Stay prepared from organizational readiness through to vendor selection, complete with a template specific to trade promotion management in CPG.
For CPG manufacturers, running a successful trade promotion event is the key to driving your bottom line. But without meaningful post-event evaluation, manufacturers tend to copy over their old plans and repeat the same events, whether that plan is driving efficient incremental sales or not.
Before running a new promotion, it’s key to narrow in on what you’re trying to achieve and why. From boosting sales for a specific product to improving brand visibility or loyalty, knowing your KPIs will ensure you stay on track.
There are multiple factors that can affect the success of your promotional events and it might be difficult to narrow down what exactly you should focus on. We’ve gathered the top 5KPIs to help you improve your trade performance. But first, it’s important to do a check on the foundational data feeding these KPIs:
Start with accurate base and uplift models
When using accurate base and uplift factors, you can:
- Get an accurate projection of planned sales
- Generate a holistic forecast – all consumption included, whether promotions exist or not
- Manipulate promotional plans and get an accurate impact on total planned sales
- Calculate ROI from trade events - ROI is a measure generally based on incremental sales. Accurate base and uplift are vital to accurate ROI.
Base sales are what you expect to sell if there was no trade promotion happening in-store. Uplift factors predict the incremental volume from planned promotions. The goal of trade promotions is to generate a high ratio of incremental sales relative to trade spending.
Base Sales=What you would expect to see in the absence of trade promotions
Incremental=Additional sales (over base) generated by in-store trade promotions
To understand the options for generating accurate baselines, you can access our blog for building a strong foundation of data here.
Trade promotion KPIs for meaningful post-event evaluation
Understanding post-event KPIs is the first step to improving trade performance. Here is a list of common ROI indicators and how to interpret and apply them.
Lift is a simple measurement of effectiveness that can be easily compared across events. Lift can be expressed in either dollars or units.
Incremental/Base Sales (expressed as a percent)
With little to no sales lift, your team risks wasting a significant amount of time and money.
2. Incremental sales
Incremental sales volume measures the increase in sales during a promotion. When evaluating promotions internally, it is helpful to express incremental dollars in terms of manufacturer revenue dollars as opposed to retail dollars.
3. Event Spend
This KPI looks at the total trade spend on an individual event as a portion of the total revenue generated. . This is a measure that can be helpful in using as a guardrail as well as giving you the ability to analyze events when you don’t have the base vs. incremental split (for non POS accounts). You can calculate event spend by dividing the following:
4. Cost per Incremental Dollar (CID)
CID is a simple yet powerful measurement that holds your salespeople accountable for what is in their control, how much they spend, and how much incremental sales their spend generates.
Trade Spend/Incremental revenue dollars
ROI takes post-evaluation one step further to help you understand the return on investment from a profit standpoint, and gives credit for generating INCREMENTAL sales. When evaluating trade event ROI, it should be noted that you are inherently encouraging more trade spend on items with higher profit margins, which may or may not be in line with the company’s goals.
ROI = PROFIT on incremental revenue/trade spend
Understanding post-event KPIs improves trade performance
With the proper post-event analytics, you can gain a 5-10% increase in efficiency across your promotions. Evaluating each spend is an important discipline that should be employed throughout the process. Use predictive analytics to evaluate planned ROI and compare to actuals after these data points are available. Hold the entire team accountable for ROI improvements and allow the team a little room to try different promotional strategies and tactics and see how they perform.
The best-in-class fully connected and integrated RGM solution suite for the CPG Industry.
Meet CPGvision: the best-in-class fully connected and integrated RGM solution suite for the CPG industry, 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, RGM, and beyond.
Your success is our success- CPGvision proudly provides a dedicated customer service 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. Learn how you can nimbly react to today’s ever-changing economic environment by downloading our resource here.