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Business Intelligence can be an enabler for performance improvement across multiple areas of a Consumer Packaged Goods (CPG) business. In this blog I will focus on Trade Promotion Management.

What is Trade Promotion Management (TPM)?

A simple definition is a set of processes that aim to manage promotional spending so that it maximizes sales up-lift, brand awareness, market share, and return on investment.

Why is improving trade promotion management important?

Trade promotion management is the second largest expense in CPG businesses, and on average it represents 17% of revenue according to benchmark studies by the Trade Promotion Management Associates (TPMA). Yet most CPG companies acknowledge that their TPM activities are not effective at generating incremental sales volume and return on investment. Survey respondents indicated on average only 61% of trade promotions generate incremental volume, only 62% of promotions are being fully implemented at all locations, and  promotions increase out of stock incidents 2.3%.

How do you improve trade promotion management?

Measure and analyze post program results – companies need to understand why different trade activities are successful or not. By measuring and analyzing results companies can better understand the impact of various factors such as placement (checkout stand vs. end of aisle), spending type (off invoice, bill back, scan-based, etc), distribution channel, frequency of promotions, seasonality, and brand/category, on incremental volume and profitability.

Focus program spending – companies need tend to spread trade dollars evenly across brands and categories instead of focusing on those with the highest trade returns and greatest growth prospects. Brands with high market share in premium categories generally merit high investment, whereas brands with low market share in value categories tend to be poor opportunities for trade investments.

Link promotions with stock planning – companies need to ensure products are on the shelf during promotional events. Improving trading partner collaboration on forecasting and replenishment logistics helps maximize sales/margins by reducing out of stock incidences. It also helps improve customer satisfaction, loyalty and traffic during future promotions.

What can BI enable?

The data integration, reporting, analysis and visualization capabilities of BI can provide better visibility and insight into the efficiency and effectiveness of TPM. Some examples include;

A food and beverage company used BI to analyze promotions and found that the poor incremental sales volume and return on investment were a result of their complex mix of many small trade programs. Despite outspending competitors on promotions retailers were under the impression the company was spending far less than it actually was. Consequently retailers were giving competitors more favorable display and ad placements. By significantly reducing the number of trade programs and redirected spending toward brands with the highest potential the company increased in-store activity 10% and ROI 15%.

A household products company used BI to better understand the relationships between promotions and purchasing patterns. By analyzing the historical effect of promotions based on different attributes such as promotion type, channel, geography, etc they were able to more accurately forecast retail demand. Better integration between promotion and demand plans enabled them to reduce out of stock when a promotion is running from 5.2% to 2%, while reducing overall days of stock 24% (from 29 to 22 days).

Demonstration

At the following link you can see a demonstration bit.ly/LLLB2L

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19 Comments

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  1. Shaji Thomas
    This looks interesting… Would you be able to share more info such as:

    1) The solution components in the landscape required as a prerequisite, eg: SAP CRM, SAP BI, BObj etc

    2) Is this available as BI business content / standard offering or is it a custom solution?

    3) Apart from enterprise data sources, are external sources also considered?

    4) Would the solution be applicable for a CPG customer without SAP CRM (TPM), i.e only SAP ERP in place (using promotions in SD module)?

    Thanks,
    Shaji.

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    1. Dan Everett Post author
      Hi Shaji,
      Our industries team has built several of these types of accelerators to speed time to value.
      While dashboard I show was built with integration to SAP CRM, the design idea behind the value accelerators is to make them flexible enough to work in any environment.
      So the only required component is SAP BusinessObjects BI, which can integrate data from any source (Siebel, Saleforce, JDE, Peoplesoft, Wal-Mart Retail Link, etc).
      If you have SAP CRM it is more pre-packaged, if not it is more a template where the data sources need to be mapped to the report/dashboard models.
      I am going to contact our industry team and have someone provide more detail.
      Regards,
      Dan

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    2. Chantal Henault
      Hi Shaji,

      Regarding your question on the integration of  external sources, I can provide additional information.

