A definitive guide to trade promotion management
Table of contents
What is trade promotion management?
What are trade promotions?
Why is trade promotion management important?
What is trade promotion management software?
Seven steps to successful trade promotion management
Understanding trade promotion management workflows
Why trade promotion management workflows are important
Simplifying trade promotion management workflows
Best practices to optimize trade promotion management processes
Importance of trade promotion management volume phasing
Why choose TELUS Trade Promotion Management?
Trade promotions are a staple of the retail and foodservice industries and a driving force to increase sales and grow market share. However, understanding profitability and managing trade promotions is challenging. Many companies are unsatisfied with their trade planning processes and don’t have clear visibility into how their investments perform. Trade promotion management (TPM) software can help design efficient promotions that deliver better consumer value and ultimately increase your profits.
What is trade promotion management?
Trade promotion management is the process of managing trade spend activity in the retail and foodservice industries. It encompasses the entire trade promotion lifecycle of planning, executing and settling trade activities.
What are trade promotions?
Trade promotions are B2B promotional activities that use pricing tactics to stimulate demand for certain products. Effective promotional strategies can boost brand success. For foodservice manufacturers, trade programs focus on operator and distributor incentives, while CPG retail manufacturers create incentives for consumers to take action.
Some of the most common retail trade promotion strategies include:
Deals and discounts
Discounts for a certain dollar amount or percentage off are the most common tactics to drive consumer demand. You can combine these promotions with incentives for retailers that encourage them to promote the product as well.
Bundles
Bundles can provide value and convenience for shoppers while helping you drive volume. Examples include bundling ketchup and mustard together, or promoting personal care gift sets during the holiday season. Bundles can also help sell slow-moving products by pairing them with popular products.
Display fixtures
Catching the consumer’s attention is the first step in getting a sale, and in-store displays do just that. Examples include end caps, free-standing and interactive displays, shelf talkers, instantly redeemable coupons (IRCs) and more.
Rebates
Post-purchase rebates are popular promotion tools, as they target both wary buyers and impulse shoppers. Rebates can drive demand with minimal impact to profit margins as consumers may purchase the item at full price, but later forget to claim their rebate.
Sales contests
Engaging retailers to promote your product is often essential for successful trade promotions. You can offer prizes, bonuses or other incentives to stores that achieve predefined targets.
Special pricing
Special pricing and customized discounts can be offered directly to consumers digitally, or through partnerships with retailers.
Some of the most common foodservice trade promotion practices include:
Deductions and claims
When distributors or operators agree to carry a certain product they negotiate trade terms with the manufacturer. These can include volume discounts, minimum order quantities (MOQs) and other promotional agreements. When submitting invoices, retailers and distributors deduct funds based on the trade agreement, then your accounts receivable team must validate the claims are legitimate. Efficient deductions and claims management is crucial for maintaining profit margins and fostering positive relationships with your distributors and customers.
GPO discounts
Group purchasing organizations (GPOs) are buying associations that negotiate with manufacturers, on behalf of their members, for volume-based discounts or preferable terms.
Operator deviated pricing
Deviated pricing occurs when the distributor purchases a product at their normal price, then delivers it to the operator minus a discount from the manufacturer. In that case, the distributor bears the short-term cash flow burden of the incentive.
Why is trade promotion management important?
Trade spend is typically the second largest line item on a manufacturer’s P&L after the cost of goods sold. Effective trade promotion management can have a substantial impact on your sales and profits, either positive or negative. Starting with high-quality, historical data is key to designing successful trade promotions and growing margins.
Accurate and timely information: Trade planning decisions are often based on incomplete assumptions or inaccurate data. Sales and marketing managers may have details on past promotions, but they need the full picture. Clearly defined pricing commitments, an accurate demand forecast and store-level performance data all inform successful promotions.
Efficient organization and partner integration: Key elements of organizational and partner integration include standardized metrics, systemic information sharing and collaborative processes. Integration with retail or foodservice partners is the key to successful execution of promotions.
Well-defined key performance indicators (KPIs): KPIs tell manufacturers how trade promotions perform against predetermined objectives so they know what makes a promotion effective.
