What is Trade Promotion Optimization?

Understanding Promotion Performance

The annual sales revenue of Consumer Goods (CG) companies globally is well over one trillion US dollars. And according to a report by McKinsey, these companies are spending over 20% of their sales revenue on their trade promotion. Of these promotions, 59% of them actually lost money.

This significant lack of confidence in trade promotion strategies and limited return on investments, highlights a real issue with current trade promotion processes. A more holistic insight-driven approach needs to be taken in order to minimize overall trade spend waste and maximise effectiveness.

This is where Trade Promotion Optimization (TPO) is the game-changer; the ability to review and relate past promotion performance to future promotions removes the issues that arise when ‘flying blind’. More often than not, companies will repeat the same mistakes based solely on the merit of consumer habits and segmentation assumed to be the same as last year (SALY). Outdated insights lead to promotions that are not relevant to the changing consumer marketplace.

TPO vs. TPM: Integrated Optimization

Data-driven insights into all areas of commercial and promotion performance is where TPO adds value to existing Trade Promotion Management(TPM) approaches. While TPM orients around planning, management and execution of promotions; the optimization element comes from understanding.

Typically, TPO has been considered the afterthought to follow TPM, regarded as an entirely separate entity in the promotion process. But, the two areas need to be seamlessly linked together in a real-time partnership. Before a promotion is at the planning stage, TPO provides the opportunity for businesses to understand:

• Prior success (or failure) of individual promotions with reflective analysis from previous cycles.
• External influencing factors that can affect customer habits and segmentation.
• Cannibalization impact of promotions within the same category.
• Multi-category cross and upsell when promotions are run.
• The impact of competitors on promotion effectiveness.
• Pre-existing relevant data on similar promotions and target audiences.

The value of these insights are significant. Without them, Trade Promotion Management strategies won’t drive a return of investment and when issues are identified, the necessary improvements are too late to be effective. By combining these data-driven TPO insights with TPM execution, peak performance can be achieved across category and trade promotion spend optimized.

Aforza Trade Promotion Optimization

Aforza Trade Promotion Optimization (TPO) provides a suite of new capabilities to support the continuous improvement of trade promotion strategies, with:

• Real-time insights, pulled from a range of commercial data sources, that allow you to optimize strategies based on your business goals and current supply and promotion constraints. This allows you to maximize the value of every dollar invested in trade promotions.
• Rich, interactive reports and chart visuals make this insight highly actionable, so changes can be made in real-time. Users can seamlessly drill down from the insight into related records.
• Powerful Promotion Planning Dashboard that allows you to target the right customers by sharing a real-time view into promotion performance, inventory levels, sales order insights, budgets & funds, plans and objectives.
• Granular Promotion Insights that provide a real-time view into how a single promotion is performing, including individual SKU performance within the promotion, promotion performance over time, and overall promotion profit & loss. This supports real-time in-flight changes to promotions to maximise their effectiveness.

With these industry-leading innovations and capabilities, the Aforza cloud & mobile solution continues to help consumer goods companies sell more and grow faster. Take the first steps now and experience how insight-driven decisions can grow revenue like never before.