The State of Trade Promotion Optimization
TPM Share Group Recap – June 6, 2011
Members of CGT’s Trade Promotion Management Share Group met on June 6, 2011 at the Consumer Goods Sales & Marketing Summit in NYC and engaged in a lively discussion about what might just be the hottest topic of the year among sales and marketing executives: Trade Promotion Optimization (TPO)! With countless definitions and approaches floating around the industry, the share group set out to identify logical steps for getting from TPM to TPO rather than establishing a common definition. Key discussion points included:
- What is TPO? Well it all depends on whom you ask!
- Does splitting TPO into two projects (typically predictive planning and pure analytics) make the most sense? What is the middle tier between TPM and TPO?
- What’s in TPO for the account team/sales? How can you change their behavior? They don’t come with the skill sets to do analytics, but you need them to provide value-adds to retailers rather than repeating last year’s plans. A subset of questions was then posed around sales incentive plan changes due to an introduction of a finance plan for trade promotions. Some companies in the room now base incentives on net sales (top line minus trade). As you improve net sales, you get an increase.
- Most members agreed that the technology offerings on the market that claim to offer TPO are confusing. Thus, it’s important to find out what you need first before consulting with solutions providers. Define the processes first. BUT make sure vendors can progress with you when you’re ready. Is there one solution for all? Consensus of the group was “no”.
- TPO requires teamwork…it’s simply too much to put it on one individual/function. You must tie together Sales (planning) + Category Management (causals/deep dives into why or why not a promotion worked) + Finance (looking at ROI, analytics) + Marketing + Supply Chain.
- Along those lines, each group of the business has their own requirements, so you’ll most likely end up with and TPO plan resembles a NASA application. A steering committee will help manage expectations internally, and ultimately make decisions and set parameters.
- So who owns the process? Sales, finance or do you need to create an entirely new function? Most members reported that a sales finance organization owns TPO. A helpful tip: have your sales finance folks report to headquarters to avoid local influences.
- And finally remember that TPO is a journey. Not one company in the room feels like they are doing true TPO! The general feeling is that you never feel like you’re done, the journey is never complete. Does a destination even exist?
After the two hour TPO discussion, the share group briefly pondered the progress of Demand Signal Repositories. Only three companies in the room admitted to having a DSR in place, signaling that it is still a topic of mystery.
From there, Share Group sponsor Cognizant previewed results from its 2011 Shoppers' Promotional Experience Study, which reveals what consumers like and don’t like about promotions. Key findings of which include:
- E-mails tailored to shopper preferences will replace weekly circulars
- It’s official: Consumers across age and income brackets demand brand names at a good price
- Peer reviews are powerful
- Digital marketing sites are their own worst enemy with only 40 percent satisfaction scores on average
- Physical stores beat the Internet for offering better product information nearly 2:1 across age and income
- People go online b/c they are never out of stock
- Age is a better indication of promotional behavior than income
- New tactics in digital marketing are emerging. It’s a changing world, and what we’re optimizing in the next five years could be vastly different from today.
In closing, CGT would like to thank everyone who attended the meeting for making it exactly what it is meant to be – a true share group. The next meeting will be June 30, 2011 at 12:00 PM EST.