Numerous companies continue to struggle to capture the benefits associated with an effective and mature Trade Promotion Management (TPM) program. In many cases, companies fail to recognize the overall importance of “softer elements” such as a change management and training and subsequently place insufficient emphasis on them at the outset and throughout their TPM journeys. This blog series thoughtfully examines the people and softer sides of TPM implementations, spotlights their contributing roles as critical success factors and demonstrates how Clarkston Consulting helps leading Consumer Products manufacturers on their journeys to becoming mature TPM practitioners.
If your organization is considering an investment in a Trade Promotion Management solution or if you are not fully satisfied with your current TPM initiative then this blog series is designed with you in mind. In this series, we’ll explore how to shift TPM out of neutral and provide advice on how to effectively progress TPM toward your desired end-state. The ensuing blogs will focus primarily on leading change management practices and training approaches for mobile constituents.
Over the past few months my colleagues at Clarkston have published several insightful articles (2014 Consumer Products Trends Report and Navigating The Retail Revolution) that contained a number of significant implications for Consumer Products manufacturers and retailers alike. The upshot is how the retail revolution will forever change the way Consumer Products manufacturers go to market and how it will mandate the development of novel consumer engagement strategies in response to evolving brand loyalties and shifting purchase patterns.
Based on these trends and growing body of evidence, it’s safe to assume that Trade Promotion Management (TPM) should expect to be more scrutinized than ever by the C-suite given its sheer magnitude and impact on the bottom-line.
For Consumer Products, where is Trade Promotion Management in the maturity cycle? Trade Promotion has a long and storied history and can be traced back to the 19th century. Progressive companies innovated by coordinating advertising campaigns with trade spend and then equipped their salesmen with inducements for trading partners – the mom and pops and general stores – to drive competitive advantage and promote their products. Coca-Cola, P&G, Wrigley and countless others relied on nascent trade promotion to strengthen bonds with commercial partners while concurrently building resilient consumer brands. Over time, leading Consumer Products manufacturers honed their Trade Promotion practices and birthed TPM as part art and part science.
Fast forward to today where it’s estimated that Trade Promotion represents over $200 billion in annual spending with the typical Consumer Products manufacturer spending between 15-20% of gross sales thus making it the second largest expenditure on the P&L behind COGS. The inventory of expected benefits of a successful TPM program are legion with increased sales and profitability, greater planning efficiencies, tighter spend controls and improved sales forecasting chief among them.
While there are certainly a number of leading Consumer Products manufacturers renowned to be highly proficient practitioners of TPM, from an overall industry perspective, the TPM maturity level is surprisingly low given historical focus, ample resourcing, business process maturity and an array of enabling technology solutions. As evidence, survey after survey reveals a general level of frustration with the current state of TPM affairs inside many CP manufacturers. You can include me in the growing chorus of those who would argue that, in general, Trade Promotion Management has yet to consistently live up to its enormous value-creation potential. Compounding the issue is the aspirational, yet currently unrealistic, anticipation of achieving Trade Promotion Optimization before mastering the basic tenets of TPM.
My personal feelings aside, the pivotal question remains why do so few companies truly succeed in achieving their TPM goals where many more ultimately fail to realize its promise? More to the point, what do those companies do differently from a change management and training perspective to achieve and sustain successful implementations?
There has never been a more critical time for Consumer Products manufacturers to get TPM right. In today’s hyper-competitive retail environment with increasingly empowered consumers, CP manufacturers must fully understand where trade dollars are being spent, corresponding ROIs, and proactively address changes needed to perform more effectively. Equipped with this knowledge, CP manufacturers will be better positioned to achieve the level of TPM maturity right for their business.
Read the next blog in this series: Does Your TPM Need Alignment?