If you think that trade promotion management technology has a strong record as a long-term enterprise solution, guess again. The growth of discontent for TPM technology solutions, especially among some of the largest global consumer products companies, is not new, but does not seem to abate.

 By:  Rob Hand

CEO, Hand Promotion Management, LLC.

 

 

Among the majority of consumer products executives, managers and key operations stakeholders I talk with daily, there is a consensus that the most critical functions within the so-called demand chain must have consistent, trusted and dependable technology managing them. In many cases, the non-negotiable variable seems to favor the priority of the technology solution over the human performance.

That is a sad statement, but it is, unfortunately, true. The ideal scenario is having long term  continuity of a powerful technology solution running mission critical areas like ERP, supply chain, demand planning, manufacturing, logistics, analytics, and HR, is it not?

When you go the distance it takes to review, assess, select and implement any new enterprise technology, the LAST thing you want to do is repeat the process three to five years later (and, unfortunately, sometimes more frequently than that!).

You have to count trade promotion, retail execution and revenue growth management among those technologies as well nowadays. With the rapid increase in prioritization of trade promotion management among consumer products companies these days, the focus is shifting from “whatever it takes to ensure we can fund, track and analyze spending” to an elevated level of searching for the most suitable and sophisticated advanced generation of tools and technologies that help to reduce poor promotional performance and accelerate revenue growth and profitability.

The double-edged sword is that trade promotion is now so critical that the consumer products executives in charge of making the decision to change are under pressure to do something fast. The vendor community is aware of that, and although everyone in the loop wants to make sure the time is taken to fully vet and decide on the solution, pressure to get started often trumps the process to ensure all details are evaluated.

We are seeing the rapid rise of global trade and channel promotion management vendors touting powerful AI/ML-driven tools to enhance promotional planning, optimize ROI and improve financial and sales performance. In my many years in this domain, I have never seen so many TPM vendors aggressively pursuing every type and size of consumer products companies—all touting the “most advanced TPM solution” in the market.

Timing is pretty good, too, as the market is more receptive to TPM than it has ever been.  Hence the rush to a solution is often the priority.

The result is more often than not, discontentment and disenchantment with the choice, the plan and the results.

Discontentment with trade spend management runs deeply within the corporate business units most affected by TPM—finance, sales, IT, and more recently, marketing. It is not a new condition, rather one that has been around for decades.

As a supplemental series of follow up questions to our 2023 HPM Survey on Trade Promotion, we asked about the most common areas of discontent around trade and channel promotion management.

The top vote-getter was promotion planning. This is not surprising given the need to be more precise, trustworthy and consistent in the efforts to increase ROI from trade spending.

In fact, the top three choices are related. Everyone recognizes that data and analytics go hand-in-hand toward the achievement of effective promotions. Yet this is one of the most difficult and frustrating combinations of problem areas to solve.

It is also one of the most common complaints by CPG executives about technology solutions they have used over the years to manage trade promotion planning.

“I’ve nearly lost my job more than once because we succumbed to a sales pitch from a solution vendor that their solution would guarantee consistently higher data accuracy and ROI,” says the CIO for a large paper products manufacturer. “I’ve had the best in here and we’ve spent millions on long, costly implementations that turned out failing us in the end,” he continued.

“Promotion optimization for us has been a disappointing illusion,” commented the regional sales vice president for a large produce supplier. “All the talk about AI and machine learning is great but applying it to what we need to do has been a dismal failure.”

Ouch.

The blame can’t be totally laid on the vendors, although too many “TPO” promises have been made without genuinely dramatic results. Most CPG companies—even the largest global brands—have the worse historical data imaginable.

So, garbage in, garbage out, right?

Discontentment also stems from constant service issues among even the top vendors. Solution functionality has often been slow to catch up to the rapid pace of change in supply chain, consumer demand and channels of distribution.

As a result, it is not uncommon or unusual to see CPG companies change vendors multiple times in too few years.

“In my 12 years on this job I’ve had four TPM vendors in here,” says the CTO for one of the world’s top snack companies. “I even went back to one of them twice, and I am looking for another vendor to fix our problems again.”

Based on our supplemental survey, the pattern of change among these respondents shows that at least one-third of them have changed vendors at least three times with several making the change more than that!

Why so many changes?

We attempted to generalize the reasons for change against the knowledge of which areas were most affected (see the first chart above) and came up with these common issues:

  1. Failure to provide promised functionality (38%)
  2. Cost – Implementation and/or Total Cost of Ownership (30%)
  3. Poor customer service and/or technical support (18%)

Other reasons included changes in corporate technology (typically a new ERP installation), building their own TPM system internally, mergers or acquisitions where a different TPM vendor of the merged company was selected over the current vendor, and so on.

Comments relating to the failure to provide promised functionality showed that almost half of those choosing this options made decisions to fire the TPM vendor before the implementation was actually completed. The other implementation issue revolves around the unexpected (and unbudgeted for) increases in customization costs for functionality that was not available in the base vendor solution (For a more detailed description of implementation customization, see my blog post HERE).

The third most common source of discontent is the lack of customer service and/or technical support. This also includes areas where the vendor promised to provide timely business and/or status updates, as well as a lack of domain expertise to provide ongoing advisory services.

Clearly, trade promotion management has a set of “nerves” which, upon triggering causes action to be taken to resolve these and other similar issues. Because of the high priorities and serious efforts to improve trade spending ROI are accelerating globally, the issues arising that prevent the achievement of these goals become mission critical.

The more visible these issue are, the more attention is given and the more value is placed on trade and channel promotion management, no matter what the region, product or consumer is targeted. Multiple aggressive TPM vendor sales pitches have a tendency to draw attention to the five or six major issues, problems or concerns of most CPG companies around trade promotion management.  Vendor advertising touches on similar topics, drawing the interested party into looking deeply into their own situation to see if there is a way to leverage this information and solve the problems.

This effect is significantly elevated if a globally published RFP is issued. These days, it is not unusual for a major CPG company to receive up to 25 responses to the RFP. That being said, it is one of the reasons why I am often asked to help the selection team pare down the list to four or five vendors which would most likely accommodate the requirements.

The caution here is that, although painful and damaging to corporate revenue and profitability, discontentment with overall trade promotion management and performance can lead CPG executives to “leap before they look.” In other words, you must look deeper into the issues to determine what the real reason(s) for them are.

The answer is not always clear and visible. Like bad data, if you prepare and distribute an RFP that does not adequately identify, define and detail the issues, you can’t effectively create the right requirements against which the TPM vendor must submit a proposal.

Likewise, there are too many TPM vendor presales teams that lack deep domain expertise to address and respond effectively, which can and often does lead to a bad blueprint design or worse, misstated functionality.

The downside to discontentment is failure and financial disaster.

The upside to discontentment is innovation, as old Tom Edison proved.

Let’s work together to achieve the latter, shall we?

 

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.

Rob Hand

Author Rob Hand

Consumer products industry domain expert specializing in trade promotion management and execution. Experienced data and analytics professional focused on how your company can improve the ROI, reduce failure rates and improve overall value for the money you spend on trade promotion, co-op advertising, consumer marketing, demand planning and retail execution. When your company is ready to move to a new vendor, develop a more advanced data and AI capability, improve the collaboration with your marketing department and retail accounts, I am the best contact you can make. Independent, reliable domain knowledge and a long history of success will ensure your own successful results.

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