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There’s no doubt that trade promotion management systems are a huge investment, but they prove to have a significant payback for CPG companies in the long run. Quantifying payback, however, can be a difficult task, but is a key component of convincing key stakeholders in your organization to get on board.
While improving the ROI of your trade spend is the key driver, TPM systems can provide significant payback in other areas as well. This guide will provide structure and help quantify the ROI of implementing a TPM system as to generate a well-thought-out and compelling business case for TPM investment.
Throughout this blog, we’ll walk you through three key areas to consider in order to gain payback on the cost of the system seats and implementation.
Find the right TPM solution to help improve productivity
Trade promotion management in the CPG industry describes the process of budgeting, planning, reconciling, and analyzing a company's trade spending, with the aim of driving sales and profitability while increasing the productivity of sales and finance personnel.
A well-planned and executed trade promotion strategy helps CPG companies grow sales, improve profitability, and build relationships with their retail customers that translate into category growth and customer loyalty. That’s why it’s important to find a TPM solution that makes it easy for your brands to drive growth and systematically manage, adjust, and optimize your promotions. Below are a few ways you can build a business case to build consensus among key stakeholders who need to approve both the project and your choice of vendor.
Improve promotion effectiveness and efficiency
Most CPG companies spend between 10 and 20% of gross sales on trade promotions. That means even a small improvement in effectiveness and efficiency within your processes can generate a large payout. In fact, improvement in promotion ROI in year one is likely to fall in the 5-15% range, but will likely be higher if using modeled optimization programs.
To get executives on board with a trade promotion management system, you’ll have to make the case that it will help drive bottom and top-line growth. Having an automated process in place will ensure your team removes manual Excel work from their day-to-day so they can spend more time building customer relationships, selling, and taking action on intelligence generated from the system.
In every case we have seen, analyzing post-promotion ROI in itself leads to better decisions and more efficient trade spend. But employing a true optimization engine really ignites efficiency. If TPO is in your plan, make sure you account for this improved efficiency in you analysis!
The right TPM solution can also yield significant ROI by aligning all stakeholders within your organization on one source of truth. Building each customer's promotion calendar is a process that takes coordinated effort, from setting strategy and guardrails, understanding customer requirements, and building a plan that is an efficient sales driver - and one that demands planning can utilize to inform their process.
Building alignment through all stages of the process is a tricky task when using disjointed spreadsheets as a method of communication. It slows down the process, makes changes and approvals difficult to implement and track, and ultimately hampers the ability to get the right amount of product, to the right place, at the right time.
So the ROI from a promotion planning perspective is three-fold - improve the efficiency of trade spend, get accurate sales and spend projections and increase the productivity of the whole team.
When deduction management is manual and handled in disparate systems, invalid deductions tend to slip through. When you have the capabilities in place to validate deductions systematically and accurately, your investment in a TPM will pay for itself. Having in-app collaboration and communication speeds the process enables validation and provides an enclosed audit trail. This can add up to significant annual savings.
Improvements in promotion planning, reconciliation as well as strong data harmonization provide the finance team with accurate and up-to-date views on accrual liability and reduced AR aging. All key KPI metrics are important to key stakeholders.
For further efficiencies, look for a solution that incorporates auto-settlements functionality to also help your AR team improve productivity.
In our ever-changing marketplace, getting the right quantity of the right product in the right place at the right time can be a real challenge. Your TPx implementation will improve forecast accuracy, which will benefit sales by preventing out of stocks, improve costs by reducing inventory, and greatly enhace retailer relationships with better service levels!
Quantify your investment with a trade promotion ROI calculator
Quantifying all of the components above can be difficult. That’s why we built an ROI calculator to enable you to quickly build an effective and comprehensive business case.
Meet CPGvision: the best-in-class fully connected and integrated TPx and RGM solution suite for Consumer-Packaged Goods, built on the Salesforce platform. With the most advanced functionality in the industry, CPGvision equips you with real-life problem-solving applications for TPM, TPO, and RGM.
Your success is our success- CPGvision proudly provides a dedicated customer success team staffed with CPG industry professionals. Regardless of where you are in your RGM journey, you’ll be fully equipped with the solutions you need for profitable revenue growth. Contact us today to learn more.