A study by Nielsen indicates that the consumer goods companies across the globe have doubled the amount of money they spend on trade promotions, and today about $1 trillion is spent annually on trade promotions by them. Trade Promotions such as coupons, bulk deals, and others help businesses get their products onto store shelves for a better consumer mind share, convert non-buyers to consumers, encourage repeat purchases, and make the brand stand out.
But, budgets are not bottomless, and without a formal trade promotion management framework to plan, analyze and predict the performance of promotions, you slash prices but erode your profit margins. With the right promotional tactics and recommendations, your business can ace promotions for an improved topline and the bottom line.
In this blog, we will be discussing some of the best practices a CPG company can implement in its Trade promotion practices for better success.
Adopt a fresh thinking
Consumer goods companies may still have the traditional thinking on trade promotions management, leading to a wrong idea of success. Tracking unimportant metrics or incorrect measurement of promotional sales leads to poor performance and reduced ROI.
The trade promotions management model can be highly complicated, and by breaking it down into Trade promotion management (TPM) and Trade promotion optimization (TPO), you are over-simplifying the process.
Take a closer look at how things are currently, and maybe you would want to go from implementation to measurement of trade promotions and then to best practices, planning, and optimization. This approach will help you test promotions thoroughly for better success.
Measure the right Metrics
Most consumer goods companies focus on retail dollars or shipment dollars for measurement and try to equalize product volumes across. This approach fails when you have products of varying measuring units like beverages measured in cases and candies in pounds.
Convert these metrics into easily comparable ones across products. You may also want to measure your promotions by the incremental sales generated to help you estimate the impact on business without a particular promotion in place.
What metrics to choose depends on your business processes, but make sure that those do help you analyze promotions holistically.
Not Everything that Shines
You may be envying new promotions that your competitor is running like Buy One Get One Free, Get 50, Bonus Packs, but are they successful? You may have interesting displays in stores, but without the price discounts, they don’t work. BOGO (Buy One Get One) helps lift the sales, but if your products are at a higher price point, you will need a percent off. Consumers are intelligent enough to let some promotions pass by. So you would be better off with fewer promotions but deeper ones. Choose what works best for your business.
Choosing the Trade Promotion Management Software
CPG brands handle hundreds of promotions as the importance of trade promotion grows. With an exponential growth rate, you should be able to set up and implement trade promotions quickly and easily. With a robust solution that adopts a solid TPM framework, your business will achieve faster implementation and better optimization with minimized costs. The software will help you become data-driven with your trade promotions for long-term efficiency.
By opting for a trade promotion solution with the right framework and technology, your business is up for success. Keep these best practices in mind when setting up your next promotion!