Transform your trade promotions! Learn the importance of effective deduction management and discover how technology can revolutionize your approach.
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I have spent a significant portion of my career using analytics to help smaller consumer goods brands compete with their resource-rich counterparts and compete successfully. In fact, this is how I came to work with CPGvision, assisting a smaller client who did, indeed, need to do a better job managing trade and validating deductions. Today, more than ever before, the use of technology is what provides an edge for smaller companies, especially as these brands are managing high growth. For these companies, adapting technology is a journey that evolves as the brand does.
The strength of emerging brands lies in their origins. They start with a unique and necessary offering that resonates with consumers. In the earliest stages, keeping up with growth is the key challenge, but operating in a smaller marketplace with fewer competitors provides a great start and typically enables the brand to earn strong consumer loyalty, albeit with a smaller base.
Loyal consumers allow for higher profit margins and easier targeting. A strong brand identity forms. This niche phase typically gains traction in specialty outlets, online, or in natural foods stores. While you are small, big competitors don’t typically take too much notice.
After some time, expansion becomes the goal. Aside from growing sales and profits, scaling up will likely lower overhead costs and mitigate the risks of fewer distribution points. However, expanding into higher-traffic, more mainstream outlets requires investment.
The expansion phase is also when the bigger brands take notice and work to ward off the competitive threat you pose. Scaling operations, managing expenses, and preserving your brand identity, differentiation and loyal customer base is a complex puzzle that must be solved.
The expansion phase is typically where we see consumer goods companies wake up to the fact that spreadsheet management of trade and consumer promotions is not cutting it. As the brand requires more investment, effective revenue growth management (RGM) is vital – and trade promotion management (TPM) is the place to begin simply because of the sheer magnitude of trade relative to other expense lines on the brand’s profit and loss (P&L).
This can be a scary concept for emerging brands. You have probably read about high-tech revenue growth management platforms that come with an equally high price tag. The largest consumer brands are deeply into these customized, AI-driven revenue growth management (RGM) systems – with investments rising into the millions.
Steps for Brand Growth and Corresponding Technology
So how do smaller, high-growth brands without multi-million-dollar technology budgets compete? With limited funds to invest in technology you must consider the following when choosing your vendors, vendors who can help you:
1) Focus on the biggest impact functions first
2) Leverage Artificial Intelligence
3) Gain industry knowledge and best practice advice
4) Start quickly
5) Enable a full journey, adding what you need when you are ready
Focus Your Start
We maintain that there are a few vital areas where out-of-the-box solutions or hybrid (a combination of out-of-the-box with some custom modeling) will unlock the revenue growth management you need – in an affordable solution. Let’s talk about the vital solution components for emerging brands.
- Deduction Management – The number one reason emerging brands come to us is for deduction management capabilities. Typically, these smaller brands are either automatically clearing nearly every deduction that comes in (without validation), or they are expending inordinate and valuable human resources on manual deduction management across multiple spreadsheets and communication streams. It’s simply no way to manage such a huge expense.
- Promotion Strategy – Emerging brands often feel lost as to what direction they should be giving field sales as their trade budgets expand. What are the right tactics, timing, frequency, and discount levels? They need to start with the ability to read post-promotion results to inform strategy.
- Transparency – Often, emerging brands do not even have an understanding of how trade funds are being spent. What promotions are running where? When account plans exist in a labyrinth of spreadsheets it is difficult to answer the most basic questions, let alone roll up the volume and spend forecast!
Leverage Artificial Intelligence
Yes, it’s all anyone talks about now but the role of artificial intelligence (AI) in leveling the playing field for smaller brands cannot be understated. You don’t have time to cull through reams of data from disparate sources. It is better to leverage a system based on harmonized data with an overlay of AI to point you in the right direction. Emerging brands can leverage solutions that give you a jump start with harmonized data and AI-driven analytics.
Gain Industry Knowledge and Best Practices
“A best practice is a method or technique that has been generally accepted as superior to other known alternatives because it often produces results that are superior to those achieved by other means or because it has become a standard way of doing things.”
Industry knowledge and best practices can and should be included in any technology for revenue growth management and trade promotion management. At CPGvision, we work with our clients to understand their current process, share best practices, and close the gap based on what is best for the business so that if best practice isn’t followed it is because there was a measured choice made – ensuring that clients are set up for future success. It’s important to understand the background of the vendor personnel who will be helping you with best practices – ensure they have business knowledge AND the technology experience to guide you.
You can’t afford multi-year, expense implementations, and there really is no need in today’s marketplace. Out of the box, configurable functionality is the way to go. What we see working best is a deep dive into a client’s current and desired state, and a full mapping of gaps. It’s not a flip-the-switch and you are ready, those solutions don’t typically last as companies grow. Taking advantage of the out-of-the-box as much as possible and configuring the rest is the way to gain a fully functioning solution with staying power. Don’t be talked into skimping on integrations either. At the very least you will want to integrate any RGM/TPM solution into your enterprise resource planning (ERP) and have the ability to integrate into other systems as you grow (demand planning is a key one!).
Enable a Full Future Journey
The proverbial crawl-walk-run approach is still employed by most emerging CPG companies. There are capabilities that you will want to add on as your business matures and you have mastered the basics already listed above. Some of these may include:
Trade Promotion Optimization (TPO) – Imagine an interactive, scenario planning capability where you work with the AI to generate better plans faster. TPO is a natural next step along your RGM journey. Look for AI-generated promotions with user interactivity and iteration capabilities. Strong guardrails are a must here, as you want to ensure that plans are realistic and acceptable both internally and to your retail customers.
Annual Operating Plan (AOP) – Automate your AOP process with top-down/bottom-up planning and target setting, collaborate across functions, and keep everyone on the same page.
Pricing – Understanding the implications of pricing actions before they occur is vital for emerging brands, especially in today’s volatile marketplace. Supply chain, cost of goods issues, commodity fluctuations, and changing competitive landscapes all require agility and adaptability, particularly in pricing. For emerging brands especially, price elasticity is likely to change as the product becomes more broadly available. Balancing consumer value with profitability is tricky, and in this case, science is better than gut!
Product Portfolio Management – As your brand expands, it is likely that the complexity of your product portfolio will expand as well. Having an RGM system that will enable you to manage your product portfolio at some point is a big plus!
Category Analytics and Optimization – Understanding your competitive landscape and the impacts on category growth are key components of internal RGM, as well as strengthening retail partnerships – another key area you may want to consider in the future.
Don’t get locked into a vendor with whom you won’t be able to grow; this will just leave you needing to restart the whole project – and probably sooner than you think.
Ready to take your brand to the next level?
At CPGvision, our expertise in RGM and TPM is designed to address the specific needs of high-growth brands in the consumer goods industry.
Many successful brands have already benefited from our practical solutions. We bring analytics, optimization, and strategic planning to help you compete effectively and grow sustainably in your market. Get in touch with our team and deliver success in the consumer goods sector.
Here at CPGvision, we have a tremendous amount of experience working with smaller and high-growth brands – explore a few case studies and learn their stories: