Trade Promotion Effectiveness

With high spending in trade, trade promotion management (TPM) is always top of mind for consumer goods (CG) companies. CGT Publisher Lori Castle spoke with Tim Vollman, president and CEO of the newly merged Adesso Solutions/Gelco, to obtain some market perspective on the subject. Vollman founded Adesso Solutions in 2002 and led the merger this fall.

 

In the 2007 Tech Trends Study, only 3 percent of CG companies surveyed rated their trade promotion programs as excellent, while 20 percent rated their performance as poor; 40 percent plan to replace their current systems within 12 months; and 73 percent say that TPM is their main focus for future technology investments. Given this data, what key areas should CG companies focus on when managing trade promotion programs?

VOLLMAN: An effective TPM system is one based on integration and includes all elements of planning, execution, deduction management, field checks and promotion evaluation. Thankfully, many companies are realizing the critical nature of integration and seeking a solution that combines all of these elements (see Figure 1).

 

ERP solutions also don't provide the funding, allocation of funds and other related tools that distribute funding to the appropriate levels. A good solution must provide flexibility and sophistication to accommodate live accrual funding at multiple levels across the customer base.

 

Current ERP systems typically address deduction clearing as opposed to deduction management, and don't provide the tools to determine "root cause" analysis. Many companies have also attempted to "build out" the ERP to include these functions. After a heavy investment, they find the ERP is not equipped to be a collaborative field solution that provides work flow capability and sophisticated funding functionality. This lack of functionality leaves users grasping for other tools, such as Excel spreadsheets, to provide ancillary planning functions for event plans and event planning.

CG companies have spent more than $20 billion in retail trade payments, yet market surveys indicate that they question the effectiveness of those dollars spent. How can a TPM solution help?

 

VOLLMAN: The goal for CG marketing and sales teams is to effectively manage trade funds to planned levels while driving incremental shipment volumes to the highest margin. To be effective at trade spending, manufacturers must create efficiency in all facets of the trade management process while driving targeted promotions that are more specialized and attractive to the retailers. That's not an easy thing to do in today's market. A successful trade solution must be able to address the layers and processes behind such a task.

 

Effectiveness of dollars spent on promotions must be measured in several different ways. Manufacturers must be able to track movement of shipment data in conjunction with the consumption. This requires a solution that begins to allow the manufacturer the ability to determine base or turn business volume. This can be determined by calculating base shipment volume and then comparing this to the base volume provided by syndicated data sources.

 

Now that POS data is available, manufacturers can more precisely measure both direct and indirect product movement. This will supplement the syndicated data and provide key information for scan based promotions.

 

VOLLMAN: Several of our clients have adopted our complete TPM system. The real value proposition takes hold when clients utilize each of our funding, planning, execution, deduction management and alert modules. Combined, the components have allowed these clients to reduce outstanding deduction balances by more than 50 percent, while keeping executives and field users apprised of key performance metrics.

 

New clients are also interested in integrating their TPM system. Jarden Home Brands, On-Cor and Palermo Villa Inc., creators of the Palermo Pizza brand and Amerifit Brands, a leading developer, marketer and distributor of branded nonprescription products, including Estroven, AZO and CULTURELLE, have recently joined the Adesso/Gelco family knowing that integration is key to solving their TPM challenges.

 

VOLLMAN: A best-in-class TPM solution should deliver: Functionality for funding, planning (volume and event), deduction management and flexible reporting; and Sarbox compliance, which includes, full auditing of all changes to funds, deals, deduction and access to a complete history log of all changes. This allows auditors to trace any and all changes to promotions, audit the resolution of the deduction to promotion and verify the connections back to the ERP system.

 

Control is the primary benefit you should require from a TPM vendor partner. If the solution puts you in control of your TPM issues, you'll have fewer sleepless nights. Even better - you'll improve your bottom line if you can control committed but used funds, resolve deductions more quickly and analyze the promotion performance.

 

VOLLMAN: Adesso/Gelco provides all aspects of a TPM solution, including "in the field" check writing. This allows companies to utilize both in-house check writing for direct customers and in field check writing for indirect customers. Adesso/Gelco also offers a new Alert module for all clients to provide "key alerts" to all aspects of the business, including promotions, deductions and account performance. This new feature offers tremendous benefits. CG