The Hunt for ROI

Research analysts agree that on average less than 32 percent of trade promotions today are measured and, of that small number being measured, a significant percentage are not realizing return. This month, CGT sat down with Fred Schroeder, CEO of MEI, who taps into his more than 25 years of consumer goods experience to offer perspectives around this critical area of trade promotion ROI. Schroeder also shares thoughts on promotion optimization, Sarbanes-Oxley and the need for a better line of communication between retailers and manufacturers.

How should companies measure ROI on trade promotions? What tools are available to make ROI a reality?

In looking to develop a plan to improve, many CG manufacturers feel the need to address every possible scenario in looking at solutions, and do not realize that improvements in the ROI of promotions are an ongoing and evolving process. Secondly, there is often an attitude that their particular company has a very unique business, and needs something that is completely custom to their individual business process. In speaking with more than 30 CG manufacturers each year, you realize a few things:
Most CG manufacturers have common issues in managing trade funds, as well as analyzing promotions. While the brands are different, and the brand strategies are also different, the metrics are common. I would cite the "80/20 rule" here. Certainly, there will be exceptions that need to be addressed in a more specific fashion, but most issues are common to most manufacturers.
In looking at ways to solve the problem, there is a desire to "have everything right away". Quite frankly, the normal sales organization, including the sales agents that represent them, takes a long time to refocus on different ways to address the business. In our case, all of our manufacturer clients are excited about our solution as well as the fast time to implement (less than six months) and are able to look for "low hanging fruit" very quickly.
Building momentum, based on initial results as mentioned above, maintains momentum and builds excitement at the CG manufacturer.

When you get this level of support, as well as key initial results, you truly begin changing how the organization approaches more and better promotional analysis and improved ROI.

CGT notices a shift in how companies perceive TPM -- moving from a transactional function to a more strategic business weapon. How close is the industry to fully leveraging this type of analysis?

Clearly the role of trade promotion for the CG manufacturer is to move from a very tactical, "volume at whatever cost" tool to a more strategic weapon where there are joint business plans developed with the goals of the retailer aligned with the sales objectives and brand strategies of the manufacturer. Fortunately, there are tools out there that address this area. These tools are no longer just available to large CG manufacturers with millions of dollars to spend on a solution and years to wait for results, but they are available to all CG manufacturers, regardless of size. A solution today is able to offer the following:
Promotional results updated daily for shipment information, and as quickly and often as data is available at each retailer for POS or scan data.
A calendar to align consumer/customer marketing events with the corresponding trade promotions, creating an integrated business/brand plan.
Immediate analysis on either the projected results of upcoming promotions or the actual results of promotions that have already occurred; based on the specific brands, customers, periods that the CG executive, account manager or sales agent needs to analyze.
All the information for the promotion, including the "dialogue" and ongoing performance, within one space. (We all know that another barrier for sales personnel to spend time analyzing their promotions and working with their retail partners is the amount of time reconciling old deductions, chasing down old information and the frustration that goes with this.)

So, when you ask how close "the industry" is to realizing these results, I would answer that the future is really here and the next few years will prove to be a very exciting time.

How does Sarbanes-Oxley affect the industry's investment in TPM solutions?

Over the past year to year and a half, I would say there are two key areas of change that are happening:
Many CG manufacturers, if they weren't already, are moving to "accrual based" funding for their budgeting purposes to insure that the starting point for all retailers is the same.
Within the field sales organizations, there is a greater concern with "overspending" at a retailer and market level. In the past, not knowing exactly where the trade budget was, coupled with volume targets/quotas led to "rolling the dice" with promotions. Today, many more CG manufacturers come to us because they are concerned that, due to lack of timely visibility into the trade budget, field sales managers and sales agents are not using all the dollars and leave "money and cases" on the table.

Clearly, again, there are solutions that are available to the CG manufacturer to provide more than the necessary insight into the trade plans and results. Often I hear some solution providers discussing how their solution is "SOX compliant", which generates the obvious chuckle. A TPM solution is not "SOX compliant". The CG manufacturer needs to address compliance. There are, however, solutions that can provide the accurate, timely numbers that the manufacturer needs and the ease of use to analyze these quickly.

In recent years, the trade promotion space has been challenged by missed implementation dates and cost overruns. How can a better sense of expectation be created between CG manufacturers and TPM vendors?

Having spent well over 20 years with CG manufacturers, dealing with all of their pressures, they should not, in any way, change their expectations as to what should be provided from a trade management solution. While it is a complex issue, solutions work extremely well. I would suggest that manufacturers do look at some of the following ways to make sure that they are not selecting one of the solutions you refer to:
First and foremost, check as many references as you can. Not one, two or three, but eight, nine or 10. Talk to region managers, IT personnel responsible for the implementation, administrators at your sales agents, as well as the list provided. All CG manufacturers have a "network". This is a key companywide initiative and you should aggressively use the network.
When checking references, ask about the results versus the committed timeline, versus the cost, how the supplier is to work with, how did the training go, etc.
Also, ask about the product as it is used by a variety of CG manufacturers; if they all look different, you will not be getting regular upgrades and enhancements. No product does everything to meet all the needs of today, yet alone two years from now.
Do not cut costs by reducing training; it is a critical part of the success of the project.
While price is important, I'd question why a TPM vendor would always be cheapest.

Finally, do not put too much emphasis on the demo. It is a part of the selection process, but client experience and satisfaction, industry experience, references and a true partnership are equally, if not more, important. It is this relationship that differentiates solution providers, and stops the issues that y