$500 billion a year is spent on trade promotions globally, with companies often investing as much as 20% of their revenue into them – yet according to Nielsen 59% of these make a net loss in the Western world’s major markets.
Trade promotions are delivering diminishing returns, and often sustaining rather than increasing category value. And very often, these problems sit squarely on the already burdened shoulders of the Key Account Manager (KAM).
Questions to consider when evaluating trade promotions
It’s easy to see why KAM’s struggle: you have to juggle driving volume, net sales and gross margin. Copy and pasting the same solution from last year might seem to be the answer – but as we have seen above, it just isn’t providing the same ROI. In order to get a better return on that spend, an evaluation of the Trade Promotions both current and historical is needed. Some good questions you may consider are:
- How can I optimise both amount and type of promotional spending?
- Which are the most profitable outlets, and what is causing this?
- What cannibalisation are we likely to see, on both competitors and our own portfolio?
- What expectations and targets did the retailer set this year, and are we meeting these targets?
For meaningful answers to these questions, you need good promotional governance – a simple system to evaluate and predict the success of promotional investments. You need a way of ensuring that your investment will work hard to increase sales, gain market share and engage more customers.
SAP Customer Business Planning takes TPM to a new level
At a time when all these issues are becoming very apparent, SAP’s announcement of an expansion to the Trade Management portfolio is welcomed with open arms.
SAP Customer Business Planning offers better management capability over both promoted and non-promoted products, and when run on SAP HANA, enables real-time management and execution of volume when combined with SAP Trade Promotion Management and optimisation solutions. It can track volume against business targets and provide forecasts with actual data collected from past periods in addition to planning data for future periods.
Providing volume, financial and promotion planning down to individual product level, fully integrated with all backbone functions – finance, pricing, claims management etc. – SAP CBP has potential to provide the KAM with a single workplace.
Could this be what KAMs are looking for?
Either way, effective Trade Promotion Management is not a differentiator – it is a requirement.
Can you afford to fall behind?