VANTAGE POINT: The TPM Tipping Point Is Near
The TPM Tipping Point Is Near
By Fred Schroeder, President, North America, Sales and Marketing, MEI
For years now we have all heard the same stories about the big problems with the management and control of trade spending for consumer goods companies. They spend 10 percent to 30 percent of revenue on trade promotions, representing the No. 2 line item, yet two-thirds or more still use spreadsheets to manage billions of trade promotion dollars. Over the years, a range of studies continue to find that consumer goods executives indicate:
> More than 70 percent do not capture or measure results adequately
> Less than 30 percent of programs are not profitable
> Pass-through to consumers has dropped to 50 percent
> Promotion administration consumes 33 percent of sales time
> 54 percent are unhappy with promotion effectiveness
> 85 percent are concerned with their ability to track and manage spending
> The net result is there are mistakes, wasted time and lost sales and profits.
So, it's no surprise that many solution providers, from the large ERP and CRM providers to the small niche players, have gone after this "huge" opportunity in their traditional ways -- timely and expensive custom solutions or inexpensive limited functionality solutions. The result is also no surprise -- after a major push from all these providers for the better part of the decade, there are very few success stories of clients who have had broad adoption by the sales force with a solution that actually was easy to use and worked. Consequently, our research shows that one of the major reasons that consumer goods companies have been slow to adopt TPM solutions is because of the horror stories of solution implementations that took years and millions of dollars only to fail and have, therefore, given providers a bad reputation. Hence, all the consumer goods companies are moving cautiously.
Why did this happen? The fact is that selling in the consumer goods industry is complex. Consumer goods companies must sell through different channels (brokers, distributors and indirectly); payment types vary (invoices, off-invoices and post audit deductions) and it impacts many internal departments (sales, marketing, finance, operations and logistics). Therefore, this complexity led many consumer goods companies and their providers to think they needed to create a custom solution to go to market. So, without enough input from the actual users and folks knowledgeable about selling in the consumer goods industry, armies of seasoned software specialists created complex solutions that were just too difficult for the average consumer goods sales person to be able to learn and use easily. Hence, the high failure rates.
So what's changed that would cause a TPM Tipping Point in 2008/2009? The concept of a hosted, subscription based, SaaS (software-as-a-service) model in TPM is now possible and available. Yes, selling and management of trade spending in the consumer goods industry is complex, but that complexity is consistent across all categories and all companies -- big or small. They all go to market the same way and, therefore, all face the same TPM issues -- the bigger ones just have more zeros on their charts. The fact is that they can all use the same common solution as long as it is easy to learn, easy to use, quick to implement and provides functionality that delivers the ability to totally manage the business to include annual operating planning, budgeting, forecasting, account planning, promotion management, funds/spending management, payments and reconciliation, and promotion/spending analysis. It's also critical not to diminish the importance of being "easy to use." True SaaS TPM models have been designed and vetted by consumer goods experienced teams to ensure a solution is elegant in its simplicity. The result is it takes just two clicks to view a report versus more than 20 clicks with non-SaaS solutions. Or it takes only seconds to enter a promotion versus upwards of 10 to 15 minutes. That kind of time saving adds up when you multiply it for each user, numerous times a day, every workday of the year.
The beauty of a common solution/SaaS model is that a working, functionally superior solution is significantly more affordable as development costs are complete and the focus can be on upgrading versus starting from scratch each time. It's also much more efficient, since as the same solution keeps being successfully implemented with more clients -- the time to implement is cut dramatically. This means service teams have done the same implementation numerous times making them much more knowledgeable than someone implementing a first time solution. Additionally, a common SaaS solution successfully integrated with the ERP systems of numerous companies, ends up being capable of handling any ERP interface, thereby, providing a track record and experience base that is increasingly making client IT departments more comfortable.
