Discover the top 3 factors to consider when evaluating TPM solutions and learn how to maximize your trade promotion investment with CPGvision's blog.
Trade promotion management (TPM) & trade promotion optimization (TPO) in the CPG industry
The CPG industry is highly competitive, with many companies vying for market share and fighting for a place in consumers' shopping carts. CPG companies are challenged to differentiate their products and stand out in the market.
Generally, trade promotions are the second-largest line on the P&L, only behind COGS, underscoring the importance of maximizing the efficiency of this spend.
Best practices to maximize ROI with trade promotion management (TPM)
1. Let DATA, not tradition, drive your strategy
CPG is a dynamic industry. For example, the pandemic rocked supply chains in 2020. Shoppers stocked up on items such as toilet paper, leaving shelves bare. In addition, retailers’ omnichannel capabilities and shoppers’ adaptation to e-commerce rapidly accelerated.
Then, inflation rates started climbing in 2021 and 2022. Adding category-specific influences grows this list further. For example, the pandemic amplified demand in the vitamin and supplement category.
The problem is many CPG manufacturers rely on past strategies to guide their trade spend.
Repeating promotional plans is common practice as last year is a simple and straightforward way to start this year’s calendar for both manufacturers and their retail customers. However, doing so without confirming results via data and insights that these promotions will deliver the best results, especially as retail conditions change, is a big mistake. It is more important than ever to do predictive analytics and monitor results throughout the year.
In a simple example, sales of lipstick declined sharply during the pandemic due to the use of face masks. However, data showed women were still wearing eye shadow and mascara, so beauty brands concentrated their trade promotion efforts on these products instead. But what is happening now as women begin to socialize again? You guessed those lipsticks need to be replenished.
Trade Promotion Optimization provides insights beyond traditional analysis. These insights can identify factors that can positively or negatively impact ROI on trade spend. Insights could be which product mixes drive the highest gross sales or profit dollars, which promotion type will result in the most lift at each account, and even which Analytic rigor will help you navigate a dynamic environment.
You can then create a promotion plan best suited for your objectives and ROI targets.
2. Know your own playbook
Every CPG category has a variety of brands available in-store. The sheer quantity of brands creates a complex environment full of promotional activities. Competitive analysis will help you understand and navigate this environment.
A few questions to think about are:
- Is your brand on the value end of the competitive spectrum or a premium offering?
- Who is your target shopper, and what do they value?
- What are the target shoppers' spending habits?
Each of these will affect the success of your trade promotion. For instance, premium brands tend to be less price elastic than value brands.
Temporary price reductions (TPR) may not generate consistent ROIs for premium brands in the same way which TPRs may drive ROI for value brands. A shopper who identifies with a premium brand may be highly loyal and willing to pay the full retail price for the product.
But your goals and success metrics are likely different than competitors. For example, a new brand with a small market share may be more focused on driving trial than a brand that is leading in market share. Other objectives may include increasing brand awareness, market penetration, and selling excess inventory.
Planning your own path to success based on your data and objectives is the best strategy to maximize your ROI.
3. Cultivate strong retailer relationships with joint business planning
Salespeople are well-versed in the value of strong retailer partnerships.
An ideal trade promotion plan will mutually benefit the brand and retailer. Identify common objectives between the two parties to design a successful promotional plan that drives both brand and category growth. Arm your salespeople with a comprehensive analysis of promotion by the retailer to help communicate and achieve those objectives in conjunction with your customers.
A Joint Business Plan (JPB) is often used to facilitate collaborative discussions between buyers and manufacturers. Retailers can share their vision for your brand within their category. Sales leads can share their latest and greatest ideas to reach the retailer’s shoppers in new ways. This knowledge share combined with goal setting will act as a roadmap to meet the defined goals.
A strong sales and retailer relationship will involve ongoing collaboration and lead to smooth promotional execution benefiting both parties.
4. Always evaluate and adjust
The CPG industry is far from stagnant.
The retail space, in-store and online, and consumer shopping habits evolve constantly. As a trade promotion manager, your strategy needs to be nimble. If you are stuck in your ways, you will be left behind.
Allocate time in your schedule to read about the latest market and category influences. This knowledge, combined with regularly evaluating new insights discovered via TPO, will allow you to adjust your promotional plan as needed to achieve your objectives.
Curious about how to keep up with the industry? We can help!
CPGvision is a 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. Regardless of where you are in your RGM journey, you’ll be fully equipped with the solutions you need for profitable revenue growth.
Contact us today to discuss how the right TPx solution can help you implement these trade promotion management best practices.