The rush to add, develop or replace your TPM solution often leads to a disastrous result in time and cost. Even the largest, most sophisticated consumer products companies learn this lesson the hard way—over and over again. There is only one way to avoid it.
By: Rob Hand
CEO, Hand Promotion Management, LLC.
The attention given to trade and channel promotion within consumer products companies’ C-suite has never been more prominent among the top technology transformation actions today. This focus has led to the explosive growth of trade promotion solution and service vendors globally and, subsequently, the highest number of contracts awarded for TPM implementation in history.
Unfortunately, the rate of TPM implementation failures has also increased.
It used to be the case that a CPG company would average roughly 6.5 years before considering and/or taking any action to upgrade, replace or add new TPM technology solutions. Even with the incredible growth of sophisticated TPM solutions, the major workbench of most key account managers and trade promotion operations stakeholders continues to be the spreadsheet. That, in itself, is a subject for another time.
But that says more about the lack of ongoing functionality of the new technology than it does the love of Microsoft Excel®. It signals the need for something easier to work with, more accurate, faster and familiar to the user—especially when it comes to trade promotion management.
Trade promotion, by its very nature, integrates with so many internal and external data systems and functional operational processes that some CIO’s have likened a TPM implementation to the pain of a corporate-wide ERP transformation.
And they’re not wrong. It is painful.
Anyone who has ever dipped their toes into the force 5 rapids of a full scale TPM implementation knows the answer to that question. There are so many dynamics of operational, financial, marketing and sales processes, systems and policies that making sure the TPM solution fits every requirement is grueling and tedious work that takes a long time and requires a lot of customization of software.
Most modern TPM vendors sell their solutions with a two-prong pricing model—the initial license agreement and the initial cost of implementation. That is over simplifying a bit, but the phrase “cost of ownership” used to provide a total financial commitment is often clouded with ongoing customizations and additions of functionality such that there seems no end to the implementation process.
In other words, there is a perception among IT and finance executives that the “price” of the software is never fixed, but rather an ongoing financial liability that is unplanned and all too often necessary to achieve the required functionality.
One would think that by now, most TPM solutions would enable broad flexibility and accommodate every potential form of trade promotion management and operational process. However, we continually see vendors having to make functional changes to the solution to accommodate business and process needs such as supporting account hierarchies, funding, promotion planning, selling, marketing, settlement, and analytics we are seeing today in modern trade promotion. The truth is that many of the top tier solutions do offer a wide array of configurable functionality, but why, then, do we continue to see multi-year implementation projects that run into the millions of dollars and euros?
The quick answer, if there is one, is that there is never enough flexibility in the code of these solutions to simply check a box, click a radio button or select a drop-down value that would automatically accommodate all the specific requirements. While that is an accurate portrayal of reality, it is not fair to lay this problem solely at the feet of the TPM vendor.
I’ve been involved in literally hundreds of TPM implementations, and I can assure you that I rarely see a consumer products company which is completely and fully ready to accurately define all requirements necessary to ensure a fully comprehensive and accurate design blueprint. The closest thing I have seen in the past 20 years is a 55-page RFP from one of the top FMCG companies that later had to reduce to encourage more TPM vendors to bid! In fact, even the request for proposal is, more often than not so incomplete in the coverage and detail of the company’s requirements that there is no way a TPM vendor can provide anything more than a ”best” estimate of cost and time of implementation.
So we have two culprits here—the TPM vendor and the consumer products company.
There are some arguments to be made that the systems integration partners also force cost and time delay problems via the turnover of key implementation developers and leads, lack of experience with the software or worse, trade promotion in general. But, let’s include these within of the overall technical issues that cost time and money in an implementation.
The TPM Vendor
Many of my best friends and colleagues in this industry come from the TPM vendor community. I am proud of the work these people have done to contribute to the enormous growth and leadership over the past decade alone in the area of trade promotion management. These people are among the top experts leading the industry for trade promotion management and have contributed to the growth of this domain.
This will not be a slam against one solution or another, but instead a general observation I make based on actual experience in the trenches of implementation projects. I’ve seen what is “under the hood” at these companies, and for sure, there is some very strong and innovative technology in place—especially in the emerging area of advanced data science and what we call “TPO” or trade promotion optimization.
However, the top tier vendors which have been at this business now for, in some cases, 40 years, have created highly complex and technical solutions intended to manage the bell curve of trade promotion functionality and operations. The key point here is that, while there have been multiple upgrades and re-introductions of technology over the years, the data models, workflow functionality and internal infrastructure has not changed as much as you might expect.
No doubt there will be those vendors which will vehemently disagree, and their continual upgrading and updating of solution functionality certainly comes from real industry business use cases and requirements. But in actual practice, you can’t hard-code every potential deviation in specifications and requirements, and there it is—the need to tweak, change, add or delete code based on the customer’s special requirements. For any one of these vendors to make the significant permanent changes in those specifications to accommodate all modern TPM operational requirements often means nothing short of a system-wide rewrite.
That is not going to be commercially viable for any vendor.
So, the efforts for complying with many modern operational and financial business requirements are more of an internal and/or external “work-around” to accommodate the new requirements. This means a difficult and time-consuming set of configurations and, in many cases, outright development work.
In fact, a sort of “acceptable perceived standard” has been promoted to the consumer products industry for TPM implementation to accommodate all of these necessary changes, customizations and configurations, and it has succeeded in cementing the idea that it just takes this long to fully implement a major tier one TPM system.
To that line of thought, I say “Not So Fast!”
While it is true that this seems to be the “norm” in major TPM implementations, it also seems to say that our innovations of the past decade are not enough to significantly reduce the time and cost to implement a modern tier one TPM solution. That is quickly becoming unacceptable to most CFO’s and CEO’s.
