Harnessing the Real Power of Trade Marketing

Automation of trade marketing and distribution

The Consumer Packaged Goods (CPG) industry today has seen a historically unprecedented amount of pressure being placed on manufacturers. With increasing consolidation across distribution and retail channels, manufacturers are struggling for visibility, as well as struggling to meet customer demand profitably.

Significant Spending

In this scenario, one of the most difficult and costly challenges facing manufacturers is how to maximize returns from trade spending, or spending aimed at marketing to distributors, wholesalers and retailers. According to one survey by AC Nielsen, trade marketing spend consumes 11 per cent of sales, making it the second largest cost; next only to the cost of goods sold. Additionally, trade marketing also places a significant burden on administrative resources.
Despite this, studies show that most trade marketing and promotion programs are neither cost-effective nor efficient as sales and marketing tools. Research suggests that nearly 90 per cent of trade marketing initiatives do not produce a positive return on investment.
The problem exists partly because of ineffective business processes that characterize most manufacturer-retailer relationships: relationships not altered because manufacturers fear the reactions of their prized customers who have thus far profited. The bigger problem, however, lies in the sheer inability of most manufacturers to properly track and control trade spending.
Thus, if CPG companies can redirect inefficient spends and reduce excess promotion costs, they stand to gain a dramatic increase in returns from sales.

Significant Spending

Automation solutions offer CPG companies a number of significant advantages in the area of trade marketing and promotion:
Advantage #1: They allow manufacturers to analyze markets segmented on the basis of consumers/ products, and plan and execute full-cycle trade marketing initiatives accordingly. They also allow manufacturers to accurately plan their initiatives and incorporate anticipated incremental sales volumes into sales forecasts.
Advantage #2: They provide real time data on trade fund spending, promotional performance and so on, as well as allow for the reallocation of funds across accounts and channels. Automated solutions also allow field sales agents to easily monitor retailer compliance remotely or through store visits.
Advantage #3: Many solutions also let manufacturers automate deductions, claims and settlements. This exempts them from the costly and inefficient task of following paper trails on claims, a lengthy process that retailers often exploit to their own advantage.
Advantage #4: No trade marketing initiative is complete without accurate analysis of profitability, which is by no means an easy task. Automated trade marketing solutions allow manufacturers to analyze profitability based on a wide variety of key performance indicators (KPI).

Solutions for CPGs

A variety of SAP and Siebel solutions are available for automating trade marketing. Oracle Trade Management, for instance, is a comprehensive solution for CPGs. With emphasis on integrated business flows, it is aimed at helping manufacturers adopt best practices to align data, automate processes, and analyze customers and promotions.
Siebel eConsumer Goods 7 is another CPG-specific solution, which incorporates industry best practices for trade promotion management, trade funds management, and deduction resolution. It delivers pre-built integration with back-office systems, including SAP.
The SAP CRM Trade Promotion Management and Marketing Development Finds solutions are designed for companies using trade funds to promote turnover, and having difficulty making decisions on where and how they are spent and accounted for, as well as their efficacy.
Among analytics applications, the Oracle Siebel Analytic Applications for Trade Management come with an open architecture that provides far greater accessibility to the data warehouse supporting a range of analyses. The SAP® xApp™ Analytics Composite Application for Consumer Products provides information on a variety of KPIs such as trade promotions by channel, tactic analysis by sales, actual versus planned promotion sales, actual versus planned budget and budget availability.

Time Saved = Money Earned

If retail companies can adopt industry best practices with regard to planning and execution of trade marketing initiatives backed by fully integrated automated solutions, they will have a chance to capitalize on every spent dollar of their trade funds. And this considerable saving in time and costs means significant increase in profits.

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