The majority of today’s vehicles have enhanced safety features that alert you when you make a driving decision that puts you in jeopardy. The logic is that to increase safety we must eliminate vulnerability, specifically in our blind spots. Businesses also have blind spots – areas of assumed stability that can quickly lead to susceptibility. For Consumer Goods companies, few blind spots are as great or as preventable as their trade marketing investment.
The reality is that the lack of intelligence, oversight and predictability (See also: Financial Leadership in the Age of Analytics) in this investment, that for most companies is reaching upwards of 23% of annual revenue, exposes companies to revenue-threatening risk. In fact, many CPG executives cannot answer basic questions about this significant investment such as:
- How much are we spending on trade promotions?
- How have our top 5 accounts contributing to revenue generation over the last 6 months?
- How will we invest differently in the next year to meet our company’s growth targets?
- How does our promotional plan account for new product innovation, distribution changes, and other disruptions?
- How does our promotional plan optimize our individual brands and our company portfolio?
While some of this detailed information may not be at the fingertips of all CPG executives, it should be easily accessible by others in the organization that quickly provide both information and recommendations based on data intelligence. This too is not present within most CPG companies.
The result is that many sales teams are simply repeating last year’s plans hoping for different results. Many finance and revenue management teams are left building investment strategies on hunches and historical inaccuracies. As such, the significant spending on in-store marketing that was intended to drive volume, improve incremental profit and be a foundational element of your company’s revenue growth strategy degrades into just another expense that people complain about, but never address.
This story is nothing new for most CPG companies facing increasing accountability of their spending and mounting pressure from retail partners to do more to “earn” their category share. However, it is the inability to leverage the available intelligence and technology that can leave organizations exposed to unanticipated competitive threats, lost market share and even potential and unwelcome acquisition.It is long overdue that CPG executives recognize the blind spot that they have with their trade investment and prioritize putting the pieces in place to solidify their organization’s strategic commitment to data-driven investments with quantified and predictable ROI. It is only with these actions where executives can not only prevent decisions that veer them into unforeseen danger, but also steer the organization towards more profitable destinations.