The TPE Gap (Trade Promotion Effectiveness)
Everyone in CPG who has anything to do with trade spending knows the importance of having a trade promotion management or TPM product / solution.
Not everyone uses one, and many don’t use it correctly, but most at least see the need and benefit. CONTROL. TPM products finally provided the visibility and a tool to manage and “control” where the money is going so it can at least be tracked with a relative degree of both timeliness and accuracy without sweating while waiting months for final deductions to come in that could dramatically impact the financials.
However, over the last 5 years or so the industry thought leaders have been focused on the evolution from TPM to TPO or trade promotion optimization. What is TPO? Basically it’s analyzing past performance to create models as a predictor of future performance. Pretty sophisticated stuff. And while not necessarily esoteric in concept, in practice there are not many, if any, manufacturers who are doing it to the degree that it has become part of their annual planning.
But there is a big gap between a TPM product that controls where the money is going and TPO that predicts future performance. It’s called TPE – trade promotion effectiveness.
TPE is a range of practices, processes and analysis to maximize the ROI on your trade spending working within and beyond the TPM product. It goes beyond just inputting data into a TPM product to manage and control your trade spending by:
- Ensuring that the approach to trade spending is guided by trade marketing best practices in general and within a TPM product.
- Analyzing your trade spending, and both shipment and syndicated data results at top retailers and your top promoted groups (based upon the 80/20 rule) to determine if you are getting a reasonable return from your trade spending.
- Developing trade marketing plans from a macro and then an account by account basis to maximize your overall business and brand objectives in total and by retailer, promoted group etc.
- Finally, ensuring that a TPM product is being properly used to maximize its effectiveness which includes proper training, administration and compliance to ensure all levels of the organization use it correctly and fully.
In summary, almost every CPG manufacturer, and certainly the small and medium sized CPG’s, need to fill the TPE Gap to maximize ROI of trade spending before thinking about predicting future performance: