Trade Management Moneyball
Trade management has been around for more than 25 years. So you’d think that we would have mastered the trade management process by now, right?
But the truth is, many CP companies are still struggling with how to manage the daily aspects of trade management. In fact, even today, many are still using spreadsheets to calculate an ever-changing combination of business rules, constraints and goals to create the optimal trade strategy. This causes issues with everything from version control to limitations on collaboration with partners.
There are many compelling reasons to deploy better, more advanced tools to manage trade promotions. For example, retailers count on manufacturer support to achieve revenue and profitability targets, and they demand personalization to match their own shopper profiles. If retailers can’t get the right promotions in place, they’ll look to other manufacturers who can provide the promotions and programs they need.
Beyond this, CP companies have an opportunity to improve return on promotions. Most companies don’t realize that the average return on trade promotions today (according to Capgemini) is negative 19 percent. But using new tools can help improve that percentage significantly.
By expanding the definition of trade management to include all volume – both promoted and non-promoted – and leveraging solutions that enable collaborative business planning, CP companies can align and tailor plans to retailers, while driving revenue, volume and profitability growth for both parties.
It’s comparable to the revolution that’s occurred in baseball the last decade. If you saw the movie “Moneyball” with Brad Pitt and Jonah Hill, you’re familiar with the story of how a low-budget baseball team embraced statistical modeling and analysis to win more than 100 games and achieve one of the longest winning streaks in baseball history. It was a revolutionary approach that challenged traditional thinking, and it worked.
Today, every team in baseball uses the moneyball approach by leveraging advanced modeling and optimization to monitor player performance across a wide spectrum of measures, identify skill gaps on their roster, assess players’ strengths versus field position and game conditions, evaluate proposed lineups versus other teams for upcoming games, and field the optimal combination of players in the best positions to help ensure a win.
Sound familiar? The moneyball approach can elevate your trade management game, too.
In baseball, the same data that influences how a pitcher will pitch to a hitter can also influence where outfielders are positioned to improve the likelihood of recording an out.
Likewise, in trade management, planning for all volume – promoted and non-promoted – against CP company and retailer goals by leveraging actual past performance data can enable companies to forecast and optimize results for future periods.
Enabling a comprehensive view of overall account relationships, including promoted and non-promoted activities, gives sales leaders and account managers the capacity to fine-tune all activities and plans versus shared revenue and volume objectives with the retailer, enabling teams to design and tailor plans and execution to meet both retailer and consumer expectations.
Finally, offering account managers real-time visibility into key performance indicators (KPIs) for daily measurement of business performance, target achievement and ROI enables comprehensive trade management that that includes collaborative planning and an end-to-end account management.
Consumer products companies can pursue trade management moneyball in three steps:
1) Think. Leverage new, integrated tools that align both non promotional and promotional activities. By combining planning and execution for non-promoted volume along with promoted volume, consumer products companies can better achieve comprehensive, real-time, end-to-end retail and omnichannel account management.
2) Plan. Optimize volume and margins during planning, taking into account both retailer perspectives and other internal perspectives such as marketing campaign plans, supply chain forecasts, inventory availability, production plans and more.
3) Manage. Manage execution, driving toward the overall plan and fostering a shift toward measureable, profitable promotions and programs.
Pursuing these steps relies on data and augmenting internal data with external POS, syndicated and other data can significantly improve promotion performance and customer profitability while helping drive category growth.
For example, by monitoring consumer sell-through patterns with an individual retailer, CP companies can tailor promotions and programs to regions or individual stores to align activities with consumer behavior, help ensure compliance and enable course corrections as needed, all while improving ROI for themselves and the retailer.
Looking beyond trade promotion management to a more holistic definition of trade management helps enable collaborative and continuous improvement. For more information on how to reinvent your trade management program, watch our recent presentation on Revolutionizing Trade Management