Salesforce com : Everything You Know About Trade Promotion Management Is Wrong

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Sep 10, 20216 min read

In Salesforce's recent consumer goods report, business leaders indicated that managing trade spend had become one of the top three priorities for consumer goods (CG) companies over the course of 2020. Many CG companies continued to invest heavily in trade spend, regardless of performance. Now, given the increase in spending, the changes in consumer shopping behavior, and heavy investments in digital, many brands are rethinking how their trade programs are managed.

Forecasting methodologies are not always clear and aligned across sales, marketing, and demand, making it difficult to reach a consensus on exactly how much will be sold.

Consumer goods is a $2 trillion global industry, and back of the napkin math tells us about 20% of the revenue ($400 billion) is spent on promotions. Startling recent research shows $104 billion of trade spend is lost on inefficient in-store and digital execution. Retailers continue to hold all the cards, charging a premium for shelf space, demanding on-time, in-full shipments, short-paying the brands, and demanding increasing trade spend. Most CG companies still use disparate spreadsheets and siloed teams to fund, plan, and track these massive budgets and corresponding promotions, so they have no real insight into what's working and what needs to improve. Furthermore, forecasting methodologies are not always clear and aligned across the multiple departments (sales, marketing, demand), making it difficult to reach a consensus on exactly how much will be sold and, consequently, how much will be spent. The reality is:

• 72% of promotions fail to break even
• 60% of promotions go unevaluated due to lack of analytical rigor and manpower
• 58% of business users in a survey believe existing solutions are only somewhat effective at revenue management
• 71% of customers use spreadsheets for trade promotion management

Trade spend effectiveness has always been a challenge, despite being the second-largest profit-and-loss expense after cost of goods sold (COGS). Now, following the great business-to-business (B2B) digital acceleration of 2020, CG companies may risk losing even more control of that spend. Customer expectations have changed, and while other areas of CG companies have been digitized to offer a streamlined, modern customer experience, trade promotion management could lag even further behind. Juggling multiple spreadsheets and parsing historical data just can't keep pace or scale with the real-time data and single-view dashboards deployed elsewhere in their business.

Get a head start on modern trade promotion management

Go to dreamforce.com and sign up for your free front-row seat to learn, connect, and have fun. You won't want to miss our keynote: Drive Revenue Growth in Consumer Goods With a Connected Platform. This will be followed by a product deep dive: Consumer Goods Cloud: Newest Innovations and Roadmap. It starts Tuesday, September 21, at 3:30 p.m. PT.

Register now

Ready to take back your piece of that $104 billion pie? The first step is a change in mindset. The era of traditional trade promotion management is over.

It's time to focus on strategic revenue growth management, here's how to get started.

Evolve trade promotion management to omnichannel

Consumer goods route-to-market strategies are complex. The rapid growth of digital channels and proliferation of points-of-sale have increased pressures on brands to balance in-store and traditional channels with online and emerging channels. Additionally, employees, buyers at the customers, and distribution partners are demanding a modern experience across digital and physical channels to drive value and growth. CG companies that reduce friction through integrated processes and a seamless user experience for internal and external stakeholders will win the day, and we know this is a top strategy for 55% of the CG companies Salesforce surveyed.

Consumer goods companies must be prepared to optimize trade dollars in both traditional trade markets as well as digital channels.

According to RBC, post-pandemic, large retailers intend on redirecting trade dollars to support their own digital footprints for consumers. This means CG companies must be prepared to optimize trade dollars in both traditional trade markets as well as digital channels. Walmart, for instance, is projected to earn $4 billion in advertising revenues by 2025 according to Morgan Stanley. Based on recent acquisitions and partnerships, a good chunk of that will come from brands who want to target its 150 million weekly customers in stores and online. Even traditional CG brands like Campbell Soup Company now see digital spending making up about 50% of their total advertising and commercial support budget. For example, a holiday partnership with Instacart gives consumers free deliveries when they spend $25 on Campbell's products.

