Table of Contents
Introduction
Retailers have to continuously plan their promotional activities to achieve long term corporate goals. But due to business circumstances, restraints, and market fluctuations it’s hard for a business to decide which promotions to run given the spending budget costs. What combination would yield maximum profit or sales? How to ensure that minimum margin targets are still being met? Often the amount spent on trade promotions for the brand’s growth fails for both retailers and manufacturers.
Sales strategies are becoming more customer-centric every day. Despite online sales channels reporting significant growth, many consumer goods manufacturers and retailers continue to use traditional trade promotional ways. Most consumer goods companies are not entirely sure if Trade Promotion Optimization helps in boosting sales and is useful for the promotion of products.
It takes time to learn from each promotion and gather insights to improve strategies but TPO is critical for the success of a business.
What is Trade Promotion Optimization?
Trade Promotion Optimization is a data-driven process to continuously improve the effectiveness of trade promotion strategies by optimizing them. Its key objective is to maximize the value of money, minimize spend while increasing ROI on their trade promotions. Trade Promotion Optimization focuses on What-If scenarios and uses data from the past to plan for better future promotions.
TPO is important for better allocation of trade spend. Based on business goals, and promotional constraints brands can create a cycle of continuous improvement with a better trade promotion strategy. The longer one implements a trade promotion strategy, the better insights it brings. This will help set up accurate goals and find deviations.
Trade Promotion Optimization Software supports the process by creating mathematically optimal sets of promotions. The software is capable of predictive modelling, analytics, and data harmonization. Optimizing the promotional plans is the key to ensure the right direction to achieve more sales.
TPO is the learning stage of how you can change the way of doing things and make more money.
Trade Promotion Management
The industry has divided trade promotion into two steps-
- Trade Promotion Optimization (TPO)
- Trade Promotion Management (TPM)
Trade Promotion Management
focuses on the internal execution and operations of trade promotions. This includes defining new promotions, allocating budgets to numerous departments at various stages, retail activity management, managing finance, authorizing payments, and tracking promotions, etc.
Trade Promotion Management deals more directly with logistical and strategic aspects of trade promotion.
There is a misconception among companies that they need to straighten out all minute details of TPM before following TPO.
Describing Trade Promotion Management in three steps:
Execution- promotional information is entered into a selected software system
Tracking- the utilization of promotional funds can be monitored over time
Reconciliation- Retailers are paid for promotional performance and appropriate accounting entries are made for it.
Tools for efficient Trade Promotions
Trade Promotion tools should be able to eliminate time-consuming, error-prone management processes, and make the planning of campaigns more actionable. The software should be able to track results in real-time and make adjustments to improve sales and profit.
- Trade Promotion Optimization Software
- Trade Promotion Management Software
1. Trade Promotion Optimization Software
The trade promotion optimization software you choose should allow:
1. Data Integration and Harmonization
Most Consumer Goods Companies store data in disparate silos. It disables decision-makers to have a holistic view of reality. An operational TPO solution should be able to bring together high-quality real-time data from multiple external and internal sources without errors. It should also have data cleansing capability to ensure data consistency and accuracy.
Internal Data includes past promotions, primary and secondary sales, market research, marketing campaigns, and point of sales.
External Data comprises syndicated data (from data brokers), changes in consumer behavior based on seasons, events, and digital media.
Data harmonization means aligning all data sources including sales, spending, performance dates, and qualitative information to analyze the results.
2. Promotion Effectiveness Measurement and Analysis
Post-event analysis is a key feature of the TPO solution. But the prevailing obstacle to a more meaningful post-promotion analysis is that it lacks automation. Automation eliminates human error and relieves the burden of the field sales teams.
Automation allows you to measure the performances of promotions whenever you require. The solutions should display deeper insights like sales, ROI, profitability, volume, and growth at the flexibility of brand, and location.
3. Promotion Optimization
Trade Promotion Optimization Solution should enhance spend based on forecasted promotion combinations. It should then recommend what promotions should be run based on the constraints defined and the objectives that are to be achieved.
The solution should permit the planner to stimulate promotion scenarios to choose the best possible scenarios based on sales uplift and predicted profit.
In short, Promotion Optimization is a mathematical standard that provides the ability to generate the best possible promotion outcome based on a series of constraints identified by the user.
Publishing to Trade Promotion Management Solution
Business Adoption
Promotion Forecasting and Planning
Following are a few trade promotion strategies that increase sales:
- Focusing on in-store display
- Offering deals and discounts
- Appointing in-store demonstrators
- Offering product sampling
- Attending trade shows and exhibitions
Conclusion
When it comes to trade promotions, integration is the key to optimization. The concept of trade promotion is to spend money with the expectation of deriving tangible benefits like increased sales and profits or higher market share.
An efficient TPO solution captures business constraints and conditions accurately. It is critical to have an ideal promotion plan and to be able to track their execution; thus, allowing finer management of trade spend. This helps the retailer to develop innovative promotions and achieve a new level of success.
