Heavy Investments in TPx Vendors Signal a New Level of Maturity

2021 saw perhaps the highest investment funding and M&A activity ever for trade promotion management software vendors. The level of investment is an all-time high, and the venture capital community includes some of the world’s most well-known investment firms. Why now?

The growth of trade and channel promotion management, execution and analytics (TPx)  software and service vendors has been exponentially high during the past 15 to 17 years. Prior to 2000, the leading trade promotion software solution vendors included SAP, CAS, Vistex, Adesso, Oracle, Flintfox, MEI, Synectics, XTEL, and Promax.

Between 2000 and 2010 there were new entrants from AFS, CPGToolBox, Demantra, Exceedra, and Upclear. In 2010, Accenture acquired CAS and Wipro acquired Promax. In 2014, Kantar acquired XTEL and began building out a complete retail channel promotion and execution platform. Since 2015, TPx vendors Blacksmith Applications, Blueshift, Comarch, Visualfabriq, Aforza, Cresicor, Enable, and Arker have jumped into the global TPx solution marketplace.

To say the least, the decisions to be made by consumer products companies seeking automation and transformation of their trade channel promotion management, execution and analytics have become far more difficult. Each of these TPx vendors are continually upgrading and updating their software to accommodate the rapidly accelerating revenue, profitability and consumer engagement mandates of modern trade promotion. Even the long time players are finding themselves challenged by a highly motivated and aggressive competitive marketplace environment.

Throughout all those years, these vendors have had to base their cost of development and future roadmaps on organic revenue growth through the acquisition of consumer products clients willing to invest in what is often joint development and proof of concept engagements.

No more, it seems.

The infusion of investment capital from major investment bankers and venture capital firms over the past few years alone has put TPx software solutions on the map as strong revenue generation and ROI deals for the first time in my long years of experience in this industry. Many of these investments are in the multi-millions of dollars and involve some of the world’s largest and most powerful venture capital and investment banking firms.

Here are some recent examples:

In anyone’s book, this is big money.

So why now?

Even before the pandemic, the focus on the nearly one trillion dollars in global trade promotion spending became a major priority for all consumer products companies. The rate of return on trade spending hovers just above 50%, which, also in anyone’s book, is unacceptable. Revenues and profitability for both the retail channel and the manufacturer/supplier was growing and somewhat stable, even with new products hitting the market daily.

Speaking about the investment into Visualfabriq, for example, Edward Hughes, Managing Director at PSG, said: “We believe that Visualfabriq has developed a leading revenue growth management software solution which has strong long-term growth prospects given the large addressable market in the CPG space.” This is exactly what we are talking about here.

Brett Queener, partner at Bonfire Ventures echoed the needs talking about their $22 million series A round for Aforza. “It is time for Aforza to tell the world about its technology, time to build out its footprint in the U.S. and in Europe, invest more in R&D and execute the Salesforce playbook.”

Listening to these guys, you can see that they not only get it, but are excited to be part of this growing technology sector. So how does this now play with the practical application of TPx applications within the standard business processes surrounding trade promotion?

The sales force focus on the sell-in, as we mentioned in the previous blog, “The Name of the Game,” was beginning to change as corporate management mandated more emphasis on the quality and success rate of the actual performance of the promotion—at retail. The pandemic almost drove the supply chains into the ground and the ongoing battle with ecommerce selling channels took its toll on the brick and mortar retail sales—hence, trade promotions.

So what is going on that spurs all this new investment and energy?

Think about it. Not only do these TPx solutions manage the funding, settlement and field execution of the promotions, they are beginning to become the primary tool for advanced planning for both the consumer demand and the eventual promotion itself. As such, the combination of investments into more advanced analytics including predictive and prescriptive analytics and the increased collaboration between sales (who owns the trade spend planning) and marketing (who owns the consumer intelligence) demands a powerful platform on which all this planning and execution can be managed.

If you add in the exposure on consumer engagement, especially the negative side of it we all saw and felt in the pandemic, you have the conditions of a perfect storm of innovation coming fast. The consumer now becomes the focus of trade promotion…or darn well should be.

And finally, you have to consider the trends to bring trade promotion management, execution and analytics under the direction of the revenue growth management side of the house. With more focus on merging price and promotion optimization with assortment planning and retail execution, there is a much wider audience now for what TPx brings to the party.

The practice and habits of the trade promotion vendor community of seeking out joint development deals as the primary method of building out the roadmap most likely have seen their end times approaching. With so much technology now on the market, and so many new entrants with financial support capable of enabling a bypass of those long joint development proof of concept projects, going to market with a cool PowerPoint presentation and a minimum viable product demo just may not cut it any longer.

And the consumer products manufacturers and suppliers know it.

The demand for immediate comprehensive functionality in a TPx solution is understandable, as is the unwillingness to accept costly and lengthy implementations due to running customization. These new TPx vendors are hitting the market with full functionality as well as a highly flexible and malleable system infrastructure that does not demand the first-born to customize.

Having the money and technical support these large investors bring make it possible to create a more powerful TPx solution without having to find adventurous risk-averse clients to agree be the Guinea Pigs. Of course there are always going to be some degree of joint development, especially for highly unique requirements, but these new vendors are hitting the streets with more functionality up front than their competitors may have after years of being in the market and serving CPG customers.

Who knows what 2022 will bring in the TPx solution marketplace in terms of new investments and entrants, but I would be willing to bet we are not at all finished seeing some rather large-scale mergers, acquisitions and start-up investments before the year is out. After suffering through years of failed promotion spending and “flip-a-coin” promotion planning, it is refreshing to finally see the TPx solution sector as a maturing and worthy investment.

If you like this content, follow me @RealRobHand and online at handpromotion.com.