3 Mistakes CPG Companies Make When Planning Trade Promotions

Avoid common pitfalls in trade promotion planning with our guide. Learn how to optimize your strategies for increased ROI and market success.

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The trade promotion planning process can be fraught with challenges, especially if you are new to a particular channel, brand, or product category. Every retail customer has different needs, and every product requires a different strategy.

So, whether planning your first trade promotion or tweaking an established brand’s strategy, it is important to know the common pitfalls to avoid. To help with that, here are three mistakes new key account and channel managers often make when planning trade promotions and what you can do to avoid them.

1. Making Decisions Based on Tradition Instead of Data

Many CPG companies put their trade promotion planning on autopilot, running the same promotions year after year with no deep analysis to drive their decisions. If this sounds like your business, it is time to think about an overhaul.

Building a trade promotion plan using data-driven and predictive analytics can significantly improve your ROI and bottom line compared to plans driven by traditional or habitual approaches. To avoid the "autopilot" mistake, consider using the increasingly granular consumer sales data available today to support your trade promotion planning process. Here are several suggestions for how you might do this:

  1. Optimize your pricing: Having more accurate sales and promotion data helps you better understand the impact of different pricing schemes on consumer behavior. That knowledge allows you to set the most effective pricing strategy for both your everyday shelf and promotion events.
  2. Be nimble in your decision-making: Having regularly updated sales data available at the retailer, territory, or even store level lets you monitor promotion results in real-time. That way, you can make changes to the account plan throughout the year as actual sales data is incorporated into the system and you can assess what is working and efficient.
  3. Hold salespeople accountable: Having more accurate cost-per-incremental dollar calculations at the event level helps you identify which promotions are working and which are not. This knowledge is useful for keeping your salespeople accountable regarding how much ROI their trade promotions generate.

If you are new to trade promotion planning or have inherited a complex plan someone else created, you might be tempted to stick to the status quo. Avoid that mistake. While it takes time to become savvy at wielding the vast sales data available, doing so will ultimately pay off.

You might begin by accessing the data sources available to CPG manufacturers. Ideally, your TPM system will have harmonized data from your company's ERP system, point of sale (POS) data from Nielsen, IRI, or retailer portals, and relevant distributor data.

With this data at your fingertips, the next step is to learn how to analyze it. Research and study the best practices of industry professionals such as which KPIs should be tracked to build this skill.

Finally, use your analyses to plan compelling, data-driven trade promotion strategies that will get buy-in from your entire team. (If your TPx software has integrated AI and machine-learning-driven optimization tools, these can simplify the process and take your plan to the next level.)

If you make your trade promotion decisions in this manner, your ROI for trade spend will significantly improve along with your bottom line.

2. Ignoring the Competition

If you are a trade promotion manager, you make it your business to know which strategies best suit your brand and products. However, you are not marketing in a vacuum. Your competition will likely spend significant dollars on trade promotions that could put a wrench in your calculations. This means you need to keep current on what your competitors are doing and adjust your plans accordingly.

For example, say you plan to run a TPR on a product. When planning that promotion, you consult the historical data on past TPRs and learn that a $2 off TPR with a $100,000 budget generated a 20% increase in retail sales.

Seeing this prompts you to run the same TPR with the same budget. To your surprise, the resulting lift is only 5%. After digging into your POS data, you learn that several competitors were running TPRs at the same time as you. As a result, your event did not generate the expected lift.

This simple illustration shows how competitive trade promotions can adversely impact your sales forecasts and your profits by putting pressure on you to spend more (or offer deeper discounts) to stay competitive. Thus, keeping an eye on your competition is vital. 

Discuss the category promotion schedule with your buyer and negotiate the best possible strategy, for example, running your event a week before the peak season thus pre-empting the competition!

3. Treating all Promotions the Same

Another common mistake made by new trade promotion managers is not fully understanding the pros and cons of their programs. If that's the case with your business, you risk missing out on significant opportunities and wasting your trade budget.

For example, imagine a company that sells high-end, eco-friendly cleaning products decides to offer a buy-one-get-one-free promotion. Such a promotion might fail to generate more sales than a lower discounted program because the firm's customers are usually willing to pay higher prices for environmentally sustainable products and may not be interested in stocking up.

If this happens, you have wasted the funds needed for the deeper discount and lowered your ROI

Having predictive ROIs while you are planning will enable you to understand the impact different promotional strategies are expected to have. The financials are a key piece of the puzzle but you will also want to understand which promotions are on-brand for your products.

As seen in the example above, premium brands carry a much greater incentive to preserve their perceived "high quality," so running a deep discount promotion may be counterproductive. In the same vein, running an expensive end-cap display promotion might be the wrong call for a low-priced value brand.

Knowing how each promotion type works and if it fits your brand will make your trade promotion planning process much easier and more effective and improve your outcomes.

CPGvision: The Ideal Trade Promotion Planning Partner

CPGvision is the best-in-class, fully connected, and integrated TPM 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. Wherever you are in your RGM journey, we can equip you with the solutions required for profitable revenue growth.

Contact us today to learn about our trade promotion management software.

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