One of the major hurdles for change is the inability to harness existing first-party and syndicated data forintelligent trade planning and execution.Lack of an integrated activity plan means brands show gains with one customer and losses with another, diminishing overall profitability. CG brands need a single source of truth for planning, executing, and assessing trade spend, one that ensures the $800 million spent on consumer marketing works in tandem with execution on the shelf, synchronizing consumer activation with trade promotion. A connected digital front office helps manage customer business plans, joint business plans, and account plans, while allocating trade spend through promotions and maximizing revenue; working offline and in email using spreadsheets is simply inefficient and costly.

Leverage joint business plans

The retail channel is still responsible for over 90% of revenue for many CGs. Joint planning with retailers continues to be a clearer path to better execution of both short-term tactical initiatives as well as long-term strategies. Savvy CG companies are driving market strategy through tight alignment with their retail partners, leveraging capabilities that facilitate true joint planning and monitoring during execution. This results in a more agile collaboration so they can pivot and evolve to stay ahead of the competition, ensure return on investment (ROI) and maintain tight partnerships with retailers. Easy access to all information across the CG organization keeps retailers informed and prepared to invest.

A joint business plan process ensures brands can establish governance and accountability across key stakeholders.

A joint business plan process ensures brands can establish governance and accountability across key stakeholders, holding all parties accountable to executing against the plan, detecting deviations, addressing issues, and deploying remediating tactics in real time.

Empower teams to make real-time decisions

There's also growing expectation from end customers, channel partners, and even your employees for the same level of personalization, responsiveness, and 24/7 engagement with your organization that they experience in their personal lives. Real-time data allows for better planning and deployment of resources across channels. Visibility into tasks done by your company or channel partners, shelf availability, shelf standard adherence, shopper touchpoint assets, consumption data, promotion performance, and engagement with promotional assets generate valuable and immediately actionable insights.

What-if analysis can provide insight into how different scenarios will impact ROI, which then can be used to drive discussions during the joint business planning.

Traditional trade management was labor intensive, with 25% of a salesperson's time spent on designing, implementing, and overseeing promotions. But, with a connected digital platform, teams have more time for strategic planning. They can access and orchestrate across multiple models that decompose volume into baseline, calculate real-time uplift and planned total volume, tally KPIs and account scorecards, and simulate scenarios to determine the most effective plan in less time. By leveraging artificial intelligence (AI), they can forecast the baseline, predict uplift and provide a planned total volume and revenue against which real-time KPIs benchmark performance during the execution phase. Additionally, what-if analysis can provide insight into how different scenarios will impact ROI, which then can be used to drive discussions during the joint business planning phase.

Having this data at the fingertips of stakeholders allows inflight adjustments to help accounts and their respective outlets achieve the goals set out in the joint business plan. It further helps to activate the right products at the shopper touchpoint, improve display quality, and strategically implement marketing assets.

Strategically fund trade

Casting large nets with trade dollars while hoping something will catch does little to move business forward. CG companies need to know if the money they spend on trade promotion is yielding real value and ROI.

Modern trade planning should address the rapid growth of digital channels, balancing in-store and online promotion spend, collaborative processes, and in-built optimization.

Modern trade planning should address the rapid growth of digital channels, balancing in-store and online promotion spend, collaborative processes, and in-built optimization. Salesforce's trade promotion management product, acquired through the IP of Accenture's Cloud for Consumer Goods, brings these capabilities to Customer 360. The profit realized through more effective execution - achieved through revenue growth, improved margins, and reduced costs - can be rerouted to investments like product research and development (R&D) and moving the needle in other sectors.

Dive into modern trade promotion management at Dreamforce

Register for your free front-row seat to learn, connect, and have fun. Don't miss our keynote: Drive Revenue Growth in Consumer Goods With a Connected Platform. This will be followed by a product deep dive: Consumer Goods Cloud: Newest Innovations and Roadmap. Dreamforce starts Tuesday, September 21, at 3:30 p.m. PT.

Sign up