Trade Promotion Optimization is just what your TPM needs.

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1 Trade Promotion Optimization is just what your TPM needs. While many manufacturers worry adopting Trade Promotion Optimization will replace their investment in TPM, a true TPO will bring out the best in both tools. t-prosolutions.com

2 Trade Promotion Optimization is just what your TPM needs Executive Summary CPG manufacturers are investing significant time and money into technology systems in hopes of better aligning trade promotion investment with quantifiable returns. However, limited visibility, inaccurate measurement standards and a misconception about software functionality leaves many users more confused than when they started. This report clarifies how two often confused systems - Trade Promotion Management (TPM) and Trade Promotion Optimization (TPO) can work collaboratively to enhance the overall perfomance and analysis of your trade promotion spending. TPO is more than a nice to have Always build trade promotion optimization (TPO) into your trade promotion management approach Gartner Market Guide to Trade Promotion Management and Optimization While this may be the recommendation, our experience shows that the majority of CPG companies are either too overwhelmed by the often cumbersome and costly implementation of a TPM system or have become accustomed to the manual labor and inaccuracies associated with post-event analysis so much so that disturbing these habits seems like starting from scratch. In fact, we often hear We are just starting to understand the data coming in and are not quite ready to look at ROI or efficiency. Isn t this like looking in the mirror and saying I know my hair is a mess, but I don t think that I will brush it today? TPO can make any TPM system best in class? A TPM system is great. It lets you plan and execute your promotions. It allows you to track spending and invoice retailers. It is an important data collection vehicle as part of the trade promotions process. But it is only part of the process. Because most TPM systems do not integrate syndicated or retailer POS data as a key component in dynamically measuring the performance of post events, the results are not an accurate portrayal of the effectiveness and efficiency of the trade spend. A TPO system should work in partnership with your TPM system to provide a central intelligence center for a more complete and accurate post-event analysis providing greater insight to the comparative effect that shipments, trade spending, consumption data, consumer marketing and competitive activity have on your base volume. In addition, a TPO system should provide dynamic visibility to ROI and KPIs of the trade promotion investment. In addition it should provide a robust historical and predictive what-if scenario planning module, enabling accurate and optimized customer plans. t-prosolutions.com 1

3 But what about Even with a better understanding of how TPM and TPO can work together, the concern of implementing yet another system that provides even more functionality then you think you need still echoes. However, consider: 1) You are already doing this work, or you should be CPG companies have a love/hate relationship with spreadsheets. They have needed them to perform even the limited analysis that is being done, but they are challenging to work with and they open the door for a multitude of human errors. You must address data quality issues as they can impact internal collaboration as well as external. The most common example occurs where multiple versions of the truth are brought into play. There is no simple solution to data quality, but it starts with the recognition that there is a problem and focusing on solving it, states the 2015 POI TPx and Retail Execution Survey. After one year of utilizing the T-Pro Analytics solution we were able to reduce the time it took analyze trade spending at the end of each quarter by 15%, enabling us more quality time for analysis prior to submitting results to senior management. Sr. Manager, Global Revenue Management Kellogg s With the average data scientist now making upwards of $160,000, why would you want this professional fiddling with disparate datasets only to reach the wrong, and possibly costly, conclusion? Not only is this not cost-effective, but also by the time it has been completed (on average 10 weeks or more), the results of the analysis are too late to inform planning or to allow leadership to get an accurate picture of overall business. In the past, this meant forecasting based on limited data from a small subset of customers. Your TPO system should allow you to have accurate data across ALL of your customers. A TPO system should make the work you are doing more efficient and more accurate without the strain on additional resources. 2) TPM and TPO implementations are not created equal A TPO system can be fully implemented in a fraction of the time. By nature, TPO should be designed to increase efficiency and cut unnecessary cost. One of the ways to do this is by capitalizing on existing tools without complicated data conversions or customizations. In doing so, implementing a TPO solution should: Take between 8-14 weeks to implement Minimize the involvement of your IT team Offer only customizations that improve workflow or meet your company s circumstances Seamlessly integrate with existing ERP, TPM, and any other provider of trade promotion data with read and write capabilities t-prosolutions.com 2

4 A TPO system should be a true solution that creates opportunities for workflow and trade promotion optimizations from day 1; not a problem in and of itself. t-prosolutions.com 3

