Trade Promotion Management Software Solutions: Thriving in the Fourth Industrial Revolution
It’s no secret that recent decades have seen drastic, ongoing changes in the retail industry. As consumer demand increases and methods of buying and selling shift, new revenue opportunities emerge for retailers. In order to fully pursue those opportunities, it's important for retailers to overcome old challenges. Industry 4.0 is here, and it’s transformed how retail operations relate not only to consumers but to the manufacturers they work with.
One of the ways businesses can adapt to the new landscape of Industry 4.0 is through effective digital transformation — what we call digital evolution. By successfully implementing the necessary tools to handle and interpret data, streamline processes, and overcome challenges, any adaptable and driven business can thrive in a retail environment that is unlike the retail environments of the past.
Although many aspects of retail have completely changed as a result of Industry 4.0, some areas are still modernizing. Due to significant challenges in the area of trade promotion management (TPM), digital evolution is greatly needed in this space.
What is Trade Promotion Management?
It’s easy to think of consumer goods manufacturers as focused entirely on the production of goods for sale. In this way of thinking, retail and manufacturing are almost entirely separate. The reality is that they have a much closer relationship.
Manufacturers regularly engage in TPM to effectively drive demand for their products in retail spaces. It’s a B2B marketing and revenue strategy that makes a manufacturer’s products more attractive to the retailers that buy them through the use of various incentives. It also ensures retail and foodservice companies are getting the right products to the right stores at the right time.
Here’s how Gartner defines TPM:
“Trade promotion management (TPM) is the processes and technologies that consumer goods manufacturers leverage to plan, manage and execute the activities that require collaborative promotional activity from their retail partners.”
So why do manufacturers do this? And what do retailers get out of it? Ideally, TPM is a mutually beneficial, collaborative process where both manufacturers and retailers earn better ROI. Having solid TPM software can also increase market share, customer loyalty, customer satisfaction, and customer retention. Both manufacturers and retailers are able to sell more, and consumers are able to take advantage of the promotions.
Most of the time, TPM incentives are structured around special pricing. One well-known example is a manufacturer’s coupon for any number of consumer products. However, many promotions like rebates, bundles, included gifts, and other offers are all forms of trade promotions.
Examples of Trade Promotions
Retailers and manufacturers use a range of techniques to drive demand for products.
There are more kinds of discounts than just coupons. Consumer-level offers such as buy-one-get-one-free, percentage-based discounts, and seasonal discounts are all effective for driving sales on items that retailers want to move.
Wrapping multiple products into a bundle is a promotional strategy that works to expedite sales for slow-moving products by offering them more popular or faster-moving ones.
Another widely-known strategy is for manufacturers to offer retailers special merchandising displays for products that are new, discounted, or otherwise part of a promotion.
Rebates are financial offers that a buyer can claim after making a purchase. Usually a fixed amount, these offers can look similar to a discount, but in practice, they work quite differently. It is up to the buyer to claim a rebate after making a purchase, meaning the seller takes in the full price of a product.
Prizes and Gifts
These items may be offered in limited or unlimited quantities, meaning they can be guaranteed with a purchase or offered for a limited time to drive demand for the associated product.
TPM Offers More than Increased Sales
Which kinds of promotions a manufacturer or retailer will want depends on a complex set of factors, from what kind of product is being sold to what is most likely to facilitate data collection. Although it isn’t always leveraged to its full advantage, TPM can be a great source of data. Current data from TPM activities can lead to actionable insights that better support ROI.
This is one important reason why manufacturers and retailers must pursue digital evolution to optimize their TPM. While lost revenue opportunities are a significant challenge, underutilized data sources also represent a loss. Without effective data collection and analysis, companies miss out on opportunities to improve their TPM for long-term efficiency.
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How Can Technology Solve Problems in TPM?
TPM is a complex set of processes, and it goes much deeper than simply offering and accepting discounts. The fact is, trade promotions come with their own costs, and those costs can be substantial. What’s more, many companies don’t have the technology in place to give themselves a clear understanding of how the time and money invested in trade promotions is being used and whether or not it’s paying off.
One challenge affecting retail is that 72% of trade promotions fail to break even. Why? Oftentimes, poor promotion planning is a significant factor. Without effective planning procedures and tools in place, there’s no basis for trade promotion optimization efforts that increase the success of promotions over time. This means companies can get stuck creating promotions that don’t work.
