Drinks companies consistently name trade promotions as the biggest drain on their revenue after the cost of goods.
Most accept this as the price of meeting customer expectations, but how many companies can point to detailed statistics that prove their promotions provide a benefit?
Remarkably, not many.
The reason for this can be pinned on the shortcomings of standard Trade Promotion Management tools (TPM).
This means that, despite the high share of revenue they invest in trade promotions, drinks sellers are facing issues such as:
- Lagging trade promotion performance
- Difficulty of trade spend management
- Failure to derive transferable insights from trade promotions
Questions abound on the topic of trade promotion management best practices, and 67% of consumer goods manufacturers have expressed concern about efficiency and cost.
All this is not to say that trade promotions are a bad thing. We know promotions and price elasticity matter to customers, and can provide brands with much needed gains in visibility and market share. In that sense, it does work as a marketing strategy.
Drinks companies do still depend on trade promotions, but some sellers are getting far more out of their investment than others.
Can can you ensure better trade spend management? The more obvious way is replacing those trusty old TPM spreadsheets with automated technologies, optimised for measuring trade promotion effectiveness.
Software is stepping up to help drinks brands in two key areas within the execution of trade promotions.
Trade Promotion Management (TPM) software gives companies accurate, real-time data and improved control over the promotions they run collaboratively with retailers. Uses include promotion planning and budgeting; abbreviated profit and loss calculations; promotion execution; payment of retailer claims and customer deductions; and measuring trade promotion effectiveness.
Marketing can see whether their strategies are being executed and can thus provide appropriate feedback; sales agents can find out how much budget they have left to use by checking the live program budget, management can easily review performance at whichever level of detail they require.
With TPM functionality built into your ERP system, all staff and colleagues can plan, execute and prove return, all in all, they can do their job better.
Trade Promotion Optimisation (TPO) software, functionality makes use of data for advanced analytical processing that enables better trade promotions.
Its uses involve specifying constraints on promotion variables such as timing, frequency, duration and promotion type.
Typical target outcomes for these activities include increased trade promotion ROI and more effective trade spend analysis.
TPO software represents an improvement on the pre-existing human expert approach, which is just a ‘finger in the air’ approach by comparison. Its ability to rapidly analyse high volumes of inter-related variables has constituted a paradigm shift in how trade promotions are planned, run and optimised. So the question is, \’why aren’t drinks distributors making more use of these features?\’
TPX and industry-specific ERP
TPM and TPO software may be used individually (e.g. one might be phased in before the other), but have greater potential when used together. Gartner evidently considers TPM and TPO as two sides of the same coin, referring to them collectively as Trade Promotion Execution (TPx).
Drinks sellers should be better attuned to the benefits of delivering their TPx modules within an ERP software that’s designed with their market vertical in mind. This is where generic ERP software tends to lag specialist solutions. Sure, it can get the job done (some of the time?) but what about the things it can’t do that are central to drinks?
What’s holding it back?
The key historical obstacle to effective management of trade promotions has been the inadequacy of traditional trade promotion management best practices for collecting, storing and interpreting performance data. Drinks businesses that fail to look critically at their systems also fail to see the solutions that TPx could offer them in terms of bang for their buck for trade promotions spend.
How TPX software helps teams act fast and innovate
As discussed, one of TPM software’s key functions is keeping stakeholder apprised of trade promotion performance. Not only does this capability support promotion management; it also enables a more agile approach to promotions in general.
Thanks to comprehensive reporting, a team can fully commit to a new promotion launch, but then make ongoing budgetary commitment contingent upon performance intelligence received in real-time.
Without such immediacy of measurement, the team might find themselves heavily backing a promotion long after signs of its under-performance would have become discernible via up-to-scratch TPM technology. Worse still, they might not have risked running an innovative promotion in the first place.
Not only does TPx software help teams be agile; it also helps them work together. As Gartner notes in its Market Guide for Trade Promotion Management and Optimisation for the Consumer Goods Industry, TPM software can ensure “sales, marketing, finance and supply chain organisations are clear and aligned on the goals of a trade promotion implementation”.
This is especially applicable where the TPM solution is ERP-integrated. Uniformity of data access and access-points amongst stakeholders can create an ease-of-collaboration that would be harder to achieve where the exchange of information is reliant on interdepartmental communication involving multiple information systems.
All these capabilities of TPx software, along with others mentioned in this article, form a compelling argument as to why drinks sellers using traditional methods should rightly be concerned about their trade promotions.
They’re missing out in ways they literally cannot quantify.
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