Effective trade promotion management can boost top-line sales, grow market share and increase net profit.
What is trade promotion management software?
Trade promotion management software automates the process of planning, approving and analyzing trade spend. It provides detailed insights into the volume and profitability of trade promotions, and aids in gathering real-time data. TPM solutions can be enhanced with trade promotion optimization tools, but should include the following standard features:
Reporting and analytics: A robust trade promotion management system will automate data analysis and produce reports to help you make better business decisions.
Contract management: Centralizing contracts provides visibility into how various promotions compare to one another.
Calendar promotion planning: A trade promotion management solution should include a calendar feature with easy-to-view snapshots of past promotions. With a master calendar, your team can assess total spend as well as compare individual accounts.
Automated claims processing: A trade promotion management solution should automate claims processing so that it is streamlined, effective and straightforward.
Issue checks: Automation helps save time and money, and reduces the chance for human error. Issuing checks automatically facilitates accurate and timely payments.
Close deductions: Automatically match open deductions with claims so you spend less time manually identifying payments.
Manage direct and indirect customers: Manage promotions for indirect customers that buy through distributors. Unlike direct sales, where transactions are clearly visible in customer order data, indirect sales require additional attention to maintain accurate promotional pricing and pay claims correctly.
Seven steps to successful trade promotion management
1. Standardization
Capture the right information, and take the right steps every time, with standardized processes. Standardization minimizes or eliminates the chances for human error in each key component in the trade promotion management process.
2. Promotion management
Take control of your promotion creation and storage. Reduce lapsed and lost promotions and build approval accountability. A trade promotion management system’s centralized data makes it simple to approve promotions, pay claims or clear deductions.
3. Data acquisition
Maintain data hygiene throughout the acquisition and logging process to improve financial performance. For example, if a distributor does not meet the deduction policy timeframe you may not have to pay that incentive. Data acquisition includes importing electronic claims data and logging incoming paper claims.
4. Verification
Review claims throughout your trade management process. At each step, be sure that payment requests are valid and non-duplicative. Manufacturers should compare each claim against the terms of the contract and its associated products to ensure valid payment. Evaluate claim data against previous claim submissions to support reconciliation and prevent double dipping.
5. Reconciliation
Resolve invalid invoice details, and place any claim with a discrepancy on “pending” status. The promotion owner can then update the promotion details, or give direction to reject the invalid products or invoices. The account manager must also address the issue with the distributor or operator to prevent future discrepancies.
6. Settlement
Prevent deductions and confirm a valid settlement when settling by check. Or issue a deduction If a check won’t reach the distributor before the deduction policy timeframe.
7. Analytics and reporting
Understand how a trade strategy is performing across channels and customers, and adjust where necessary. Use a KPI dashboard to monitor pending claims, rejected claims, spending by component and volume fulfilment. In standard reports, pull information on distributor performance, estimated vs. actuals by promotion and analyze market support spend against promotion budgets.
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Understanding trade promotion management workflows
Central to the success of trade planning solutions is an efficient and clear workflow. It enables effective management, tracking and optimization of trade promotions. Yet one of the most common change requests post implementation is to simplify the workflow. Below we look at the importance of workflow management and discuss best practices to achieve trade promotion excellence.
Why trade promotion management workflows are important
A well-defined trade promotion management workflow defines the steps to plan, execute, analyze and optimize a promotion. Clear workflows support accurate forecasting to minimize inventory disruptions and deliver more successful promotions. Having visibility into the entire promotion lifecycle can prevent siloed departments from launching overlapping or competing promotions.
Setting business rules and clearly defining your trade promotion management workflow can mitigate budget issues and better control trade spend. This helps avoid overspending and ensures alignment with strategic objectives.
Simplifying trade promotion management workflows
Even basic trade promotion management workflows include the following key processes:
Planning and budgeting: This involves setting objectives and allocating budgets.
Promotion development: This includes product and mechanic design, creation and approval.
Efficient execution: Facilitate communication among internal teams and external partners. Monitor real-time data such as sales, stock levels, customer engagement and retail execution compliance, and adjust as needed.
