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A Trade Promotion Optimization Health Check

Whether you are well along your trade promotion optimization journey, just getting started, or are focused on getting the most value out of trade promotion management; a trade promotion optimization health check is always a good thing. Take for example a typical consumer products company with $1 billion in annual sales will, on average, invest approximately $200 million on trade marketing activities. For an investment that is such a large portion of your budget, the right level of attention is required to achieve performance expectations and realize business benefits.

What is Trade Promotion Optimization (TPO)?

Before we dive into TPO, let’s level set on the definition. Trade Promotion Optimization (TPO) is the use of predictive modeling techniques and advanced analytics to identify the best combination of promotion investment variables (mainly prices, merchandising, and timing) with a set of constraints to achieve a specific goal (e.g. $1M in incremental sales return). While the ultimate goal is to get to trade promotion optimization, focusing on properly managing your trade resources effectively is an expectation which itself can drive tremendous value. Before making a leap to TPO or setting an expectation of TPO performance, a self-reflection needs to occur to make sure your trade promotion management (TPM) processes are well established.

How can you set your TPO journey up for success?

TPO Health Check

Click the image to view Clarkston Consulting’s perspective on TPO

TPO is a journey not a project, is bigger than just technology, and when done right, can drive you organization forward and generate positive returns. But a TPO journey and its ongoing success is complex to manage. Regardless of where you may be on the trade promotion continuum, take a step back and ask these five questions to gauge the health of your TPO journey.

1. What is your trade strategy?

Strategy needs to be well defined, communicated, and executed. Strategies can change and a health check can confirm that your strategy and actions are in sync and driving the intended outcomes. When reviewing your strategy, consider changing consumer preferences, industry dynamics, economic trends, and company performance. One of the biggest factors impacting trade strategies today is the complexities of multichannel and digital.

2. Is your trade process a well-oiled machine?

A prerequisite to TPO is process excellence. A combination of repeatable processes, enabled by your people will give you the foundation to leverage the outputs of TPO effectively.

3. Are your people bought-in and incentives aligned?

Success of your TPO journey is largely driven through the adoption and support of your people. Are you incentivizing sales in a way that supports your trade strategy? Do you have stakeholder support and interest?  May companies implement aspects of TPO, but don’t do the needed change management with Sales to make it executable.

4. Are your tools and technologies a right-fit?

There is a perception that TPO requires a large investment in technology. In our experience, TPO doesn’t have to be an expensive investment in technology. You can use a point in time TPO analysis or create low cost TPO solutions. Having the right requirements will help you make decisions on where to invest time, energy, resources, and dollars to keep you moving forward in your TPO journey.  Additionally we recommend looking at your TPM and TPO tools separately vs. trying to find one solution which fits both.

5. Do you trust your data?

If the answers are unclear to any of the four questions above, likely the answer here is no. Trustworthy data from TPM is required for TPO. Poor data is often a reflection of gaps in strategy, process, people, and tools. Remember Optimization is a math model, and garbage in equals garbage out.

Take a step back from the day-to-day and reflect on where you are or where you want to be with Trade Promotion Optimization. A mature organization would have processes that drive consistent results, with ongoing opportunities to engage with customers using speed and agility. To take the next step in your TPO journey you must understand where you are today compared to your peers.

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