Furthermore, because you don't have to recreate the wheel each time with a common SaaS model, product development efforts can focus on blazing new trails to create innovative firsts with new functionality that wows users and management alike by significantly impacting their business with time, and therefore, money saving features. The best SaaS model solution will deeply involve their clients in the process since they can provide enormous insight if they are intimately and collectively involved in prioritizing product upgrades to address the most pressing collective issues. The common SaaS model taps the collective brainpower of clients and employees alike to create functionality that is ahead of everyone else in the industry. Manufacturers should look to a SaaS TPM model that goes well beyond the basic TPM functionality available today for cutting edge functionality that solves some major issues with TPM. For example, look for a SaaS TPM model that provides the ability to allow users to plan scenarios in Excel, collaborate with their customers and brokers, then download and populate data into the solution in order to input data with 100 percent accuracy by eliminating duplicate manual entry. Also, look for time saving methods in building reports that allows users to create or modify their own reports directly in the system, then save it for future use versus having to rebuild it every time so reports can be saved and shared for seamless collaboration. Finally, look for a SaaS model that provides at least five ways to analyze your business versus the more typical one or two views of most solutions. This allows for users to be able to view by national accounts, sales structure, geographic region, class of trade and customer distribution centers. Importantly, the best SaaS model will allow the user to "save" all those views for future use versus having to rebuild it every time -- an enormous time saver.
But a TPM Tipping Point? Well, if you track the amount of TPM client deals that have been announced annually in the industry by the solution providers, it is typically under 20 per year. That's in an industry with roughly 2000 consumer goods companies. This means that to date the TPM industry is still in the "innovator" to "early adopter" stage of the category lifecycle. However, MEI's common SaaS model has closed well over a dozen deals in the last 12 months with several deals in the final stages of negotiation happening monthly and a pipeline that is growing by the day. The word is out that MEI has redefined the TPM industry and our clients have been evangelical in their support since almost half have had negative experiences with prior solutions. They are so happy they are willing to publicly share quantifiable results that range from double-digit growth at one client, to everyone experiencing spending within 1 percent of budget and deductions are driven down so the end result is that it pays for itself quickly. Given the significant up-tick in the number of inquiries and the amount of deals we are now discussing, we believe that the TPM tipping point is very near.
__________________________________________________________________________________________________________
Fred Schroeder is the President, North America, Sales and Marketing at MEI, a leader in Trade Promotion Management and Retail Execution solutions for the Consumer Goods (CG) industry. MEI's quick to implement, easy-to-use, robust solutions have generated consistent results for clients that have led to an unparalleled level of references. For more information, contact Fred Schroeder at [email protected].
By Fred Schroeder, President, North America, Sales and Marketing, MEI
For years now we have all heard the same stories about the big problems with the management and control of trade spending for consumer goods companies. They spend 10 percent to 30 percent of revenue on trade promotions, representing the No. 2 line item, yet two-thirds or more still use spreadsheets to manage billions of trade promotion dollars. Over the years, a range of studies continue to find that consumer goods executives indicate:
> More than 70 percent do not capture or measure results adequately
> Less than 30 percent of programs are not profitable
> Pass-through to consumers has dropped to 50 percent
> Promotion administration consumes 33 percent of sales time
> 54 percent are unhappy with promotion effectiveness
> 85 percent are concerned with their ability to track and manage spending
> The net result is there are mistakes, wasted time and lost sales and profits.
So, it's no surprise that many solution providers, from the large ERP and CRM providers to the small niche players, have gone after this "huge" opportunity in their traditional ways -- timely and expensive custom solutions or inexpensive limited functionality solutions. The result is also no surprise -- after a major push from all these providers for the better part of the decade, there are very few success stories of clients who have had broad adoption by the sales force with a solution that actually was easy to use and worked. Consequently, our research shows that one of the major reasons that consumer goods companies have been slow to adopt TPM solutions is because of the horror stories of solution implementations that took years and millions of dollars only to fail and have, therefore, given providers a bad reputation. Hence, all the consumer goods companies are moving cautiously.
Why did this happen? The fact is that selling in the consumer goods industry is complex. Consumer goods companies must sell through different channels (brokers, distributors and indirectly); payment types vary (invoices, off-invoices and post audit deductions) and it impacts many internal departments (sales, marketing, finance, operations and logistics). Therefore, this complexity led many consumer goods companies and their providers to think they needed to create a custom solution to go to market. So, without enough input from the actual users and folks knowledgeable about selling in the consumer goods industry, armies of seasoned software specialists created complex solutions that were just too difficult for the average consumer goods sales person to be able to learn and use easily. Hence, the high failure rates.
