channels, and an understanding of (and ways to mitigate) the unintended consequences of cross-channel everyday pricing or promotional pricing misalignments. Given the pace of algorithmic pricing updates in the online channel, TPM practices will need to be much more agile, dynamic and connected. Manufacturers that don’t get this right potentially risk the downward spiral of “responding to the algorithm,” while those that deploy their trade funding strategically can manage the conflict toward balanced customer profitability and healthy brand margins.
RICE: As the retailing environment continues to evolve, manufacturers will need to ensure that they have the processes and systems to support price and promotion strategy development, monitoring, and analysis. With these revenue management capabilities in place, manufacturers can keep their fingers on the pulse of every channel of business with clear sight not only into pricing and promotional spend, but into all activities and expenses down to a detailed customer P&L. A shift in volume, revenue and spend across channels is taking place, with some product categories experiencing a more accelerated pace than others. Managing this shift will be business as usual for those manufacturers that have put the right processes and systems in place.
ADAMS: Consumer goods manufacturers are getting closer to their consumers, driven by omnichannel opportunities. Specific channel data analysis, such as where purchase decisions are made and what drives them, will enable manufacturers to allocate trade spend where it will make the greatest impact on incremental volume and profit margin. Using this data to determine how to allocate the trade spend toward the consumer purchase-decision point (sell-out) will reduce the amount of funding eaten up by purchase-driven (sell-in) programming.
Q: Are TPM vendors helping CGs address these new challenges?
PENSA: Data is the new currency, and a TPM solution empowers CGs to manage, mine and analyze real-time data in one place. In today’s omnichannel landscape, retailers are under a lot of pressure to drive in-store traffic and optimize shelf space. Manufacturers armed with fact-based data and what-if scenarios derived from a TPM solution will be more successful at generating profitable collaborations with retailers. Manufacturers that start using data to personalize promotions down to the individual store level, versus running a blanketed promotion across all banners, will have a leg up on the competition. TPM solutions that are agile and in continuous development are purposefully designed to help manufacturers do just that. It’s about selling smarter. We’re trying to anticipate features and functionality that will help manufacturers manage digital and traditional activities.
SPENCER: It should be a top priority for a TPM/TPO vendor to provide post-event analysis intelligence in near real-time, a configurable report engine that can provide an accurate recap of all the retailer’s promotional offers as well as a nightly tracking of liability.
SOUDEE: On the positive side, vendors are providing the ability to consolidate and manage vast amounts of data to provide analysis and insights-driven decision-making, and giving CG companies the ability to manage bespoke hierarchies that allow planning, execution and post-event analysis across all routes to market. Negatively, first-generation TPM solutions are not providing the flexibility to manage in-depth promotional investment across the evolving omnichannel landscape; and a lack of clarity, from a poorly executed wider IT landscape and third-party data integration, can prevent companies from fully understanding the profitability and ROI of their trade investments.
JOHNSON: The technology space in this area is still emerging — in part because underlying data models in the tools historically have not been equipped to deal with truly dynamic consumer pricing or events at a more granular level. In an omnichannel world, retail stores or banners no longer define the parameters of a promotional event. There is instead a shift toward consumer-based offers that deliver more targeted value based on buying patterns and preferences. Tools that now are leveraging in-memory computing and are underpinned by larger, more granular data lakes are becoming better equipped to handle this business model. Now that these tools exist, the onus is quickly shifting to getting the fundamental design and implementation correct to support the nuances of selling in an omnichannel world and responding to ever-shifting requirements for funding and spending.
RICE: Not all TPM systems or vendors are the same. The traditional systems used merely for the internal tracking and payment of trade spend have long been overshadowed by a broader set of process and organizational requirements. A modern TPM solution must be part of a larger integrated business planning ecosystem for a manufacturer. That starts with better support of customer business planning through the integration of consumption data and the embedding of core capabilities such as TPO/predictive planning and post-event analysis into the system. This also includes the capabilities to scenario plan and analyze the business in real time to support a broader audience in revenue management as well as sales & operations planning. So, to answer the question, vendors with a modern TPM system will provide the needed capabilities to plan, execute and manage the shift in business across channels.
ADAMS: TPM vendors who want to stay viable must accommodate the omnichannel analytics and planning requirements of the business. By incorporating all pertinent information, like consumer takeaway, market/competitive, account sell-in and inventory/ pricing, TPM tools become broader in their purpose. The expectation is to enable CGs to develop and deliver omnichannel trade/customer programming that drives improved forecasting for the enterprise. Vendors of choice will be the ones that help users determine the impact of channel programs and deliver complete revenue management visibility to the brand.
MURPHY: As a collective, of course we are. But are we really doing enough? We’re challenging ourselves to provide more capabilities within our own solutions, with an aim toward helping our CG clients move further toward mutually beneficial, performance-based trade agreements with their channels. By helping to understand the real drivers of performance success, we can use these insights to refine future trade investments.
CARTWRIGHT: There hasn’t been an influx of development requests to address the challenges. What we’re seeing is essentially a shift in emphasis from one promotional tactic to another — a reduction in feature and display activity and an increase in pricing and digital couponing. We are anticipating, and already seeing, an increase in non-traditional CG customers outside of food, beverage, drug, and general merchandise requiring TPM software. There are more durable goods manufacturers entering into a competitive, virtual retailer go- to-market plan.