Another unsettling number: 60% of promotions aren’t appropriately evaluated for their effectiveness due to a lack of procedures or personnel to conduct proper data analysis on promotion performance. Even if retail execution is generally successful, many retailers aren’t able to harness the insights to account for it.
As you can see, TPM is not without its challenges. More than half of companies engaged in TPM are missing a complete, modern, and technology-focused strategy. Fortunately, awareness of this problem and the associated revenue loss is growing. Retailers and manufacturers alike are seeing the need to evolve past simple tools in a complex industry.
Trade Promotion Management Software Solutions
Companies have the people and the knowledge to evaluate promotions, but the data shows that the tools may not be in place. 71% of customers use spreadsheets for TPM, while over half say that their methods are only somewhat effective. Considering that $300 billion dollars of TPM are managed on spreadsheets, according to Path to Purchase, many decisions about investments and strategy are often made in the dark.
So instead of using this approach to TPM, forward-thinking retailers and vendors need to consider using a trade promotion management system (TPMS). This system offers opportunities for all parties involved with the promotion to gain the real-time data needed to make effective decisions.
A good TPMS will integrate with your customer relationship management system (CRM) or offer these solutions natively within it. For example, Salesforce offers TPM solutions natively within the CRM without needing a separate system to manage it.
Regardless of if you choose a stand-alone TPMS that links to your existing systems or an all-in-one software solution, here are the hallmarks of a good TPMS:
- Calendar Planning: A significant feautre of most TPMS is the calendar planning feature. This allows decision-makers and team members to see past and upcoming promotions and track efficacy.
- Estimations, Forecasting, and Reporting: Financials play a huge role in TPMSs and trade promotion optimization (TPO). Seeing the spend associated with specific activities can help companies track profit and loss, as well as forecast future activities more accurately.
- Contract Management: TPMSs offer a centralized contract database, ensuring that different contracts can be compared with one another.
- Automation: Building workflows in your TPMS ensures effective automation of payments and claims processing.
- Approval Management: TPMS usually has features that allow for approval management and activity logging, so everyone on the team is aware of who is doing what.
A great use case for effectively implementing a TPMS is how one retailer used the MuleSoft Anypoint Platform to streamline and improve their TPM. That company used MuleSoft to create a technology-focused strategy and overcome several challenges in a difficult industry.
An Example Use Case of TPM Software to Overcome Challenges in Retail
In this use case, the company is a large retailer of fruit juices, smoothies, and other beverages operating in the United States. Not only is the market they operate in a competitive one, but short product shelf lives and the need for constant refrigeration present additional challenges. Careful planning and execution of promotions and trade activities are important for this company’s success.
Like many retailers facing challenges with TPM, this company was using multiple, inflexible tools to plan and track trade activities and promotions. Insufficient solutions like spreadsheets forced the company to rely on manual data collection, causing them to invest more heavily in data entry rather than predictive analytics. This method also left greater room for error.
Planning suffered from a lack of feedback from the sales department, leaving the process static and unchanged by insights from the results of past promotions. Inconsistent activities and difficult-to-calculate ROI only made things murkier.
One of the first challenges the company needed to overcome was the allocation of working hours. They needed to move their personnel away from spending time on data entry and toward spending it on data analysis. This would mean getting much more value out of the work being done, improving the accuracy of sales forecasting, and creating a better understanding of past trade activities.
The company also needed to find a solution that would allow them to easily track promotions as they happened. In order to get a better understanding of ongoing performance, they also needed an accurate, automated ROI dashboard as well as a method for viewing and handling customer requests.
The company found a viable trade promotion management solution in MuleSoft. Using MuleSoft, the company is now able to integrate its TPM tools into a single, unified dashboard. This gives them the intelligible, dynamic insights they need to better understand promotions and forecast sales. Its automation features also remove the need for manual data entry, as well as the associated margin for error.
With dynamic and adaptable trade promotion management solutions, they’re able to forecast their sales broken out into base and incremental sales based on their growing understanding of their own unique and dynamic promotional sales lifts. The sales and marketing managers are also now able to simulate promotions and make more informed trade promotion decisions beforehand.
Trade Promotion Management is Due for a Digital Evolution
Consumer goods companies that know how to make promotions effective rely on connected IT systems that unlock access to valuable data. MuleSoft helps securely unlock this data by integrating any system — both in-cloud and on-premise — allowing companies to automate anything and empower everyone for more streamlined processes, data-driven decisions, and more effective trade promotion.
Learn how AVIO helps companies implement MuleSoft and start their own digital evolution.