Digitalizing Trade Promotions

Gift Cards for Trade Promotions
The trade promotion practice often takes the blame for continuing to apply bygone strategies and retro technologies to one of the most crucial business functions for consumer goods companies.

A survey by the Path to Purchase Institute found that more than two-thirds of consumer goods companies consider the practice “extremely important” to the business. But many survey respondents expressed dissatisfaction with existing management systems, program performance and overall effectiveness. They all have a need for deeper insights, better metrics and faster response capabilities.

Outdated strategies might still be true in some cases, however progressive companies have been working to improve their traditional practices by adopting new tools & methods that are moving trade promotion away from excel sheets and incremental sales growth toward a more strategic, holistic practice built for the omnichannel generation.
The Conventional Landscape
Growing and Nourishing Business through Trade Promotions
With a giant budget stake, nobody can doubt the importance of trade promotion:

“More than $500 billion is spent on trade promotion annually across the globe. Making it the second-largest line item in the budget of most consumer packaged goods companies. Trade spending represents more than 15% of a CPG’s total revenue, and despite all the disruptive changes to the industry, it continues to grow, according to an EnsembleIQ/SymphonyRetail study".

No one underestimates the need for improvement either: Gartner finds that as much as 67% of trade programs don’t break even — maybe because roughly 60% of companies still use manual processes and spreadsheet applications to manage their programs.

The reasons are many and noticeably complex. One is, of course, the retailer-manufacturer relationship, which isn’t biased but sometimes it happens that way. While both parties ideally should be working toward mutually rewarding goals.

Another barrier for changing the practice: the need to utilize the right data at the right time. There are reams and reams of data available on both the retailer and manufacturer side of the table about shopper behaviour, price elasticity, past program performance and a host of other topics. Making matters even more complicated is the growing need to take the digital shopper and new forms of data (i.e. social media data) into consideration.

So while the need for change is loud & clear, the task is still daunting and, therefore, slow-moving. Many large, established CPGs are stuck in legacy systems in which they’ve overinvested; internal policies and politics can oftentimes keep them from changing and evolving with the more advanced technology now available.

Meanwhile, smaller, emerging companies — who tend to be far more agile and nimble and not anchored to legacy systems — are jumping all over newer cloud-based and SaaS solutions.

Traditional CPGs, therefore, have two general avenues to follow: Ditch their legacy systems and start anew or acquire smaller companies that are already leveraging new technology to use as a blueprint for adopting new strategies and tools.
New Tricks for the Trade
Yes, many CPGs continue to use spreadsheets. But others are at the forefront of innovation by exploring — and even investing in — some emerging technologies.

To date, a lot of AI activity has involved the use of ML in e-commerce, particularly for search analysis, product recommendations, promotions and analyzing consumer sentiment — actions that ultimately will enhance trade planning but don’t directly impact TPM.

Another potential area of investment for CPGs entails improving promotional effectiveness through natural language processing, the ability to listen to natural spoken (or written) language, analyze it and generate appropriate responses.

The Future forward
Digital Trends in Trade Promotions
When TPM was still in its infancy back then, Forrester Research reported, “Many consumer products companies are struggling with how to track, report and execute trade promotions effectively internally and … need to master that before figuring out how to manage it with their channel partners. Adding to that is a fundamental question of who owns the money. That makes TPM an extremely difficult conversation for retailers and manufacturers to have.”

Trade spending will be managed through an integrated content management system that blends personalization, A/B testing and automation to allow a much more segmented view of personalized promotions, “It will become ‘programmatic’ just like marketing has, and funding investments will dynamically move between ‘mass’ and ‘personalized’ offers.”

“Promotions will become smarter — but to do so, one needs to gobble large amounts of data, make sense of it, and segment it usefully. Ultimately, promotions should be close to real-time and based on consumer needs.”

Moving beyond isolated trade promotion planning to take a more integrated, strategic view of commercial investments is the ultimate goal for all professionals.

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