Trade Promotion Excellence: Jon Van Duyne, Booz & Co.

As the recession continues to put pressure on consumer goods companies, trade promotion investments are coming under intense scrutiny. One way to improve the ROI of trade programs is through the adoption of trade analytics.  In late 2008, Booz & Company asked consumer goods companies to identify key issues related to trade promotion excellence. Survey results indicated a growing interest in developing analytical capabilities to improve trade program execution.
 
According to the study, more than 85 percent of the respondents already use some kind of profitability metric to measure the success of trade promotions. However, the same percentage (85 percent) indicated their operations required better trade analytic capabilities. Survey participants cited inconsistency in approach, lack of common processes, system and time constraints, complexity and conflicting incentives as major reasons why post-event analysis and plan optimization capabilities have not yet been widely adopted in their companies.

We believe that companies with successful trade promotion operations address six key areas as they build analytics capabilities:

1. Aligned Planning Processes: Trade promotion planning is usually comprised of annual planning, account planning, target setting, funding and post-event analysis. Failure to align these processes and related systems will hinder the implementation of trade promotion analytics.
   
   
2. Clear Targets and Dedicated Tracking: In addition to coordinated planning processes, analytics capabilities require a clear set of shared targets across the organization. Successful implementations establish targets at the customer/category level in pre-planning and closely track new promotions, plans and calendar execution.
   
   
3. Integrated Customer Perspective: Failure to integrate the customer perspective is often the biggest issue we've seen when organizations attempt to install trade promotion analytics. The process output must facilitate customer discussions, resulting in mutually beneficial promotions.
   
   
4. Date and Modeling Integrity: To establish credibility, the analytical software must deliver believable results, and users must be able to demonstrate a sophisticated understanding of both the software and the workings of the model itself.
   
   
5. Clear Decision Rights, Roles and Incentives: Embedding trade promotion analytics capabilities can potentially impact roles, responsibilities, daily work habits and even incentive structures. A plan clearly defining and describing the nature of the changes needs to be developed as part of the implementation program
   
   
6. Change Management and Training: Companies often overlook the magnitude of the changes associated with adopting analytics capabilities. It is critical that programs -- including user involvement, communications and training -- accompany the rollout of the capabilities.

Addressing these six key factors will lead to the successful creation of internal analytics capabilities, paving the way for higher returns on trade promotion investments as well as greater efficiency in day-to-day operations.