5 3) Your retailers are, or soon will be, using analytics to make decisions in their stores. Even today where data is overabundant, there remains a contentious relationship between manufacturer and retailer. However, as retailers and manufacturers begin to not only bring unique raw data, but also powerful predictive analytics to the table, opening conversations about maximizing returns becomes mutually beneficial. For example, according to Retail Info Systems News, Kroger is leveraging its new in-house analytics team, 84.51, to gain insights into shopper behavior and trends and is using that data to make merchandising decisions. Not only would this be valuable information for any manufacturer to have, but without the ability to centralize and easily visualize this data and its effect on trade promotion effectiveness, consumer goods companies are at the mercy of retailer data when it comes to promotional compliance and supplier issues. Without a TPO system, these factors cannot be considered as part of post-event analysis, and more importantly there is little benefit for retailer collaboration due to an inability to show ROI for the retailer. A TPO system should open the door to collaboration with your trading partners providing a single-version of results. 4) ROI really does matter No matter how much we want to think that our actions are working nothing shows this more than real numbers. ROI is the stuff promotions and bonuses are made of and who is not ready for this? How would it feel to tell your supervisor that you are quantifying a 3%-5% return of your annual trade investment and that you, like T-Pro s last three customers, have already paid for the tool that helped you get there by making a single change to one customer plan. While bonuses and promotions are nice, from a business perspective we cannot ignore the significance of ROI because: Visibility of ROI holds us accountable, while a TPO tool gives us the ability to improve Calculating ROI allows us to define specific internal KPIs and reference our customers KPIs Monitoring ROI dynamically in real-time time allows us to define erosion in performance and make tactical adjustments to the trade spend. Quantifying ROI is the counter-argument to hair-trigger mandates to cut trade spending as a TPO solution provides the capability to optimize the trade spend for volume, profit and revenue. Ernst and Young s Principal, Advisory Services Consumer Products & Retail, Gary Singer, suggests of CPG companies, They need to move beyond trying to better manage trade spend and instead find ways to optimize the return on their investment. t-prosolutions.com 4

6 In reality, a TPM system is a tool to maintain the status quo and execute a plan, any plan. Whether the plan is the same as last year s, will have a negative ROI, or could be even better with a small tweak, a TPM system cannot tell you. When used fully, a TPO system should be able to show what happened last time the plan ran, what can be expected if it is run again, what factors might influence its success, and what optimal tweaks might make the plan more effective. This information then can be electronically ported to the TPM system to be managed with no redundant entry. A TPO system should empower trade departments with quantifiable results. Over the hurdle? Now have the discussion? Is a TPO system the right choice for your company? As the 2015 POI TPx and Retail Execution Survey intelligently points out, Always recognize that software is not the automatic answer to a problem. Instead, it is the enablement of an underlying business process with appropriate technology that can deliver results. Merely buying some software package and installing it is not the answer, despite all the marketing hype to the contrary. That said, the adoption of a TPM system is not a reason to pass on a TPO. Instead, take the time to make an informed decision. After all, isn t that what a TPO is supposed to help you do? Ask your organization: What are our trade promotion goals? What do we hope we can see from our post-event analysis? How are we measuring the results of our promotions? What would make our analysis and planning more efficient? What information would make our planning easier? How would visibility to ROI affect our work? What do we hope would be gained with the addition of a TPO solution? What do we fear would be lost without the addition of a TPO? Ask the TPO Solution Provider: What examples do you have of integrating TPO with our TPM? What is the timeline to complete a TPO implementation on the scale of our company? What is the estimated time to value? What customizations do you anticipate based on the specifics of our company and how do these affect cost and timeline? Who will need to be involved from our side? What do you need from our IT department? What is the estimated admin time prior to implementation? What is the ongoing admin time? In the end, the decision to analyze and plan your trade promotion spending with a TPO can only be informed by your organization s objectives and resources. Unfortunately, many CPG companies are missing out on opportunities to ignite growth and capitalize on improved efficiency not because it will overburden them, but because negative past implementation and misinformation create obstacles. Gartner suggests, Always build trade promotion optimization (TPO) into your trade promotion management approach because it is the best idea to remove the obstacles preventing your trade promotions from being successful. t-prosolutions.com 5

7 For more information regarding the implementation of a TPO solution in your organization contact: Wayne Spencer President T-Pro Solutions wspencer@t-prosolutions.com t-prosolutions.com t-prosolutions.com 6