5 Trade Promotion Optimization Myths You Need To Stop Believing

Deriving maximum returns from their trade investment is a much-desired aspiration for most Consumer Packaged Goods (CPG) companies and a  well-intentioned agenda.

However, their efforts seem to take a hit because of their reluctance to choose an automated and software-driven approach rather than a time consuming, the cumbersome manual process like using spreadsheets.

This reluctance usually stems from having misguided notions about software solution alternatives that can enable them to achieve desired results. The result of this lack of awareness has led to some CPG companies losing to competitor companies who are able to leverage valuable insights to drive growth whereas those that don’t step up their game are barely staying afloat.

The myths surrounding Trade Promotion Optimization are quite deep-seated and must be addressed individually – hence, we wanted to talk about the most common ones – so CPG companies can identify if they too are bogged down by these.

Learn more: Trade Promotion Optimization: Challenges and How AI Can Help

Myth #1 My TPM system can already do this

The most basic purpose of a TPM system is to manage deductions and record spending. It’s a transactional system and does not hold a candle to what a TPO solution can actually provide. Most TPM systems neither have the ability to gather data to conduct an analysis post an event or provide predictive analytics to help with planning ahead for an event. These are areas that only a TPO solution can provide insights into.

An efficient TPO system provides prescriptive analytics – this goes beyond what predictive analytics provides in terms of tracking features that utilize data, planning approaches for what-if scenarios, optimizing events and calendar. TPO leverages constraint-based modeling to extract meaningful insights from data and subsequently generate improved outcomes.

Because most companies seem to mistakenly assume that the systems in use currently have these same capabilities, they are unable to progress to gleaning and taking advantage of relevant insights.

As critical as an efficient trade promotion management tool is in creating and managing promotions, a platform for TPO has merits that can not be achieved by using only a TPM system. Furthermore, when choosing a TPO it is crucial that you’re choosing a system that enables two-way communication between TPM and TPO to maximize business outcomes.

Myth #2 There are no standardized processes

This myth may be somewhat true – yes, there is a lack of standardized processes across the marketplace and seems to plague both big and small CPG companies, alike. However, it is not a lost cause. Software and services providers do offer best practices for TPx deployments.

Before deployment happens, considerable effort is made to bring together multiple users to engage in improved and regulated processes. However, in scenarios where more effort is required to draft consistent processes, there are consulting agencies across the globe to address the needs of organizations of various sizes.

Myth #3 Trade promotion optimization (TPO) is a long-term vision and shouldn’t be invested in till more evolved solutions are introduced in the market

This is a fallacy that unfortunately runs deep across companies that are afraid to step into change. There is a gradual process to drive adoption and see success. Industry leaders that have chosen to invest in TPO as an experiment have somewhat seen benefits. However, when spreadsheets are used for planning purposes and TPM is the default transactional tool that keeps a record of promotions and trade, it can be complicated to add a layer of a decision support tool, such as TPO system.

Opting for tools which force you to reenter plans from one tool into the TPM system are not viable. It is necessary that these solutions are integrated and can replace the usage of Excel for planning and considerably simplify the customer planning process. There is also an element of science that is required to ensure accuracy and to make a good model work efficiently.

However, it is also important to note that the approach chosen by the CPG company can drive up TPO costs rapidly – this results in limiting the areas where it is applied.

Yet another aspect to consider is that your sales and marketing teams that should be using the analytical approach to plan promotions may not even be ready yet. This drawback becomes particularly evident when you choose a TPO solution that is far too advanced for your employees to understand. What is the point of investing in a TPO solution that generates valuable insights, but is too complicated to understand?

This struggle to understand advanced analytics can be overcome by providing additional training and education. However, CPG companies must make it a priority to design a program that takes all of these factors into consideration to ensure that the change management aspects are managed successfully for your organization.

How you can get started with TPO

TPO is rapidly gaining importance because it promises to deliver big results. Companies should be careful about not complicating the process too much at the beginning nor overwhelming users with the science behind the system. Both of these situations can rapidly lead to adoption issues and subsequent failure. Integration with TPM can be challenging but can be done as long as the rules and validations used in TPM are mirrored accurately.

Here are additional steps to consider:

  1. Strategize before taking the leap. Craft a blueprint for your TPO journey.
  2. Start small and gradually go big. We recommend not introducing complex, hard to understand analytics to beginner users
  3. Evaluate current skills and capabilities in your organization. Provide adequate training to fill in the gaps
  4. Data management can be complex – consider engaging a consulting strategist to guide your organization
  5. Including retailer metrics is crucial
  6. Integrate into existing TPM system to simplify the process for your sales teams

Read More: A Quick Guide To Choosing a Trade Promotion Optimization Software

Myth #4 Implementing a new system is going to cost too much both in terms of money and time

Introducing a new system into an organization is surely a cost and time-intensive affair. It’s easy to understand why businesses would feel reluctant about diving into and disrupting existing workflows that seem to meet current needs.

However, a TPO solution is designed to bring you maximum ROI from your trade promotions. So, businesses would be able to see these returns rather quickly, thereby negating any change management effects. An effective TPO solution and one that you would or should put your money in is one that is able to deliver you results quickly.

Myth #5  Our sales teams will find it too complicated to use

A TPO system actually eliminates repeated, redundant entries and allows sales teams to create and compare multiple customer plans to identify the best promotional mix.

Also, when it comes to working with retail customers, TPO solutions help sales teams improve relationships with retailers by providing them with predictive retailer KPIs in order to facilitate joint business planning. This helps improves business outcomes for the manufacturer, as well.

In an ideal world, you would find the most user-friendly TPO solution and be right on your way to high productivity and business returns. Reality may not quite this rosy.

However, what can greatly alleviate your sales teams’ difficulty in maneuvering a new tool is the integration of TPO chatbots. Chatbots feature conversational interfaces which make it incredibly easy for your sales teams to view their KPIs and obtain key promotion metrics at their fingertips.

If you’d like to learn more about TPO solutions and also how you can integrate chatbots to get the most out of your TPO solutions, do get in touch with us.

You might also be interested in checking out our AI-Powered Trade Promotion Optimization Software – Compass.

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HOW AN AI-POWERED TRADE PROMOTION OPTIMIZATION SOFTWARE CAN IMPROVE CONSUMER GOODS REVENUE MARGINS BY 2%

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