WIETECHA: I think the most helpful role a vendor can play is that of trusted industry advisor. Sure, the application has to stack up, but that’s table stakes; innovative functionality and planning tools are expected. CGs need to evaluate the industry expertise of software providers as critically as they evaluate the software functionality. Without trade expertise, you’re in a heap of trouble. This is where the real vendor value comes into play. Regardless of the promotional channels under scrutiny, an industry expert should be able to help navigate the post-promotion performance of a complicated landscape. The right vendor supports continued progress toward promotion optimization and arms CGs with the right strategic and financial data to go to bat for their brands when conversations are tough and customers are demanding.
Q: What must consumer goods companies do to move beyond isolated TPM and take a more integrated, more strategic view of their commercial investments? How can TPM vendors help them achieve this?
SPENCER: CGs need to incorporate the ability to accurately assess the financial investment results on their significant trade spend. To accomplish this aspect of best-in-class TPO, CGs must have accurate, tightly monitored baselines and lift coefficients (both historical and predictive). Next, they must be able to optimize future trade investments utilizing the power of constraint-based modeling for both individual merchandising tactics and a comprehensive annual customer plan.These constraints should include the ability to optimize to the retail partner’s objectives as well. These capabilities will enable truly collaborative joint business planning, resulting in maximized volume and profit for both parties.
SOUDEE: There are five key elements. CGs must deliver the means to drive cross-functional collaboration between sales, marketing and the revenue growth management teams; ensure that information and insights flows between these teams to break down functional silos; create a holistic revenue management landscape incorporating both internal and external metrics; develop truly aligned promotional plans designed to grow value and volume across the omnichannel landscape; and use data to bring insights and clarity that will empower fact-based decision-making.
JOHNSON: Much of the historic benefit of TPM tools has been standardization of the promotional process; from planning, to execution, to settlement, the tools streamlined workflow and ensured that all accounts were planned with the same framework. The next evolution of tools must also help users make better decisions: what product to promote, in which week (or hour) and with which tactics (and segments)? TPM tools must allow data to be merged with other sources (like brand marketing and social analytics) and used not only to standardize process and workflow, but also to enhance investment and promotion decisions across trade, consumer, shopper and A&P — and ultimately drive ROI. Considering all facets of demand stimulation may represent the next evolution of commercial capabilities in the broader marketing and trade space, and it likely will drive the next wave of financial benefits from advances in commercial analytics and systems.
RICE: Start with a review of the processes and systems you currently have in place. Understand the gaps between what is in place and what your desired end state is. Evaluate the best options for a modern TPM system that supports integrated business planning and revenue management. Look for an experienced vendor that knows the implementation challenges of integrated business planning.
ADAMS: Successful CGs will have access to accurate, historical channel data that will support the build-out of precise customer plans. Additionally, the manufacturer will have a clear set of defined decision points for each team member who is either planning, executing, settling or evaluating the customer plan. These insights will allow users to make timely adjustments within the plan cycle, improving the opportunity for reaching volume and profit goals. Establishing the right set of metrics, with the associated thresholds for success, allows users to focus on plan performance and foster competitive advantage for brands — all while growing their customer’s business.
MURPHY: Turning the strategic view into operational execution, and doing so with success, remains a challenge for many. While TPM vendors have historically been best at execution, it’s fair to say that the same principles of software design and architecture don’t necessarily apply for the evaluation and decision-making required around the strategic end of the business. In our experience, the CG companies that invest in education and tools combining trade investment strategy and the execution of traditional TPM into a single system are the ones who become the leaders in their field.
CARTWRIGHT: CGs should look toward an integrated S&OP process that lets them see the cause and effect of a plan through the entire supply chain — specifically, visibility into the relationship to the TPM forecast of truly incremental activity and the downstream effect on supply chain when these activities are not in the demand plan; also, the relationship between direct ship and indirect ship plan customers, aligning indirect sales to direct ship volume, for improved forecast accuracy (and aligning direct ship trade accruals to indirect spending). TPM vendors can help manufacturers by providing a simple user interface and universal integration API to a reporting system or third-party supply chain management system. For complete digital transformation, they must provide a multi-level, multi-dimensional, hierarchy capability for forecasting and executing an S&OP, and a flexible direct/indirect planning capability by tactic and multiple levels of a hierarchy dimension — all through a cloud-based, closed-loop, truly SaaS system.
WIETECHA: CGs need to make sure they’re integrating demand planning and trade planning. Many companies aren’t doing this today, due either to technology limitations or manual processes. Integrating all volume planning is a really smart tactical move to go beyond isolated TPM. Many businesses are trying to do TPO, but you can’t if you don’t first do TPM really well. Integration also prevents pitfalls due to over-forecasted volume in trade systems and under-forecasted volume in the demand plan. This can happen in attempts to get more trade dollars into a budget, and it has a negative ripple effect. Having all plans in sync for real-time inventory communication allows demand planning to know when trade promotions get moved around (and we know that timing changes frequently). This prevents costly issues with inventory and the mistiming of production. Vendors should be helping customers establish solid TPM foundations before launching into TPO territory.
PENSA: Working in silos is detrimental. It’s impossible to be strategic without understanding what impacted sales, volume, lift and brand loyalty. Manufacturers who integrate their TPM solution with shopper marketing and retail execution data can align insights and gain a comprehensive, 360-degree view of trade spending. Companies will find it faster and easier to determine compliance levels for an event and how it affected consumer conversion. TPM can no longer be an isolated point solution. Feeding more data points into the solution will bring more “aha” moments to the surface. Sales, marketing, field teams, finance — they all need to work from the same playbook, and a TPM solution helps make that a reality. Integrating data and tools will lead to streamlined processes, automation and accountability.
Download the attached file below to view an accompanying chart of 22 solution providers for trade promotion management and optimization.