Post-event analysis (PEA): Collect data from multiple sources, calculate return on investment (ROI) and establish feedback loops for continuous improvement. PEA also monitors long-term effects, both positive and negative, such as changes in customer loyalty and brand perception.
Optimize and refine future promotions: Improve promotion design, audience targeting and budget planning through post-event analysis, and by gathering feedback from internal and external stakeholders. Coordination with consumer marketing is essential to support these activities.
Reporting and feedback: Provides all relevant departments with access to outcomes for strategic alignment and cross-departmental collaboration.
Compliance and auditing: Ongoing monitoring to confirm promotions comply with business and regulatory rules. Conduct regular audits to ide
ntify areas for further improvement.
Best practices to optimize trade promotion management processes
All stakeholders should have a clear understanding of the promotion lifecycle, including the financial impact to the manufacturer and retailer. The workflow should be agile enough to accommodate changes in market conditions, consumer behavior and company strategy.
Pre implementation
The trade promotion management system should seamlessly integrate with your other systems for enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM). Modular features that can be turned on or off as needed can simplify the implementation process.
During implementation
Many organizations discover their workflows are overly complex or misaligned with their day-to-day operations. This can result in reduced user adoption, or create decision-making bottlenecks and delays. A good technology provider will take time to understand your business and focus on automating the right processes with your trade promotion management system.
Post implementation
Post implementation, regular reviews and feedback can help identify which parts of the process are working, and which aren't. Based on user input and advanced analytics, you can make iterative improvements to streamline the workflow. Whenever possible, automate manual tasks to save time and minimize human errors. Users should also receive regular training and refresher courses on how to optimize the trade promotion management workflow.
While simple workflows are ideal, the process still needs to capture all necessary information. Finding a balance between simplification and the need for control, visibility and flexibility are essential to a successful TPM workflow.
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Importance of trade promotion management volume phasing
One of the pain points with trade planning can be aligning supply and demand through target setting and volume phasing. This requires an understanding of both promotion phasing and building blocks.
Promotions can be phased according to pre promotion, during promotion and post promotion. Understanding volumes during each phase is important to designing successful promotions. A promotion can impact the shopper's typical buying cycle with stock-up effects dampening residual sales.
Promotion building blocks help you separate baseline sales vs. incremental sales to measure the actual impact of a promotion and its ROI. By incorporating this data into forecast models, Demand Planning teams can generate more accurate predictions of future demand.
The best way to optimize these two components is to create well-defined category and retailer profiles, then use your automated trade promotion management solution to analyze the data. Using automated analytics capabilities to measure promotional activities is preferable for a few key reasons:
Speed, efficiency and accuracy: Automated systems process large amounts of data faster and more accurately than humans, reducing the chances of human errors and biases.
Consistency: Automated systems help ensure volume phasing is executed consistently across SKUs and promotions, providing a standardized basis for analysis and decision making.
Predictive analytics: Automated systems are able to continuously learn by looking for patterns in historical data including seasonality, past performance and competitor actions. These machine learning models and algorithms make predictions that account for cannibalization and retailer forward buying. They also consider outside factors like economic indicators, weather forecasts and social media sentiment.
With automated systems in place, the role of the account manager in volume phasing then becomes one of oversight. This human element is equally important to ensure that market disruptions, retailer nuances and real-world events are considered in the forecast.
A balanced approach that combines the power of predictive analytics with the expertise and judgement of account managers will likely yield the best results for your promotions.
Why choose TELUS Trade Promotion Management?
Trade promotions can drive sales and profitability, while increasing customer loyalty and cash flow.
In today's competitive market, maximizing the impact of your trade promotions is crucial for success. TELUS Trade Promotion Management solutions help streamline your promotional strategies, from planning to execution. With advanced features like AI-driven predictive analytics, scenario planning and post-event analysis, you can gain valuable insights to optimize your promotional efforts and drive ROI.
Take control of your trade spend and unlock the full potential of your promotional campaigns. Ready to boost your trade promotion profitability? Explore our innovative Trade Promotion Management solutions and start transforming your promotional strategy today.
