CPG Trade Spending: An Ounce of Prevention is Worth a Pound of Cure

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…Or so the proverb tells us.  But with so many challenges with trade spending and so many mature solutions in the CPG trade planning and trade spending space, why do so many companies not make the switch from reactive treatment to preventative measures?  AFS Technologies serves many consumer goods companies and users with it’s TPM Retail platform.  Every one of them, for the most part, has the same symptoms when we begin working with them: 1) their leadership has tasked them to improve the efficiency of their people and their trade spending investment, and 2) the tools they are using for trade planning, execution, settlement and analysis aren’t getting the job done.

While the solution can vary greatly based on the scale and resources of the “patient,” we see these symptoms across the spectrum of company dynamics: companies from $30M in gross revenue to billions in sales, across most fast-moving consumer goods (FMCG) categories (and in some other categories), new companies that are growing fast, mature companies that are seeking an edge, companies planning on spreadsheets, companies that have tools in place.

So What is “An Ounce of Prevention” in Trade Planning?

The confluence of the factors explained above leaves many companies simply deciding to ride it out. When one line item is the second biggest expense to your company, there should be great incentive to understand it more and make better use of it. A great illustration of someone deciding to do something about their challenge is “Moneyball.” Oakland A’s General Manager Billy Bean used analytics to understand his “business” in a different way and make decisions differently. In a recent interview, “Moneyball” author Michael L. Lewis said that the main theme of the story is that prior to Sabermetrics, baseball teams misvalued players. Additional information enabled the A’s to identify the best bets to make, assign appropriate value to players, and make better investments. The change paid off. It was a tectonic shift in Major League Baseball, and now there isn’t a single team that doesn’t use analytics in their decision making.

A digitized trade planning process is one element of “Moneyball” for consumer goods companies.  When a digitized trade planning process is absent, consumer goods companies with high trade spending rates are probably misvaluing their customers and products.  They don’t know for sure because they can’t see what is happening, and therefore can’t challenge the status quo.  A process digitization initiative has two big payoffs: 1) Use of purpose-built tools increases the efficiency of data collection and management, and 2) the data that is collected enables transparency, Key Performance Indicator (KIP) control, deeper analysis, and quicker identification of trends, opportunities, and trouble spots.

How do I get started?

If you’ve decided to change from a treatment to prevention strategy, a great place to start is an honest assessment of your process.  Talk to your team and find out when and why they get frustrated and where they are losing in customer negotiations.  Identify your goals, then research methods of improving outcomes.  As early as possible, establish an executive sponsor, create a timeline and set a budget.  Elements of the project will change, but these initial guideposts are an important part of making an initiative real.    It takes hard work to get going, but having the information to allow you to assign the proper value to your customer and product investments is a big step towards creating better financial outcomes for your company.


About AFS TPM Retail

AFS TPM Retail makes consumer goods sales, finance, and operations professionals more efficient and arms them with the insights they need to drive better financial outcomes. More than 20,000 users across 120+ companies use AFS TPM Retail to manage all aspects of the trade planning process: objective setting, account planning, settlement, & analysis.

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Also read: Why is Trade Spending Such A Pain?