Point of Impact
This month, CGT caught up with Steve Peppler, CEO, Flintfox, an up-and-coming TPM vendor, to get the scoop on trade promotions management. Prior to his current role, Peppler worked with Flintfox as the Customer Finance Controller for the Quaker Oats Company of Canada (now Pepsi-QTG Canada) where he led a team that installed a trade spending solution developed by Flintfox. Since joining Flinfox, Peppler has worked primarily in North America to help drive the functional development of the company's TRM Suite while acting as the product manager for North America managing sales, services and marketing.
What are the key drivers that go into the execution of a successful TPM program?
To "outsiders," promotions and pricing policy in CG companies is thought of as a "black-art" and so cryptic it cannot be understood other than by the "initiated." The primary challenge CG companies have is to harness the creative, business and interpersonal skills of the sales and marketing departments, put that valuable resource inside a flexible framework that is efficient, integrated, real-time and based on factual data. the companies must go to market with this arsenal directed by a clear management policy, understood by all players, as to the expected sales revenue, market share, profit margins and positioning that is required.
The most important factor in execution is to ensure that everyone is working towards the same end goal. This means that account plans, budgets, sales force and broker objectives and trade marketing plans must be congruent in terms of rewards and measures of success and failure. Secondly, it means that budgets must be consistent across the organization, so that no one is working off of a different score sheet to anyone else.
What key business benefits does TPM offer?
The key TPM benefits for a CG company begin with understanding where and when sales and profits are earned and making this information visible to management in a real time basis. If you do not understand which customers, products, territories, promotions or event types earn the highest returns, drive the most volume, cost the most, return the least, then you will be ineffective and unfocused. Understanding allows the CG company to optimize their trade spend where it is most effective and minimize where it is least effective. The outcome of good TPM systems and processes is a company that not only knows the facts about the market, but internalizes them so they really understand the business environment.
Efficiency and transparency across the planning-through-payment cycle is another key benefit. In order to minimize supply chain costs and maximize sales behind trade promotions, the CG firm must know what events are planned and committed, at what time and for which customers, in order to ensure that the right products are available at the right time. In addition to promotional events, the effect of all commitments including price lists, discounts, retrospective payments, such as rebates, fees and commissions need to be measurable and viewable as soon as a sale is made and payments or deductions must be taken into account as received.
Define how TPM directly impacts sales and marketing effectiveness.
For sales, there are a couple of key factors to look out for. The system must deliver a real and actionable benefit to those using it. This means that administratively there must be less overhead in terms of planning and budgeting, updating commitments and measuring results. Deduction and payment approvals must be simple to perform with the right data available to make a decision quickly. Secondly, sales must be able to evaluate results in order to be able to predict future results in a proactive manner. This means having syndicated information matched up against shipment, commitment and payment information in the same time frame as the event was executed. A good TPM system should be able to deliver information not just in terms of customer or sales-based dimensions and measures, but also across marketing based measures such as brand or category.
How can TPM help CG firms become more customer-centric?
Data transparency is the key between both the customer and the CG firm. This includes sharing results that affect all customers such as consumer insights, the effect of consumer promotions on consumer purchases. It all starts with the basics of account planning, pricing, electronic order taking and sharing of results. Sharing of information that helps all retailers sell more product-versus sell more than the store next door for two weeks a month is what will drive increased cooperation.
What are the biggest obstacles CG companies face regarding trade spend?
The biggest obstacle is the notion amongst CG executives that trade promotional money is almost "funny money." This notion is nurtured by the lack of transparency and completeness of information in a timely manner, of both planned commitments and actual results. If results cannot be measured in a timely and accurate manner then it is hard to believe that much good has been generated. Unfortunately, many end up writing off large unknown deduction balances at year-end. Some prefer to manage the ratio of reserve to outstanding deductions versus the cost of trade promotions in relation to sales or to specific results and objectives. This makes the thought of implementing a TPM system or changing the processes to become more relevant seem to be too big to even start - why change the status quo? The key here is to begin with small things first that you can control and build up a knowledge base that highlights the issues requiring the implementation of a more comprehensive system to take the next big leap forward.
How are TPM benefits realized throughout a CG company's supply/demand chain?
The key is to understand where and when your sales force is committing funds to generate incremental volume. If you use a TPM system properly with the sales force incented to use the system, your compliance and data integrity in terms of updating commitments will increase dramatically. If this information is integrated with your supply chain planning systems, then the right product is available at the right time. Inventory reserves can be reduced and production scheduling can mirror demand more closely. There must be a system that minimizes administration. Adding new packs and SKU's to plans, price lists, product hierarchies, promotions, rebates, fees and commissions. A disciplined system will allow you to update in a disciplined and auditable manner.