Fear of disruption limits CPG abilities to stay competitive - PART 1 of 2

Topics: Analytics

This is part one of a two-part series on how CPG companies are hesitant to adopt seemingly disruptive trade promotion optimization tools limiting their growth and how, with the right trusted advisor, they can overcome their concerns to embrace the benefits (Part 2).

Historically, CPG manufacturers have led the way in terms of introducing disruptive innovations to the market. Swanson’s TV dinners. GoGo Squeeze Apple Sauce. As with most disruptive forces, these products were not new, but presented something familiar to customers in a new, healthier, or simpler way.

fear.pngIronically, CPG manufacturers, while being leaders in introducing disruption to the marketplace, are painfully hesitant to adopt technological innovations that may disrupt the “this is how we’ve always done it” mantras of their coporate culture. This is especially true in trade promotions and trade marketing where companies may be allocating upwards of 23% of their annual revenue for trade spending and eroding margins are becoming the norm.

Why the hesitation?

With good reason, CPG organizations are protective of their time and their investment. However, the need to protect has evolved into a fear of change. As a result, the consideration of a tool like Trade Promotion Optimization is seen as a threat. ”An innovation will get traction only if it helps people get something that they're already doing in their lives done better,” says Clayton Christensen, Harvard Business School Professor and authority on Disruptive Innovation.

What is there to fear?

1) Poor user adoption
In our experience implementing TPO solutions the number one objection from clients is “but my people won’t use it”. If new technology presents an obstacle to current practices than this absolutely is a valid argument. Again, the strength of successful disruptive innovations is that they have taken existing products or practices and made them simpler and more powerful.  Not new…better.

A trade promotion optimization tool that complicates the practices of your sales and marketing teams will fail to be adopted. We emphasize to our clients that our TPO is an extension of the work that they are already doing but eliminates much of the manual data entry and gives them added visibility and control. In this way, a sales team that is comfortable submitting their plans on spreadsheets can still do so, but has the added capability of viewing the ROI and KPIs of their planned promotions.

When seen as an extension of current practices, adoption rates are higher and training of more complex elements of the tool are easier. For example, one of the greatest strengths of our Trade Promotion Optimization tool is predictive scenario planning capability. While the ease to use this function requires little training and builds upon current industry practices, some organizations just are not ready to take this step. Because the tool is flexible and not restrictive they can still take advantage of the advanced analytical capabilities seeing overlays of consumption, spending, shipping, competitor performance and consumer marketing data and plan based on historical data.
Not new…better.

2) Long implementation period and high cost
Based on experience, many CPG companies assume that the potential gains from process simplification or informed decision making are not worth the lengthy, resource draining implementations that they have experienced with technologies such as ERPs and TPMs.

For a technology to capitalize on its disruptive nature, it needs to be a catalyst and not a deterrent. Catalysts spark a reaction quickly by adding to existing elements. In the case of a TPO Solution, this means companies need to ask:

  • Can I measure the implementation in weeks and not years?
  • Can I implement without additional demands on my IT?
  • Can I expect to see the return on my investment within the first year?

If the answer to these questions is yes and the functionality desired is present, then the solution is disruptive in evolving exiting trade promotion analysis and planning practices, not in creating chaos in the functionality of business.

3) “We are different”
Lastly, many CPG companies avoid disruptive technologies because they fear that the solution is not for them because “they are different”. Truthfully, every trade promotions and trade marketing department is slightly different, has their own ways of doing things and wants to see results in different ways. A TPO should adapt to these preferences.

Similarly, a truly beneficial Trade Promotion Optimization solution should be data agnostic without costly customizations. If the purpose to a TPO is to help optimize existing trade promotion, then any requirement of additional outside investment. That said, it should also have the flexibility to incorporate future enhancements or new data sources without reconfiguration.

In part 2 of this series, we will look at how overcoming these fears provides CPG companies with a distinct competitive advantage. Click here to read part 2!

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