Trade Promotion

This month, CGT Publisher Lori Castle asks John Kittle, vice president of Industry Development at MEI, to give his take on the state of trade promotion management (TPM). Kittle has 30 years of experience in the consumer goods industry, working for Nabisco, Information Resources Inc., and prior to joining MEI, he was an MEI client at The Meow Mix Company.

 

KITTLE: Absolutely! As recently as five years ago, the average trade budget represented 12 percent to 14 percent of revenue. The majority of prospects we are speaking to tell us that retailers have continued "squeezing" them for more trade dollars each year, and some are spending as much as 20 percent to 25 percent, with very little confidence that the increased funding is getting them any more retailer support. Many of our clients do not necessarily set out to lower their trade spending as a goal of implementing a TPM solution, but all wish to better understand, track and make it more efficient.

 

KITTLE: We believe Sarbanes-Oxley has been a good thing for the industry. In order for senior executives to be compliant they need to have a better understanding and control over their trade spending. It's important to note that a TPM system alone does not ensure compliance. It's only the tool that enables manufacturers to accurately analyze their spending practices to determine whether change is necessary. The responsibility lies with them to change spending practices if necessary. Increased visibility into current spending practices is more critical than ever.

 

KITTLE: Frankly, that depends on what the manufacturer is using to manage spending. We believe for a system to add value, trade funds managers and business managers need to be able to measure the lift that an event delivered before deciding to run a similar program in the future. Being able to measure an event's ROI and to confirm the impact it had on consumption as well as warehouse shipments are crucial, yet many still struggle to understand this.

 

KITTLE: Many manufacturers are afraid the project will be too daunting and require countless man hours and years to complete. There have been many horror stories about solutions that have cost millions of dollars and never worked. Others are a little intimidated that there will be cross-functional visibility into trade spending practices. Most quickly understand the benefits of such visibility and are able to modify any inefficient spending practices very quickly. Interestingly, we have found that consumer goods companies owned by investment groups tend to be more proactive technologically since they need to demonstrate results faster.

 

KITTLE: Many retailers and manufacturers are working together to develop promotional plans that will truly drive category volume instead of just switching consumer purchases from another non-promoted brand. Manufacturers with a fully integrated TPM solution that allows planning offline have a distinct advantage since they can quickly analyze promotions proposed by retail customers and make decisions with a full understanding of the impact to profitability for both them and their customer.

 

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