Optimizing Trade Promotions
When we have to blueprint the best and the most effective trade promotions that maximizes the truly desired outcome for the companies as well as the consumers, the companies pragmatically will need to optimize the product promotions with a cross disciplinary approach along with a Disciplined Approach To Solution Scoping. Consumer products companies reliably invest and spend substantial funds on product promotions in an effort to build a lasting loyalty with the consumers. The effectiveness of such promotional spends can be maximized by planning and optimizing trade promotions through pre-assessments and analysis of the best possible scenarios.
The integrated SAP Trade Promotion Planning and Optimization solution provides real insights to plan-create-optimize-execute-analyse trade promotions with the capabilities to adjust the promotions to the defined objectives by assessing, predicting and simulating the best possible scenarios. Here, in the following illustration (See Figure 1), for understanding purpose, a simplistic view of the product promotion and optimization process designed with its essential components.
The SAP Trade Promotion Planning and Optimization solution primarily includes the business scenarios as shown in the illustration – creation of agreements, creation of trade promotions, pre-assessment of trade promotions and what-if analysis (Predictions and Simulations). The sales and trade promotion volume decomposition can also be performed based on the historical data; this scenario makes use of the Demand Management Foundation and BW for improving the overall forecast accuracies.
In consumer products companies, typically a key account manager creates an agreement providing a framework for all the trade related activities planned for an account within a specific time period. These trade promotion agreements provide general guidelines such as products, pricing and promotional timelines etc. for planning trade promotions. With this baseline, individual promotions are created and are associated with the agreement. The key account manager creates a product promotion primarily foreseen to define the promoted spend, price, timelines for this consumer and/or customer.
The optimization of trade promotions starts with a Promotion Pre-Assessment. Promotion pre-assessment helps predict baseline demand, forecast trade promotion uplifts and volumes for a defined account within a timeline. It helps to model and compare varying scenarios and select the best possible combinations of price, merchandising and other promotion options to ensure overall sales, volume and profitability objectives. Such optimized promotions during the pre-assessment process can then be used directly to establish benefits to improve volume uplift, margin contribution, product category growth etc.
The scenario Promotion What-If Analysis enables the key account managers to analyse and optimize trade promotions with additional constraints from the consumer and/or customer. The optimization portrays insights from the past data like point-of-sales (POS) to effectively simulate all the scenarios for product promotions and then the system recommends the best possible ones. This process leverages the modelling and optimization completed during pre-assessment along with the guidelines established by the product promotions. This enables promotion planners to simulate potential outcomes based on objectives and constraints to develop individual promotions most likely to achieve ecosystem’s sales, volume and profitability objectives.
The master data for SAP Trade Promotion Optimization and the corresponding foundation are integrated and synchronized with SAP ECC and SAP BW, including the integration of sales history data comprising the distinctive data sources (POS, Syndicated, and Shipment).
The integrated solution footprint includes add-on SAP Trade Promotion Optimization within the SAP Customer Relationship Management landscape for Product Promotion Planning and Optimization. Demand Management Foundation is an add-on to SAP NetWeaver.
The consumer products companies rely on product promotions to improve sales, shape lasting loyalty, and maximize return on the promotion spend. With this integrated solution, the companies can align promotion spends to product promotions to promotion optimizations to value & objectives realizations. Together, the processes, the applications and the integrated systems provide strategic capabilities to understand promotion effectiveness and gain right insights necessary to make the most of the product promotions. They characteristically represent a complete product promotion solution.