In part 1 of this two-part series, we identified some of the common struggles of trade promotion practices that lead to under performance of trade investment, and what capabilities will help companies diagnose the areas that are the most in need of attention. In part 2, we move this insight to action by combining strategic priorities with powerful analytics functionality to improve efficiency, performance and sustainability.
Treatment – When I see how we are performing, what actions can I take to improve it?
After you’ve taken the necessary measures to diagnose the state of your trade investment, you can move on to the treatment stage where informed decision making guides the improvement of overall trade promotion health.
To begin, you’ll need predictive KPIs as part of what-if scenario planning. This is where your Trade Promotion Optimization solution takes the historical information from your post-event analysis combined with sophisticated predictive models to help you determine how to improve event performance. Unlike much of the planning done in Consumer Goods companies today, the ability to predictively calculate lift, ROI, forward buy and other key metrics of an event allow for planning to be aligned with your desired revenue, profit, or volume objectives. These what-if scenarios provide you with an optimal view of your trade spend by promoted group and total customer.
These scenarios should also provide optimal retailer KPIs that enable you to conduct productive joint business planning with your retail partners. Imagine the possibilities of bringing a retail partner an accurate visualization of past promotion performance and quantified retailer metrics of future promotions for an objective collaborative discussion around what is possible. When both retailer and manufacturer are on the same page the opportunity is maximized for mutual benefit.
"Unlike much of the planning done in Consumer Goods companies today,
the ability to predictively calculate lift, ROI, forward buy and other key metrics of an event
allow for planning to be aligned with your desired revenue, profit, or volume objectives."
Of course, things don’t always go exactly as planned and this necessitates a shift in approach. Using your TPO as an opportunity finder will eliminate the scrambling when a pivot is necessary not just to do so quickly, but also in identifying the best investment possibility. Optimizing these unexpected opportunities may mean the difference between recovery or continued struggles.
Preventative – How do I keep things healthy?
Once you’ve treated your trade investment, you’re not quite done. The final step is taking preventative measures so that your trade investment stays healthy.
The first phase in this stage is to set financial guardrails, which will define constraints for future plans, thus eliminating the unsuccessful guess-and-check method. When your TPO can apply constraints such as ‘never promote these products together’ or ‘minimum retailer profitability to a calendar plan,’ the predictive outcomes are more aligned with the promotional conditions and more likely to be approved and perform as predicted. This protects the investment by eliminating plan revisions due to internal conflicts or conflicts with retailers.
"Using your TPO as an opportunity finder will eliminate the scrambling when a pivot is necessary
not just to do so quickly, but also in identifying the best investment possibility."
This then leads to the next phase which is Optimization. The defining characteristic in a TPO solution is applying the defined constraints with the predictive models to calculate the optimal event or promotional mix for a product or product group, once again eliminating guess-and-check methods that hurt your company’s performance. This prescriptive analytical approach is the true combination of organizational strategic planning mixed with mathematical modeling to optimize execution.
When assessing your trade investment, keep in mind that it is too large of an investment for CPG companies to leave up to chance. But as you embrace the sophisticated intelligence gained with analytics, taking a holistic approach to managing your trade program will allow for informed, data-driven decisions that position your company for growth. And those companies who neglect the health of their trade programs can expect dwindling results and are risking a costly misstep that may be impossible to recover from.
What to read next: How to Keep Your Business in Shape with Analytics