By Nipun Gujral
This week’s analysis focuses on trade promotion optimization in consumer products.
Creating and unlocking value in an organization starts with knowing precisely where things stand, and where the opportunities for improvement lie. To help, SAP’s Performance Benchmarking group publishes a short analysis each Monday, highlighting hot industry topics and high-impact strategies. This week’s analysis focuses on the issue of trade promotion optimization in the consumer product industry.
KEY QUESTION: Are you maximizing your return on trade promotion spending?
KEY TAKEAWAY: For consumer product companies, competing aggressively for every retail sale, focused “trade promotion spending” tends to create more value than dispersed spending. While companies frequently run many different promotions at the same time to minimize risk and increase demand, the approach also results in lower average spend per program – which in turn prevents programs from reaching their full potential and can even lead to a perception by retailers that a company is under-spending on promotions.
In contrast, according to SAP Performance Benchmarking, focused trade promotion spending programs tend to result not only in higher spend per program but also increased rates of productive spending and overall sales volume, compared with dispersed spending. Specifically, almost 53% of focused trade spend is productive, compared with only 43% for dispersed spend.
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Note to readers: SAP’s Performance Benchmarking program is a strategic service sponsored by its Value Engineering organization. Originally launched in 2004 together with ASUG as a forum to exchange metrics and best practices, the program today has grown into a global effort and one of the largest such programs in the industry—with more than 12,000 participants from more than 4,000 companies and studies available in 12 languages. Participants receive—free of charge—customized and confidential benchmarking comparisons against industry peers as well as aggregate analyses. To participate in the SAP benchmarking program, visit https://valuemanagement.sap.com.