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CPG Trade Transformations: Customer and Product Hierarchies

The most common mistake that organizations make when redesigning hierarchies is working in a siloed manner and not considering the needs of different business functions. Organizations need to consider how the hierarchies impact different areas of their business, such as volume forecasting, promotional planning, post-event analysis, and reporting. Correctly structured hierarchies help facilitate insightful reporting, detailed post-event analysis, and accurate forecasting. The key is to set up both customer and product hierarchies in a dynamic way to properly portray how your business forecasts, plans, and executes your trade strategy to support further growth. 

One is Enough 

Organizations often create different hierarchies for different business functions. It’s not uncommon for organizations to have separate hierarchies for demand management, planning, and reporting. This can be a sign that the business functions are working in silos. Mature trade organizations understand that it’s critical to have teams speaking the same language. When managing three different hierarchies, key performance indicators (KPIs) can get lost in the translation of data from one hierarchy to the next. Clearly defined and consolidated hierarchies can help ensure that important market signals are shared from one department to another.  

Imagine a situation where an organization notices lagging demand for a key middle-tier brand. If KPIs are clearly understood and communicated between departments, promotional planning teams may view week volume indicators as an opportunity to increase promotional activities to combat lagging sales. Reporting can then help to determine how promotional activities performed, so effective promotions can be repeated and ineffective promotions can be avoided. When business functions are looking at the same core hierarchies, it opens a channel for cross-functional trade promotion management 

Not Too High, Not Too Low, It’s Just Right 

Think about your organization’s annual trade strategies. What level are targets being set at? What are your organization’s short-term and long-term revenue growth management goals? Does your organization want to expand an entire brand portfolio? Or, is the focus more narrowly on a few key customers or highly performing sub-brands? The way your organization structures its data will impact your level of visibility into how your customers and brands are performing in the market. 

Rightsize Your Data For Your Business Needs  

As your organization grows, your data management grows as well. Organizations that are just beginning their trade journey tend to look at their portfolios at a high-level. As organizations mature, brand and key account managers need to analyze their business at a more granular level of data to see what products are actually driving and at which customer accounts. Reporting and post-event analysis also becomes more insightful when you have the flexibility to track spend at various influential levels of the customer and product hierarchies.  

Make Your Data Structure Work For You 

Data structure can be leveraged to reduce the level of effort required when planning promotional events and conducting analysis. Brand managers often promote specific products together to optimize promotional performance and drive volume. Adding Promotion Planning Groups (PPGs) to your organization’s product hierarchy can ensure that these product groupings can be planned and reported on together. Consolidated hierarchy nodes, such as PPGs, can also reduce the level of effort required to manage and track your organization’s data. Time savings can then be channeled into producing more insights into how your business is performing.  

Use Your Data Structure to Leverage Your Partners 

Organizations often leverage distributors or other resellers to extend their selling power. One downside of working with distributors is that manufacturers often lose sight of  their product after it is purchased by the distributor. As technology becomes cheaper and more accessible, it’s easier for distributors to provide secondary sales (or SPINS data) to the manufacturer. Distributor sales data can be rolled into your existing data hierarchies to provide a more comprehensive understanding of where your company’s product is being sold in the marketplace. If you’re not currently receiving this data, you want to be prepared to do so in the future. Allocating a node of the customer hierarchy for distributors and their key accounts underneath creates a foundation for receiving and forecasting against this data in the future.  

Customer and Product Hierarchies

Need help designing your customer and product hierarchies? Connect with a trade promotion management expert at Clarkston today.  

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Tags: Consumer Products Trends, Data Strategy, Trade Promotion