In an article featured on CFO.com, Special Report: The Promise of Predictive Analytics, author Vincent Ryan states that "The ability to prove or disprove assumptions about the future is powerful." Typically, this is a capability that many Consumer Goods companies have lacked, especially in the area of trade promotion. With this limitation comes difficulty reacting slow growth or unstable market conditions that may warrant a reallocation of marketing budget to spur increased revenue, profit or volume.
However, until the integration of a revenue management approach to trade investment spurred by the availability to reliable analytics, shifting tactics was nothing more than educated guesses. The inclusion of a Trade Promotion Optimization solution as part of your revenue management approach will allow you to identify results-driven investment opportunities saving you both time and money. In this way, reallocation of marketing funds doesn't have to be an isolated financial occurrence, but rather part of the bigger trade investment strategy.
"The ability to prove or disprove assumptions about the future is powerful."
Furthermore, the CFO.com article states, “Advanced analytics can extract hidden patterns behind big and unstructured data, model hundreds of possible scenarios, and optimize the best action plans among all alternatives.” With Trade Promotion Optimization comes features such as constraint-based modeling, predictive manufacturer and retailer KPIs and customer and event optimization where you can discover the results of different promotional mixes before you ever take any real action. This, in turn, makes shifting budget demands much less unpredictable. With this comes an organizational shift with new expectations.
A TPO solution has three capabilities that can help position and CPG company to turn financial opportunity into profitable results:
1) Agility – With TPO’s smart predictions, you can adjust and change tactics quickly and successfully. TPO clearly and simply spells out the necessity for change, backing it with factual calculations using
three main capabilities – data harmonization, post-event analysis and optimized planning. Cleansed data is the basis of accuracy, while accurate analysis allows you to anticipate the need for change and optimized planning allows you to quickly determine the tactics that are right for this change. In another article on CFO.com, Reducing Uncertainty with Predictive Modeling, Shaheen Dil makes the claim that “Such foresight is critical in many aspects of business, as financial outcomes are often tied to both uncertainty and dependent events.” Eliminate the uncertainty and you have more freedom to change direction quickly.
2) Data-driven focus – Decision-making with TPO is far more informed due to the harmonization of disparate data points (including POS data, shipping and consumption rates) setting the foundation for accurate baselines for data analysis. This in turn creates a greater visibility into performance trends and a greater as a result greater trust in it by your staff. With this the conversation shifts
from being about what we think will happen to what the data says will happen. For a finance professional, dealing in results rather
than ambiguities is always preferable.
3) Collaborative problem solving – Without the ability to quantify results, cross-functional processes are often difficult to
communicate and add barriers between customer marketing and trade marketing groups. TPO aligns sales, marketing and finance by allowing all three to see the results of a previous promotion and therefore allow them to collaboratively work towards a goal based off historical and predictive data points. It also allows all teams to see what the best way to invest their marketing dollars to achieve the results that they want. With this open and accurate view, internal collaboration and trust comes to fruition.
"The inclusion of a Trade Promotion Optimization solution as part of your revenue management approach will allow you to identify results-driven investment opportunities saving you both time and money."
So, don't move forward with processes that result in lost opportunity. Another CFO.com article, Five Ways CFOs Can Implement Advanced Analytics, Viral Chawda says “In today’s disruptive business environment, it is critical for CFOs to detect and understand early signals of change and position their organizations to adapt.” CFOs who take control of new opportunities and create a unified and collaborative trade promotions foundation will ultimately see vast improvements and achieve a competitive advantage.
What to read next: Breathing New Life into Trade Marketing with Optimization