How to Master Trade Promotion Management (TPM) Planning

Master the art of TPM planning with our guide. Learn how to bridge the gap between corporate strategy and sales, and drive your CPG company to success.

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Trade Promotion Management (TPM) Planning in the CPG Industry

In many of today’s consumer packaged goods (CPG) companies, high-level strategies for brands and product lines are developed with thoughtful and detailed analyses of historical data, financial objectives, consumer dynamics, and portfolio optimization. Each of these elements is critical for understanding market trends, identifying opportunities, and positioning the company for future success. 

Guidelines for trade promotion planning are distributed to the field sales team to utilize in building annual plans with retail customers. They detail promotional tactics, sales strategies, and the allocation of resources, aiming to meet sales targets and foster strong, collaborative relationships with retailers.

The importance of this process is unchallenged, as CPG companies continue to spend between 10-25% of gross sales on trade promotions, not to mention a significant effort of time and talent. But there are still challenges you can overcome to optimize both the investment in trade and the productivity of those involved in managing this investment.

Challenges in trade promotion management planning 

Once field sales are finished along with the initial annual planning process and the plans are entered into your trade promotion management (TPM) system (or Excel if your company is still managing trade in a more traditional way), a roll-up and a comparison of top-down vs bottom-up plans are completed and the following key questions are answered:

  • Do the plans meet your revenue goals?
  • Are you within your planned trade rate?
  • How far off strategy are some of the account plans veering?
  • Have you allotted sufficient time to revise and adapt your plan as needed?

The disconnect between top-down and account-level planning

It's not hard to see why there is often a disconnect between corporate strategy and trade planning. Key Account Managers are generally compensated for meeting revenue goals within a set trade spend. Sometimes key objectives include getting new items on the shelf, reducing overspends, etc. While the strategic objectives are generally shared in the form of calendars and guidelines, field sales teams often do not fully understand the “hows” and “whys” behind the objectives.

To complicate matters further, the systems that are utilized for financial planning and forecasting at the corporate level are typically disconnected from the TPM and planning systems utilized in the field.

This “top-down/bottom-up” disconnect does not have to be a reality, however. Let’s examine the principles you can use to ensure effective TPM planning.

Guiding principles for effective TPM planning

1. Communicate the “why”

Your brand has equity, positioning, and a strategy that makes sense. Brand equity is an asset, and your field team can’t be good stewards of the asset if they don’t fully understand what drives that equity. They need to understand why your brand is positioned the way it is, how the brand is supported in-market, and why it is an advantage to your retail partners to support the brand.

2. Localize financial objectives

Corporate objectives are meaningless to the Key Account Manager at Publix. The right system will automatically localize objectives down to a very granular level based on historical trends. Systematic localization is a good start, but it is just a start. You will also need the ability to apply local knowledge that is not evident in the data. A human element is a vital component of getting accurate, localized targets.

3. Incorporate realistic guardrails

If it doesn’t make sense to offer “buy one, get one free/half price” (BOGOs) on your brand, don’t allow it. A good TPM and trade promotion planning system will enable you to have robust, systematic guardrails that keep everyone on track. 

Some examples of guardrails include: 

  • Maximum discount
  • Maximum or minimum number of events
  • Price point minimums
  • Retail margin requirements

4. Link objectives to incentives

In a sales incentive environment, rewards must be linked to desired outcomes, not just sales targets but vital strategic objectives as well. Account profitability goals outside of event return on investments (ROIs) will require your salesperson to focus on the whole plan, not just the short-term promotional events. 

Having the right mix on the shelf, collaborating with customers to grow your brand, and minimizing competitive gains will all have positive impacts on the overall account profit and loss (P&L). Focusing on short-term trade events is important but over-relying on them rarely has a positive impact on your account profitability.

It’s important to align your organization around the following four key components of successful annual trade promotion planning.

4 key components of successful annual trade promotion planning

4 key components of successful annual trade promotion planning

1. Collect the right data

You need the right data to provide insights into the effectiveness of past promotions to help you identify opportunities for future promotions. Data can also be used to identify trends and patterns in consumer behavior that can inform your future promotional strategies. You need clean master data (products, accounts, prices), sell-in actuals (shipments), sell-through actuals (spin), and sell-out actuals (POS) to perform all the analytics and forecast models associated with successful account and trade promotion planning.

2. Follow a process

The right process will ensure that your promotions are executed efficiently and effectively. This includes defining promotion objectives, identifying target customers, developing promotional tactics, and monitoring performance, as described above.

3. Implement the right systems

The right systems and integrations will drive the fluidity and accuracy of your trade promotion planning process. Harmonized data fed into trade promotion management and optimization (TPx) systems develop optimized plans that are then fed into your demand planning. This alignment ensures that all stakeholders are consistently informed and can focus their energies on strategic development and execution rather than collating figures from disjointed systems.

4. Hire the right people

People with the right skillsets are vital to effective trade promotion planning, utilizing the data, and overseeing the processes and systems outlined above. Your finance teams will manage and allocate budgets, handle reconciliations, and ensure that financial accruals are accurate. Your sales teams will implement strategies during the account planning process and forecast volume and spend at local levels by utilizing the data and systems.

It is important to remember that your job isn’t finished once the annual trade promotion planning is complete; continuous monitoring and adjustment are necessary, particularly in today’s ever-changing environment. 

You should evaluate events as results with continuous KPI reporting and alerts, adjust programs in the future if possible, and continuously monitor and analyze them to build a vault of knowledge that can be used in the next cycle.

How can trade promotion management software help improve the process and results of trade promotion planning?

The right TPx system provides you with the analytics, data harmonization, transactional functionality, records, and AI-driven predictions required to help you make more informed decisions and create better plans faster.

Would you like to learn more about how a TPM system can enhance your trade promotion planning process? At CPGvision, we offer solutions tailored to your specific needs. Our advanced systems can help streamline your TPM planning process, leading to improved outcomes and increased profitability.

Get in touch with CPGvision or visit our website to learn more about how our solutions can help streamline your TPM planning process.

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