So what's changed that would cause a TPM Tipping Point in 2008/2009? The concept of a hosted, subscription based, SaaS (software-as-a-service) model in TPM is now possible and available. Yes, selling and management of trade spending in the consumer goods industry is complex, but that complexity is consistent across all categories and all companies -- big or small. They all go to market the same way and, therefore, all face the same TPM issues -- the bigger ones just have more zeros on their charts. The fact is that they can all use the same common solution as long as it is easy to learn, easy to use, quick to implement and provides functionality that delivers the ability to totally manage the business to include annual operating planning, budgeting, forecasting, account planning, promotion management, funds/spending management, payments and reconciliation, and promotion/spending analysis. It's also critical not to diminish the importance of being "easy to use." True SaaS TPM models have been designed and vetted by consumer goods experienced teams to ensure a solution is elegant in its simplicity. The result is it takes just two clicks to view a report versus more than 20 clicks with non-SaaS solutions. Or it takes only seconds to enter a promotion versus upwards of 10 to 15 minutes. That kind of time saving adds up when you multiply it for each user, numerous times a day, every workday of the year.
The beauty of a common solution/SaaS model is that a working, functionally superior solution is significantly more affordable as development costs are complete and the focus can be on upgrading versus starting from scratch each time. It's also much more efficient, since as the same solution keeps being successfully implemented with more clients -- the time to implement is cut dramatically. This means service teams have done the same implementation numerous times making them much more knowledgeable than someone implementing a first time solution. Additionally, a common SaaS solution successfully integrated with the ERP systems of numerous companies, ends up being capable of handling any ERP interface, thereby, providing a track record and experience base that is increasingly making client IT departments more comfortable.
Furthermore, because you don't have to recreate the wheel each time with a common SaaS model, product development efforts can focus on blazing new trails to create innovative firsts with new functionality that wows users and management alike by significantly impacting their business with time, and therefore, money saving features. The best SaaS model solution will deeply involve their clients in the process since they can provide enormous insight if they are intimately and collectively involved in prioritizing product upgrades to address the most pressing collective issues. The common SaaS model taps the collective brainpower of clients and employees alike to create functionality that is ahead of everyone else in the industry. Manufacturers should look to a SaaS TPM model that goes well beyond the basic TPM functionality available today for cutting edge functionality that solves some major issues with TPM. For example, look for a SaaS TPM model that provides the ability to allow users to plan scenarios in Excel, collaborate with their customers and brokers, then download and populate data into the solution in order to input data with 100 percent accuracy by eliminating duplicate manual entry. Also, look for time saving methods in building reports that allows users to create or modify their own reports directly in the system, then save it for future use versus having to rebuild it every time so reports can be saved and shared for seamless collaboration. Finally, look for a SaaS model that provides at least five ways to analyze your business versus the more typical one or two views of most solutions. This allows for users to be able to view by national accounts, sales structure, geographic region, class of trade and customer distribution centers. Importantly, the best SaaS model will allow the user to "save" all those views for future use versus having to rebuild it every time -- an enormous time saver.
But a TPM Tipping Point? Well, if you track the amount of TPM client deals that have been announced annually in the industry by the solution providers, it is typically under 20 per year. That's in an industry with roughly 2000 consumer goods companies. This means that to date the TPM industry is still in the "innovator" to "early adopter" stage of the category lifecycle. However, MEI's common SaaS model has closed well over a dozen deals in the last 12 months with several deals in the final stages of negotiation happening monthly and a pipeline that is growing by the day. The word is out that MEI has redefined the TPM industry and our clients have been evangelical in their support since almost half have had negative experiences with prior solutions. They are so happy they are willing to publicly share quantifiable results that range from double-digit growth at one client, to everyone experiencing spending within 1 percent of budget and deductions are driven down so the end result is that it pays for itself quickly. Given the significant up-tick in the number of inquiries and the amount of deals we are now discussing, we believe that the TPM tipping point is very near.
__________________________________________________________________________________________________________
Fred Schroeder is the President, North America, Sales and Marketing at MEI, a leader in Trade Promotion Management and Retail Execution solutions for the Consumer Goods (CG) industry. MEI's quick to implement, easy-to-use, robust solutions have generated consistent results for clients that have led to an unparalleled level of references. For more information, contact Fred Schroeder at [email protected].