Trade Promotion Management Evolution
SAP has made significant investments in developing a comprehensive integrated SAP® Trade Promotion Management (TPM) solution. With the integrated back-end processes, the TPM solution provides accurate accounting of all trade and financial results, visibility into demand planning, and allowing users to optimally manage all customer activities. Since CRM2007 the SAP Trade Promotion Management Solution is the most comprehensive, integrated TPM solution in the market place.
Trade Promotion Optimization (TPO) is the next evolutionary step of Trade Promotion Management. TPO is an umbrella term for solutions that focus on increasing account/channel/category profitability due to better usage of trade funds and more precise forecasts using advanced analytics and demand data. This doesn’t mean that the transactional systems are obsolete or outdated – they remain the backbone of the business process as execution and monitoring is still equally important, however TPO enables organizations to do so on a more accurate base.
Consumer demand is influenced by a variety of demand drivers, some of which can be considered baseline drivers like seasonality, trend, product characteristics, and channel / store / customer characteristics. Others can be considered pricing and promotional drivers like base (list) price elasticity, promotional price elasticity, cross-product cannibalization and halo – effects, marketing and trade promotion tactics, retail media support, competitor activities and various other exogenous and macro-economic variables.
Advanced Analytics estimates the strengths of these various drivers, and provides answers to questions like what happened, what if these trends continue, what will happen next and what is the best that can happen?
In this blog I will glance at the area of required data for Trade Promotion Optimization or using the terms above – advanced analytics for consumer industries.
Below I listed topics that are worth for blogs on its own in this context … so consider this blog as the first one of a series to exchange thoughts and information on each of the topics below
- Change management process
- System landscapes and architecture
- Forecast quality and accuracy (low sellers, discontinued and new items, source data, etc.)
- Discuss adequate and inflated expectations of the market
- Science and algorithms
- Data availability and quality
- The Magic Button …
The last topic is actually my favourite …
In case you think there are more topics to be discussed here, please send me a message or comment below.
Trade Promotion Optimization software requires data in order to forecast/predict/optimize demand. Demand information is the fuel for a demand-driven process model and the Demand Signal Repository described below is therefore the tank following this metaphor. Being demand-driven is not limited to POS data, but data closer to the shopper enables better and more accurate process outputs.
AMR reports that the use of Demand Information Management (DIM) to manage downstream data has grown substantially, with 59% of companies already using or implementing a demand signal repository (DSR), of which even the most basic form can have a materially positive effect on growth and profitability. A 2006 analyst survey showed that while 70% of consumer goods companies collect downstream data, less than 3% can use it actively to sense and shape demand – we experience it isn’t that dramatic anymore, but still far away from being commodity.
In addition Gartner predicts as one of the most important consumer products industry trends 2009 as: Consumer goods manufacturers looking to manage the wide variety of data available should assess how a Demand Signal Repository could substantially enhance their sales and marketing operations.
Identifying most effective promotions and programs and eliminating promotion wasted spend is mission critical for any consumer products company. Food and beverage manufacturers spend about 16% of their gross sales on trade promotions, according to Nielsen’s 2007 Trade Promotions Practices survey.
Trade Promotion Optimization as defined by SAP provides not only forward-looking solutions allowing consumer products manufacturers to enhance promotion performance and budget effectiveness. Furthermore, Trade Promotion Optimization provides toolset for understanding the past and the effectiveness of trade promotions and the understanding how shoppers respond to the point of purchase drivers.
Therefore Trade Promotion Optimization solutions enable the understanding and prediction of decisions regarding
Customers (retailers, wholesalers, and brokers) set the point of purchase drivers in response to business needs and trading relationship with consumer products manufacturers whereby both have objectives around optimizing/maximizing sales (revenue and volume), profit and growth.
As discussed by Gartner’s Dale Hagemeyer and Synectics Group president Alex Ring, “Trade Promotion Optimization is a way to simplify your management challenges by using predictive models and scenarios to help every person in your sales team. In short, the value of predictive models is to reduce complexity, and to manage performance upward by giving your people some better tools. … It’s also true that no predictive tool can ever say: “This is the absolute one right answer.” Predictive models are analogous to a meteorological forecast that says, for example: “There’s a 60-percent chance of rain tomorrow.” It’s the person receiving that information, not the system, which needs to decide: “With a 60-percent chance of rain, am I going to the picnic or the game without an umbrella?” The forecast itself will never be so binary as to say: “Take an umbrella” or “Don’t take an umbrella.” …”
I guess this means there is no magic button … L
Nevertheless advanced analytics and TPO will be mainstream capabilities in near future within the consumer products industry and at the same time trading partner collaboration will improve as only collaboration, at least on data, will result in mutual benefits and competitive advantages.
SAP enables its customers to be ready for the next generation, and some customers are already well on track with support of SAP.
You’ll find more details about the topic of Trade Promotion Optimization and the topics listed above in future blogs.
If you are interested in other blogs I wrote so far you can click here (/people/timo.wagenblatt/blog).
Using SAP Service Marketplace Quick Link /RKT-CRM or http://www.sap.com/solutions/business-suite/crm/CRM_2007_features.epx you can get more solution-related information.
Thanks for reading – feedback and thought sharing is appreciated – like always!