Our research tells us that growth is a priority for 93% of CEOs this year. For consumer goods companies, that means the battle for both shopper awareness and retailer shelf space just got more competitive.
For consumers, the current economy is forcing them to rethink purchase decisions based on price. At the store level, sustained revenue growth is a challenge, with retailers forcing the consumer goods (CG) industry to bear the burden of price increases. Given that squeeze, 90% of brands cannot simultaneously grow market share, category leadership, and profit, according to global consulting firm Bain. For CG brands, effective trade promotion management may be the key to achieving profitable growth this year.
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Trade promotion, a long-standing marketing strategy for CG companies, helps increase demand for a brand’s products in stores by offering retailers discounts, displays, and events that help them market items to consumers. It’s becoming increasingly important for brands to manage their trade promotion budgets and activities more efficiently so they see more bang for their buck.
CG companies spend up to 27% of their revenue funding trade promotions, making it the second largest profit-and-loss expense after cost of goods sold. The in-store merchandising and support can help CG brands maintain or improve the rate at which consumers reach for their products on the shelves, which in turn helps them secure additional shelf space from retailers. Trade spend – estimated at $500 billion per year – is on the rise, but 80% of CG executives are unhappy with the results. Data shows that up to 80% of promotion budgets fail to contribute to category growth.
Are you happy with your trade promotion results? If not, now is the time to upgrade your trade promotion management. Here are some ways to get started.
Toss out your manual spreadsheets
Most CG companies still use disconnected systems, manual spreadsheets, and siloed teams to fund, plan, and track massive trade promotion budgets. That’s why they often have no idea what’s working and what needs help. Add to this unclear forecasting methods that vary across multiple departments and it becomes impossible for all parties to reach a consensus on how much will be sold and, more importantly, how much should be spent.
Brands that have automated their trade promotion management systems on a single platform, however, can achieve impressive results:
- When they identify promotions that work well, they can redeploy funds to give those tactics additional support, which can increase revenue by 4%.
- If brands make trade promotion investments more effective, they can boost gross margin percentage by up to 500 base points (5%), which means more profit.
- Automating administrative tasks frees up 30% of an account manager’s hours so they have more time to spend with customers.
- When a brand links its deduction management processes to trade programs, it can reduce unidentified items and decrease write-offs by as much as 10%.
- Brands that ditch manual tools and redundant systems can decrease IT costs by up to 15%.
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Balance traditional and emerging channels
CG route-to-market strategies are complex. The rapid growth of new sales channels and additional points-of-sale mean brands have to balance their traditional in-store tactics with emerging digital strategies. CG companies that connect in-store and digital interactions provide a seamless user experience (for internal and external stakeholders), which helps them win at the shelf. Our research found that 55% of CG companies have made this a priority.
To make the most of trade dollars in both digital and physical channels, CG companies need to use both first-party and syndicated data when planning their trade promotion strategy. Without an integrated plan, brands may show gains with one customer and losses with another, reducing overall profitability. To get all stakeholders on the same page, CG brands need a single source of truth for planning, executing, and assessing trade promotions.
A connected digital front office helps manage customer business plans, joint business plans, and account plans to optimize spending and maximize revenue.
Optimize joint business planning
Retailers are responsible for over 90% of revenue for many CGs. Joint planning with retailers helps you know and grow your customers, define account metrics, and carry out forecasting and scenario planning with cross-functional teams. This helps you and your retailers achieve short-term tactical initiatives and long-term strategies.
True joint planning and real-time evaluation of results helps brands and retailers collaborate: You can pivot quickly to stay ahead of the competition, ensure return on investment (ROI), and maintain successful partnerships with retailers. Easy access to all information across the CG organization keeps retailers informed, which makes them more likely to continue to invest in their relationship with you.
A joint business-planning process lets brands establish oversight and responsibility across key stakeholders, so everyone is held accountable. This transparency also lets both retailers and CG brands identify issues, make the necessary changes, and measure the outcomes in real time.
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Empower your teams to make real-time decisions
In today’s digital economy, end customers, channel partners, and employees want the same personalization, responsiveness, and 24/7 engagement in business relationships that they’ve come to expect as consumers. When you use real-time data for planning and managing resources across channels, you make their jobs easier. With access to information such as shelf availability, planogram adherence, shopper touchpoints, buyer data, promotion results, and consumer engagement, they can take immediate — and informed — action when unexpected issues arise, quickly fixing the situation to everyone’s benefit.
Access to data saves time, effort, and money. Traditional trade management is labor-intensive, with 25% of a salesperson’s time spent on designing, implementing, and overseeing promotions. But when you connect and automate data, teams have more time for strategic planning. They can quickly carry out multiple simulations to find the best option, using artificial intelligence (AI) to forecast the baseline, predict uplift, and estimate volume and revenue against goals. Additionally, “what-if” analysis shows them how different scenarios will affect ROI, which can help during the joint business-planning phase.
When stakeholders have ready access to shared data, they can make inflight adjustments to help accounts and retailers achieve the goals set out in the joint business plan. These insights make sure the right products are stocked at the right shopper touchpoint, improving display quality, consumer engagement, and sales.
Casting wide nets with trade dollars while hoping something will catch does little to move business forward. CG companies need modern trade promotion management to see if their spend is yielding real value and ROI.
Trade planning should balance in-store and online promotion spend, using collaborative processes that give both CG brands and their retailers a win. Then, the profits achieved through revenue growth, improved margins, and reduced costs can be invested in product research and development to move the needle in other areas of the business, all with an eye on continued and profitable growth.
Get started on modern trade promotion management
Learn to optimize trade activity on a connected platform.