      TPE architecture is highly flexible and facilitates the integration of SAP and non SAP data. We plan to enrich the universe with syndicated data.

      Best regards,
      Chantal

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      1. Alexander Schuchman
        I really think this new approach will make it much easier for us customers to implement these new SAP tools.  The “old” model of having to activate content, match the data structures used by the customer to the “SAP Standard” and then finally duplicate all other custom logic was quite a barrier to setup.
        I’m really looking forward to trying out this new TPE approach next year.
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  2. Alexander Schuchman
    We currently have CRM 5.0 TPM implemented with plans to goto CRM 7.0 TPM.  We’ve built our own Xcelsius Dashboard for TPM but would love to know more about the one you are showing here.
    -Alex
    (0) 
    1. Dan Everett Post author
      Hi Alexander,
      The dashboard I showed is currently available.
      I will find the appropriate person on the Industries team for you to speak with.
      (0) 
      1. Alexander Schuchman
        Great, thanks for your help.
        We are using BI Ehp1 SP4 with CRM 7 and BOE XI 3.1 FP 1.6 from a software perspective.
        Hopefully we’re at the proper release for this wonderful dashboard.
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        1. Dan Everett Post author
          Alex,
          Chantal Henault is the product manager.
          She indicated that she has worked with you on several occasions and that you have her contact informtion. If you don’t have her contact information send me an email (dan.everett@sap.com) and I will send it to you.
          Regards,
          Dan
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    1. Chantal Henault
      Dear Vitality,

      We are currently developing the BW content for Funds management. It will be delivered in BI 7.0 EhP5 and integrated within the next version of TPE. The planned release date for BI 705 is 14.06.2010.

      Best regards,
      Chantal Henault
      Product Manager
      IBU Consumer Products

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      1. Witalij Rudnicki
        Thank you for this information. It is relevant.

        Just one more request: it would be great to have documentation for TFM and TCM DataSoures (that are available already today) at help.sap.com.

        Best regards,
        -Vitaliy

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  3. Steve Wisz
    Hi Dan,
    This is a great dashboard and strong concepts to convey.  Currently, we (The Principal Consulting) are partnering with SAP to create an Accelerated Implementation package for TPM.  If we can also include this dashboard, then I think it would be a strong selling point for TPM.  Any contacts or further details that you can provide would be great.
    Best regards,
    Steve
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    1. Chantal Henault
      Hi Preetham,

      Find below the Bill of Material for TPE.

      ƒÞ     Business Objects Enterprise Xi R3
      ƒÞ     Business Objects Data Federator Xi R3
      ƒÞ     Business Objects Xcelsius

      TPE with Funds Management content will be available in BI 7.05

      For your questions related to APO, it all depends on your forecasting requirements. TPE is reading the Baseline volume from APO. For Forecasting, it is possible to call a Web Service to APO.

      For Forecasting, we have several possibilities. Please, send me your availability and we can discuss it.

      Analytics based on Market Research and POS data will be included in a future release of TPE. For integrating and harmonizing external data, we have a standard package available. We can also discuss it.

      With my best regards,

      Chantal Henault
      Product Manager
      IBU Consumer Products

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        1. Chantal Henault
          Hi Vitality,

          Business Objects data Federator is not mandatory but highly recommended for running TPE for the following reasons:

          – Data Federator allows the use of Business Objects “Classical” universes as well as OLAP universes for delivery of content through Web Intelligence, Explorer, Crystal and Xcelsius

          – Data Federator provides support for multiple cubes, BW and non-BW sources concurrently to the Business Objects Universe

          – Data Federator allows version control of target and source data structures, enabling a high degree of flexibility for sourcing without impact to the Universe, Reports or Dashboards

          – Ease of Use for enhancing the application with future requirements

          Best regards,
          Chantal

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  4. Kripa Nidhi Tiwari
    Hi Dan,

    What is SAP doing on the predictive analytics in trade promotion area. I have not seen anything signifcant in this area from SAP though several niche players are quite active.

    /Kripa

    (0) 

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