When left untreated, high blood pressure is the primary contributor to death from heart disease in the United States. This figure, however, is found at a time when there are highly effective drugs to lower blood pressure, which could sidestep the consequences completely. Despite this, people are often inclined to irrationally believe that “it will not happen to me,” and ignore the little signs of a major attack on the entire system. The same tendency occurs in the financial health of CPG companies: trade promotion spending, when left unmonitored, becomes the cause of margin erosion and financial instability. Just like the ‘silent killer,’ however, a highly effective solution exists in trade promotion analytics and optimization management.
In the past five years, great strides have been made in the ability to manage “Big Data” in a cloud environment for a reasonable cost to CPG manufacturers. Predictive analytics and constraint-based modeling solutions have evolved to be powerful tools to provide significant post-promotion insight and optimize future promotional spending at the customer level. This process can now be rolled-up through the hierarchy in a CPG manufacturer/retailer. As a result of this consolidated view, the process creates a platform to enable true collaborative “joint business planning” between the retailer and the manufacturer, that can break through mistrust that might have developed between trading partners over the past few decades.
The key to effective joint business planning is the ability to have all of the existing business intelligence necessary to mutually optimize the trade spend ‘de-siloized.’ For this to be effective, you should have at a minimum all shipment, spending, COG’s, POS data, competitive data, and consumer initiatives (i.e. FSI, Shopper marketing, digital media) in one real-time integrated database. This intelligence is combined with accurate baselines, lift coefficients, and predictive lift tables, and enables us to collaboratively manage the significant trade spend for a mutual return. Based on the conservative estimate that 30% of the annual $200+ billion trade spend in the U.S. is inefficient, there exists a $60+ billion opportunity gap. If retailers and manufacturers could come together to improve the efficiency of the spend by only 3%, both would mutually realize $1.8 billion ROI.
When unmonitored, your trade promotion spending could be the silent killer of your CPG company. To clear the clogged arteries that are stemming the margin erosion in the CPG sector, prescribe your company to a trade promotion optimization initiative that fits your needs. “Big Data” advancements, along with existing modeling systems have made it possible for CPG retailers and manufacturers to utilize Trade Promotion Optimization to increase ROI and stabilize their financial health.
What could a 3-5% return on your current trade spend mean for your company?
For more information, reach out to contact us.