Software is becoming smarter, and consumer targeting capabilities are advancing alongside it. As a result, trade promotion management and optimization are becoming more complex, and competition between brands is intense. For modern CPG companies, implementing trade promotion optimization (TPO) software is a key business decision for competing effectively in this new reality.
TPO must include a combination of data harmonization, analytics and optimization algorithms, reporting tools, collaboration tools, and the right team to apply all of it. Therefore, it is essential to understand the function of each and how they work together to unlock your software's ultimate potential.
In this article, we’ll discuss what makes TPO software successful, as well as review its main components and how you can use them to build a successful trade promotion optimization model. In the process, you’ll save time and maximize the ROI for your trade dollars.
What makes TPO software successful?
Accurate, granular data
At the core of any good TPO model is good data. Garbage in, garbage out, after all. In this case, good data means accurate and granular information, from as many sources as are relevant to the business. Common sources include: sell-in and sell-through data (shipment and distributor) and sell-out data (POS data from syndicated suppliers such as Information Resources, AC Nielsen, Spins, and Numerator, retailer portals, etc.) This information is typically available to CPG companies through retailers, your internal systems, and syndicated data suppliers like IRI, Spins, and Nielsen.
Models should not be data constrained - they must be flexible enough to allow for any data source that is relevant to the brand, and smart enough to tell you if the impact is significant. For example, syndicated data in other countries might not contain specific promotional causal metrics available that we see in North America, so ensuring that models and TPO systems aren't built to only utilize specific tactics, ensures that more global utilization of the system and models is possible.
To make full use of this data, however, you will need to integrate it into your software using data harmonization techniques. This means that for a given product, in a given retailer (or wholesaler) on a given week, all data sources are harmonized to that level. To successfully and efficiently harmonize your data, it is a good idea to partner with a software company with experienced data experts who can guide you. Once your data harmonization is complete, the groundwork is laid for you to utilize the rest of your TPO solution's tools.
Robust analytics tools and optimization algorithms
TPO software's true power is its capability to model and analyze vast amounts of data to optimize trade promotions for maximum return. To do this, it uses machine learning algorithms powered by artificial intelligence to identify patterns in your data, simulate various trade promotion strategies, and determine how they might impact your sales. Then, it suggests the most effective course of action for promoting your products.
For TPO software to be helpful in the long term, it needs to quickly and easily scale its operations to fit your growing business needs. That means managing, optimizing, and executing many promotions simultaneously and harnessing automation to avoid a backlog of manual tasks. Additionally, the right software will have a user-friendly interface to allow CPG companies to quickly understand their evermore complex trade promotion programs and confidently make critical decisions. It is important that your TPO system can expose the output of data science in a way that users can understand, and interact with it.
The key components of a winning TPO model
1. Accurate historical data
Extensive, granular, and accurate historical sales data is the backbone of your TPO operation. That includes POS sales data (i.e., sales volume, price, velocity, distribution), promotion data (i.e., promotion type, price, duration) either from internal records or from causal data collected by syndicated suppliers, sell-in and sell-through data, and additional data like product inventory levels, industry-specific trackers, etc. The more plentiful and accurate your data sets are, the better analyses your TPO software can perform.
2. Real-time visibility
TPO software allows you to take your disjointed data sources and combine them into one source of truth from which to draw accurate conclusions. With a transparent, user-friendly interface, revenue growth, trade marketing, and sales planning professionals gain real-time visibility over the information they need when they need it. As a result, they can make more informed decisions to improve their trade promotion programs.
3. Machine learning and artificial intelligence
Machine learning (ML) algorithms and predictive artificial intelligence (AI) models are the brainpower behind TPO software. These tools analyze your data sets, identify patterns within them, and simulate the outcomes of different promotion strategies to predict which ones will be most effective for a given product or market.
4. Promotion optimization tools
TPO software is made to optimize your trade promotions and performs several functions toward that end. These include performing pre/post-event analyses and predictive scenario planning, producing accurate forecasts, and using advanced analytics to optimize your trade spend. The ability to quickly roll-up sales, profit and spend numbers across planning scenarios enables quick speed-to-action.
5. Robust reporting tools
Reports and visuals are crucial for understanding the results of your trade promotions. TPO software comes integrated with powerful reporting tools to help you create concise, visual, and interactive reports for you and your team. These reports not only help you make decisions but get buy-in from across your organization as well.
6. Built-in scalability
When creating a winning long-term TPO model, scalability is vital. As the scope of your trade promotions increases to accommodate new products and customers, the amount of work needed to manage their scales with it. TPO software helps you meet that challenge by giving your company the bandwidth to plan, execute, track, and optimize those additional promotional investments, as well as provide ease of collaboration as your team grows.
7. Executive Support and Buy-In
As with any change in business practice, support and encouragement from the top-line executives are critical. Changing to best business practices can be difficult to keep momentum going if the importance from top executives is not heard and seen by those who will be utilizing the solution. Ensuring effective training and processes are in place, when a solution such as this is implemented, is key to success in the long term.
8. Easy and effective communication and collaboration
Finally, a winning TPO model's most important components are powerful, easy-to-use communication and collaboration tools. Siloed internal teams are a problem for efficient trade promotion execution. They often lead to duplicate work, miscommunications, and human error. TPO software solves this by giving your RGM, sales planning and ops, field sales, finance, supply chain, and logistics, teams one single source of truth to work with.
Your customer relations will benefit, too. You can easily share your reports with key customers and integrate parts of your CRM system with your trade promotion system.
A recipe for success
Building a successful trade promotion optimization model takes a confluence of tools, expertise, and collaboration. You can level up your trade promotion program with that winning recipe. As a result, you can increase your company’s competitive capabilities and positively impact your bottom line for years to come.
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About the Writer
Shelley Fow is the Product Owner of TPO and RGM for CPGvision by PSignite. She works to ensure that the TPO and RGM solutions offered through CPGvision provide the most advanced optimization capabilities available. Shelley has over 30 years of experience in the consumer packaged goods industry working with trade promotion and price elasticity analysis on both the manufacturer and software side.