Improving the ROI of Trade Funds
On June 3, 2013, over 40 consumer goods executives gathered at the Consumer Goods Sales & Marketing Summit in NYC, with a common goal to improve the ROI of trade funds. The meeting was kicked off with a presentation from Booz & Co. on trade promotion excellence including a case study, challenges and best practices to drive profitability. The consensus was that trade spend is growing but the return is often negative, and implementing Trade Promotion Management (TPM) to increase spend effectiveness can be rewarding but challenging. The following are highlights from the TPM share group meeting and best practices on developing a trade ROI mindset:
-Tackle post-event analysis (PEA) first because it’s easy to get your arms around. This concept has been around a long time, but many companies still have challenges getting it right. Booz & Co. presented two broad approaches to tackling post-event analysis and identified eight key design principles that must be addressed to build an effective PEA capability (see slide deck).
-Booz also offered some candid perspectives on various vendors that offer Trade Promotion Optimization (TPO) functionality including several with some element of TPM functionality. The group concluded that when selecting a solution, you have to be careful about what you are asking it to do and figure out if you want control over a point solution, or if you really need an enterprise-grade tool.
-Internal collaboration is key – all business channels (IT, Sales & Marketing, Finance etc.) need to understand the process and be involved.
-Successful pre-event analysis requires a combination of accurate inputs, strong models, functionality and supporting processes. Booz presented a case study based on a Fortune 100 company that realized $100M profit improvement in year one and built a sustainable trade capability.
-Many companies faced challenges when defining the key measurements for ROI. Not everyone will agree on the key measurements, but someone has to step up and say “this is what we’re doing” and everyone has to rally around that. Someone will probably get their feelings hurt.
Share Group members then joined smaller groups to discuss their trade promotion journeys even further starting with when and where the journey hits speed bumps. Discussions included: the importance of change management and the impact on culture, data and insights, ROI metrics, management support, process versus systems, and ultimate solution satisfaction.
After the small group discussions, members engaged in a lively Q&A with a panel of consumer goods executives on their different journeys to achieving their trade ROI mindsets. Discussion points included:
1. How do you drive consistency across channels?
2. Do you focus just on the biggest players? What about smaller groups?
Advice from panel:
-Tackle post-event analysis (PEA) first because it’s easy to get your arms around. This concept has been around a long time, but many companies still have challenges getting it right. Booz & Co. presented two broad approaches to tackling post-event analysis and identified eight key design principles that must be addressed to build an effective PEA capability (see slide deck).
-Booz also offered some candid perspectives on various vendors that offer Trade Promotion Optimization (TPO) functionality including several with some element of TPM functionality. The group concluded that when selecting a solution, you have to be careful about what you are asking it to do and figure out if you want control over a point solution, or if you really need an enterprise-grade tool.
-Internal collaboration is key – all business channels (IT, Sales & Marketing, Finance etc.) need to understand the process and be involved.
-Successful pre-event analysis requires a combination of accurate inputs, strong models, functionality and supporting processes. Booz presented a case study based on a Fortune 100 company that realized $100M profit improvement in year one and built a sustainable trade capability.
-Many companies faced challenges when defining the key measurements for ROI. Not everyone will agree on the key measurements, but someone has to step up and say “this is what we’re doing” and everyone has to rally around that. Someone will probably get their feelings hurt.
Share Group members then joined smaller groups to discuss their trade promotion journeys even further starting with when and where the journey hits speed bumps. Discussions included: the importance of change management and the impact on culture, data and insights, ROI metrics, management support, process versus systems, and ultimate solution satisfaction.
After the small group discussions, members engaged in a lively Q&A with a panel of consumer goods executives on their different journeys to achieving their trade ROI mindsets. Discussion points included:
1. How do you drive consistency across channels?
2. Do you focus just on the biggest players? What about smaller groups?
Advice from panel:
- Know what you want to do and be good at that. Don’t try to be everything to everybody. For example, if you start out with planning, you can then evolve to funding, payments etc.
- This isn’t easy and there’s no glory. Define the process, know what you want to do and hold people accountable. Incremental pieces are easier than big bang and change management is so important. Do not overpromise - focus on low-hanging fruit so there are tangible benefits. In my opinion, it is worth the investment to have someone on retainer to go after marginal improvements in trade spend that would equate to improved effectiveness and efficiency.
- For us, the goal wasn’t to stop spending money, but rather to make more money off of what we spend. We want to give more profit back.