Trade Revenue Management Challenges in CPG
Organizations Today
There are various headwinds which are forcing manufacturers to sharpen their ability to understand every penny that is being spent with retailers. Not just above the net sales line, but below the line where retailers are starting to make demands. Those headwinds include:
Retailer Consolidation
The Declining Center Store
The Declining Center Store
Deep Discounter Growth
Acceleration of On-Line
CPG companies are facing challenges that they have never faced before and
the solutions will require a broader set of Trade Revenue Management capabilities than have ever before.
Survey & White Paper
Exceedra and TPG fielded a survey
which reviewed the capabilities and practices that we believe should be
in place at CPG organizations to effectively address the main
headwinds faced. We then reviewed several of the more challenging
areas within the survey and provided solutions and guidance in a white paper released at the beginning of the year.
Given the industry pressures, these
core practices expand beyond classic trade investment to include other
areas. For example, eCommerce may
not be a large part of the business for companies in core CPG categories,
but the effort to service this business
and the impact on trade strategy and P&L’s, is already being felt.
The survey consisted of 17 questions
& respondents were asked to rate their company’s performance.
The questions covered were as follows:
Q1 Brand and promoted group pricing guidelines
Q2 Volume, net sales targets and
Q2 Volume, net sales targets and
trade rate budgets
Q3 Customer Segmentation/
Q3 Customer Segmentation/
Prioritization
Q4 Shopper Marketing
Q5 Incremental funding
Q6 eCommerce planning
Q7 Effective Customer Terms Mandate Negotiation
Q8 Controlling distribution related mandates, fines and fees
Q9 Settling customer claims
Q10 Product, customer and sales hierarchy data
Q11 Trade Systems
Q12 Everyday Price
Q13 Post Event Analysis
Q14 Trade Systems pre and post
Q4 Shopper Marketing
Q5 Incremental funding
Q6 eCommerce planning
Q7 Effective Customer Terms Mandate Negotiation
Q8 Controlling distribution related mandates, fines and fees
Q9 Settling customer claims
Q10 Product, customer and sales hierarchy data
Q11 Trade Systems
Q12 Everyday Price
Q13 Post Event Analysis
Q14 Trade Systems pre and post
analysis
Q15 Customer Promotional Practices
Q16 Trade Investment KPIs
Q17 Upper management understands
Q15 Customer Promotional Practices
Q16 Trade Investment KPIs
Q17 Upper management understands
Trade Systems pre and post analysis (Q14):
Systems are efficient and effective at helping us evaluate our trade
investment, pre and post event. 67% said their existing system & process, or lack of system, was poor.
Clearly there is a need and desire to improve the process and the systems supporting it. We suggest the following areas are important to consider.
1) Make it easier to enter and keep
TPM up to date. The promotion entry
also needs to be accurate based on
how it will be actually be executed. This can be a challenge depending on how things are captured in the system. Part
of the solution is establishing rules on
how to handle the entry, for instance situations like overlapping promotions.
2) Improve the ability to manage the
base volume forecast. From an
accuracy and ROI analysis perspective, the best practice is a statistically generated base forecast at the planned customer level. Many companies don’t have a good handle on this which can lead to after the fact manipulation to improve ROI.
3) Better transparency of EDLP spend when overlaying promotional activity. Promotional overlays drive incremental volume that you must also pay EDLP allowances, this additional spend needs
to be part of the ROI analysis.
4) Get the right data sets for the major accounts to support customer business planning – this means adding
consumption data. This is an ever-evolving process that must be managed on-going.
5) Correcting the event detail after the
fact can be a major challenge. From a process perspective, there needs to be
a balance and realization that what is entered should align to the desired post analysis. If you short cut the entry, it
takes more effort on post analysis to
truly understand resulting in a gap between what was planned vs actual. Correcting the process will improve misalignment.
Read more in our Trade Revenue Management White Paper which
covers numerous challenges faced
and provides you with industry best practice solutions. This is available
for free download here: http://www.exceedra.com/resources/w
Find out more about Exceedra:
With so much to look forward to in the coming decade, we appreciate your help in keeping the POI a relevant, vibrant, and active community, and we sincerely invite you to share your thoughts with us by dropping us a note at
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