In 2020, HPM produced a white paper on the Cost of TPM. The data came from 15 actual implementations with significant details on each cost element. Notice on the graph below that most of these customization costs were due to the required changes in software functionality to accommodate the CPG RFP and operational requirements.
Some of the more recent entries into the TPM solution vendor domain capitalize on this “standard” with the claim that they can get a major TPM project to “Go Live” status within only a few weeks.
How do they do that?
These are often SaaS vendors with cloud applications that can indeed be set up quickly, but if you need customization or external data integration, don’t count on it to be included within the price tag. One such project for a client of mine saw a bid of $500,000 for a full-scale TPM solution implementation in six weeks, which, as you might expect, was quickly accepted. After the first full week of design blueprint workshops, they submitted another $400,000 in additional customer requirement requests to incorporate what the RFP had already detailed as a requirement.
That was a fast decision—they were out.
In practice, most of these second and third tier TPM vendors will provide the caveat that the implementation MUST be limited to existing out-of-the-box functionality, often followed by promises to make the required changes at the next version update. For some companies, the need to fix the TPM problem outweighs the need to have everything they required in place, so they have no other option than to accept this lack of solution functionality and return to their spreadsheets or existing legacy system for the specific operation.
But for a growing number of consumer product companies, it is not enough to do the deal.
The Consumer Products Company
In defense of the TPM vendor community, I must say that the typical RFP is very lacking in detailed requirements. There are two main reasons for this:
- The team assembling the RFP does not fully comprehend or include all the necessary details for a TPM vendor to confidently bid on the cost and time frame; and,
- The data and integration requirements are insufficient.
One of my most requested roles in a TPM transformation project is to conduct the discovery and analysis of all operational, financial, data and technology requirements for a consumer products company RFP. Needless to say, I go pretty deep into the operational processes, policies, procedures and functions of the company. This usually involves many interviews, both one-on-one leadership and team stakeholders from virtually every internal organization within the demand chain including demand planning, marketing, finance, IT, supply chain, logistics, retail execution and even procurement to ensure we’ve covered every aspect, every piece of data, every use case and every individual organizational requirement around trade promotion.
This will also include interviews and/or evaluations of external support organizations and vendors such as data syndication providers, ad agencies, financial and promotion compliance support, external field merchandisers, brokers, distributors and wholesalers. There is no way I can see how anyone would be able to generate a realistic and accurate RFP without this level of intensity and coverage.
But unfortunately, most CPG companies—including some of the largest in the world—do not make this happen.
As a result, the RFP is, itself, flawed to begin with. No TPM vendor can take a limited RFP and submit an accurate proposal without this data or, on their own, a similar lengthy and comprehensive discovery process (which, again unfortunately, is rarely accommodated).
No Hold-Backs or Hold-Outs
If the initial workshops and interviews are done right, everyone’s opinion, feelings, emotional attachments and outright opposition will be exposed. This ensures that someone does not come into the design workshops (or worse, during the implementation itself) with a new twist, requirement or, as stated above, a renewed opposition to agreed-to requirements.
It happens all the time.
The bottom line is that the CPG company can and often is its own worst enemy of a smooth, low cost and rapid implementation.
My final thought for the CPG company is this:
Don’t think you can overcome this by hiring a strong SI consultant AFTER the deal is done or to put the responsibility for all this detail in the hands of the vendor.
I have yet to meet the consumer products company executive who is fully satisfied with their TPM vendor partner or their existing legacy TPM system. Everyone has a complaint.
Most CPG companies who suffer through a long TPM implementation will be forced to live with it because it was so expensive. However, give it a few years and the combination of complaints of solution functionality (or lack thereof) and the continual pounding on the door of the hundreds of TPM vendor sales representatives will soon evolve into another “We have to fix this TPM problem” campaign. Astoundingly, I see companies change TPM vendors too often, and continually poke their own eyes with yet another long term, expensive and sometimes failed implementation of a TPM solution.
Don’t get me wrong here. There are some great longstanding relationships between vendor and CPG company, but I get a lot more calls these days to help with a third, fourth or even fifth TPM implementation in too short a span of years for there NOT to be a continued problem here.
The average cost of customization approaches 10.5% over the original estimated cost, and the extension of time is more than triple that! You might think that is a respectable amount of slip. But when the cost is $3 million, that’s over $300,000—no small thing for most CFO’s.
What is worse is that the average time it takes to actually “go live” was tracked at an average of 35% later than the original “Go Live” date agreed. To protect themselves, most TPM vendors and/or SI partners will pad this estimate significantly to begin with, so it’s actually even longer than it should be.
There is innovation in the TPM vendor arena. Do your research up front to ask the right questions about how the solution platform handles known issues and problems.
Take the time in advance to build the right RFP with the proper amount of detail and comprehensive coverage of requirements—across the entire demand chain organization chart. Know what to expect before you do the vendor research, and make sure that the one who tells you that is not going to be part of the implementation. Have your IT team make sure the data model is flexible enough to rapidly integrate required data sources and, most importantly, make changes ongoing. Research the solution’s ability to change workflow process with minimal time and cost and bake those findings into your assessment of the solution.
Avoid the Multi-Million Dollar/Euro TPM mistake.
Rob Hand is the CEO of Hand Promotion Management, one of the industry’s premier analysts and consultants in trade and channel promotion. He is the author of “The Invisible Economy of Consumer Engagement,” the most comprehensive book on modern trade promotion to date. www.handpromotion.com.
 HPM TPM Vendor Analysis, 2018
 HPM TPx Solution Implementation Cost Study, 2020