Transforming Trade Promotion
Across the global landscape of enterprise business process and technology transformation, one of the most dreaded initiatives is upgrading or replacing trade promotion management and execution (TPx). In what is clearly a hockey stick-like ramp-up in C-level executive focus on and priority for broad consumer engagement improvement, trade promotion is one of the top concerns and one of the most frequent financial mandates for replacement.
One CIO for a major consumer packaged goods company recently described a trade promotion transformation project this way: “I’ve been through full scope ERP projects that were not as hard and complex as trade promotion.” She made those comments during a large virtual global conference call about how the company should address and prepare for the need to replace their existing TPx technology. The problems forcing this company’s hand were the same with any CPG company, and most others in similar industries where the bulk of revenues come from retail and multi-tier trade channels. The company had recently completed a three-year global ERP replacement initiative that was the first leg of a full corporate digital transformation that spanned procurement, supply chain, marketing, transportation, and manufacturing.
With trade promotion spending representing nearly 30% of gross revenues for top 100 CPG companies, and the industry rate for failed promotions approaching 75% according to Nielsen, it is no wonder why trade promotion commands a high priority for CPG digital transformation initiatives. If you add in the enormous budgets being directed to data and analytics improvement projects today and the still-unknown impact of the Covid-19 pandemic on every aspect of the value chain, trade promotion performance has to rank high on the list of IT initiatives that are “must do’s” for the C-suite.
Trade promotion management has been around for more than 200 years in one form or another. For the most part, it was a “necessary evil” and typically managed internally or through one of the outsource vendors by lower level supervisory and/or management personnel. But in the past ten years especially, the role of trade promotion has been elevated significantly because the old methods of funding, settlement and promotion planning have now become extremely critical operations with more financial and marketing performance scrutiny than ever before. In addition, since the turn of the 21st century, annual increases in promotion funding have flattened and even dipped, causing tremendous effort to maximize every single dollar, euro, or yuan spent through the growing implementation of promotion optimization technology.
With all this attention and focus on TPx, however, the knowledge gap in most CPG companies about what to do to initiate and carry through an innovative promotion management transformation is high. It is not to say that there are not very intelligent and experienced people running the existing TPx platform and process, rather the “what to do next” and “where to go from here” questions reveal a murky and blurred understanding of the industry “best practices.”
So often, company transition teams find themselves moving toward finding a vendor partner to help them transition; but this is often premature and unproductive. The first order of business is to understand what the company needs to achieve with trade promotion management, execution, and performance analytics. That is a much harder task than most people think. Blind focus on simple funding, planning and settlement, the primary tasks of a trade promotion system is a recipe for disaster. Today’s modern TPx is far more complex and dependent upon numerous variables that need to be considered such as data accessible and available, technology platform(s) in place with critical systems like ERP, supply chain, and analytics solutions. Waiting on the eventual vendor selected to help with that is most likely too late and a risk to the ultimate value TPx is supposed to bring in the first place. Always plan to do a thorough up-front analysis of your entire business process, technology and governance surrounding all aspects of the value chain.
And do not forget to include the entirety of your corporate marketing research, event and promotion planning, and performance analyses that exist. Most CPG companies fail to consider this and end up with continued misalignment of trade and direct-to-consumer promotion.
If done properly, these pre-implementation discoveries are typically very comprehensive and detailed. These are, of course critical processes and workstreams that are often best done with a consultant that has deep trade promotion domain expertise.
As a result, CPG companies most often rely on their systems integration (SI) partners, analysts or other third party agencies to get this done; however, many of those companies are not as familiar enough with trade promotion to do a credible job in a short amount of time and at a cost that does not break the bank. Reliance on internal executives who may have had some contact with trade promotion vendors soliciting their business or offering their business cards at trade events can help. Because of the huge financial impact of trade promotion, corporate compliance officers, policies and procedures clearly dictate the rigorous process required to transition to new technology or process vendors, and putting together a solid list of action items and vendors to evaluate can be a significant challenge to the team assigned the responsibility.
There is a vibrant TPx vendor industry globally, consisting of more than thirty companies that provide some level of TPx technology. In addition, there are outsource vendors that managed TPx programs turnkey; however, this is not a popular option in the CPG industry. Among the top software companies like SAP, Oracle, and IBM, there are trade promotion solutions available and very good ones; however, the bulk of the TPx vendor industry is made up of smaller niche vendors, many of which have very excellent TPx software and some with advanced predictive analytics for trade planning. Some of those niche vendors have global implementation coverage through SI’s, and some of the SI’s have their own TPx solutions such as Accenture and Wipro.
But the question of timing, cost and implementation quality is hard to discover and difficult to measure. References can often be out of date or not comparable to what the CPG company considers their own product category or sector to be. Most of the niche vendors do not have the global capacity for more than a few implementations over the same time period, so that can also be a deterrent to using them. This is not a well-advertised and publicized industry segment, so the selection teams often find themselves spinning their wheels, stuck in a long-protracted process that is both frustrating and unproductive.
Hiring a consultant that is both knowledgeable about the critical factors driving successful TPx transformation and is familiar enough with the industry’s leading TPx vendors is the key to success. Being a TPx domain expert is critical, but you also need a consultant that can confidently and accurately inform your TPx transition team of what to expect and when, as well as be able to manage a potentially global project with experience that prepares everyone for what’s next. This will include delivering a strong, informative analysis of current and future state processes, technology and governance, creating a detailed requirements document that is transferrable to a RFP and providing solid metrics from which to measure the intensive vendor reviews necessary.
Some consultants are eager to help in the actual selection process. This may be in the forefront of the personal meetings with the vendors, or behind the scenes helping to examine and interpret the RFP responses from each vendor.
Trade promotion process and technology transformation is, by its very nature, an initiative that must be carefully conceived, planned and executed. The old adage, “Don’t try this at home,” is very applicable here. There is too much at stake in today’s trade promotion management and execution environment.
