It is trying times in the non-food sectors. There is a global shift to emerging markets. The consumer base is broadening in terms of young consumers and the aging population. Don’t forget the divide between those with low incomes and those with high incomes. These factors lead to a greater variety of trade promotions with different retailers—and creates havoc on managing and reporting on trade spend.
Trade promotions activities are carried out by three entities:
- The trade marketing department develops the promotion strategy and manages categories.
- The CPG sales team works with retailers to execute the promotions at the store level.
- The finance department casts a watchful eye over these activities to understand trade spending investment strategies for different product groups and, more importantly, to avoid any surprises from inaccurate information.
To deliver on the trade promotion promise, it is critical that these groups work together seamlessly. That, in fact, is rarely the case.
The buck stops here
The finance organization is often the team responsible for initiating a trade promotion management (TPM) program in the non-food sectors. That makes sense, considering the finance team is:
- On the front line when it comes to reporting volume and revenue—two of many performance indicators directly affected by trade promotion performance.
- Accountable for the reliability of the results they share and for knowing how profitable customers are and how effective the manufacturer’s trade promotion spending has been.
- Responsible for ensuring that sales and marketing teams are spending the company’s trade promotion dollars wisely.
- Charged with overseeing the deduction settlement process and ensuring that proper accruals are in place to fund future trade promotions.
Unfortunately, many finance organizations operate with only partial visibility into the trade promotion process. As a result, they are finding it quite difficult to carry out their tasks and accurately report outcomes to their companies’ leadership teams, investors or other stakeholders.
The lack of an end-to-end view of trade promotions is largely due to the fact that finance, sales and marketing approach their tasks with a unique appreciation of what is to be accomplished. Rarely do these teams work with an integrated approach, aligned to a singular vision of what trade promotion initiatives can and should deliver. Instead, they operate in silos, managing their trade promotion activities via manual (i.e., error-prone) processes, spreadsheets or homegrown systems.
The case for automated TPM solutions
To effectively and efficiently manage trade promotions, finance organizations need to eliminate the single repositories for everything related to trade. Non-integrated processes and data sources need to be replaced with a trade promotion engine that enables all stakeholders to collaborate, align around shared objectives, and drive performance improvements throughout the trade promotion value chain—from planning, execution, reporting and reconciliation.
Such an engine is available today in the form of automated, cloud-based TPM solutions. Beyond providing better sales intelligence and enabling fact-based decisions, today’s TPM technologies provide the finance organization with visibility into volume, revenue, days sales outstanding (DSO) and expenses. They also give finance teams the ability to establish accruals to fund deductions and deliver more accurate reports to the senior management team. Most importantly, they enable the real-time “health-of-the-business” analysis, which informs new plans to maximize revenue and profitability.
CPG companies in the non-food sectors need not stop there. They can build on their technology base to achieve trade promotion optimization (TPO). At its core, TPO is the process of utilizing integrated goals and predictive analytics to drive even deeper levels of collaboration. In this context, optimization is about adopting an organization-wide mindset of continuous improvement. It is a business management solution that is driven by finance and adopted throughout the enterprise.
It’s time to excel without Excel
Working in a more collaborative way and with real-time access to information, finance will finally be able to manage the overspend, require workflow approvals and help increase return on investment as illustrated below.
It’s time for finance, sales and marketing teams of non-food companies to get rid of their disparate systems, manual processes and data stores. It’s time for them to adopt the integrated tools, data and objectives that are hallmarks of TPO and a world-class trade promotion capability.