A white paper from US publisher, Consumer Goods Technology (CGT), argues that many consumer goods companies and retailers are missing out on huge incremental revenue opportunities by failing to optimise their trade spending dollars.
The white paper, How to Right the Wrongs and Start Making Money with Trade Promotions, argues that companies looking to break out of a cycle of flat sales and declining profits should get more aggressive with their trade promotion activities. “When done right, trade promotions drive incremental sales and profits and grow categories,” it says. “Many consumer goods companies and retailers are missing out on huge incremental revenue opportunities by putting resources in the wrong places and failing to optimise their trade spending dollars.”
It says consumer goods companies should get more aggressive and smarter with the trade promotion campaigns. “Optimised trade promotions can generate 10 to 15 percentage points of incremental revenue growth and about half that rate in incremental profits,” it says.
CGT claims that mistaken beliefs about trade promotions are limiting the benefits it can deliver. It lists these misplaced beliefs as being that:
-Most factors suppressing consumables growth are outside brand control;
-Promotional sales spikes aren’t truly incremental;
-Consumer goods companies should focus on millennials and online channels;
-Consumer goods companies are doing too many trade promotions;
-Loyalty programs are the solution to bring in new consumers and keep them.
In addition to these misplaced beliefs it says another reason for disappointing results is that trade promotions are under-managed. “CGT custom research from the December 2014 issue of CGT found zero percent of consumer goods companies rate their management of trade promotions as excellent, with the largest group, 44 percent, calling their capabilities average.Just 18 percent adhere to their own trade promotion management (TPM) policies all the time.”
CGT blames many of the failings of trade promotion campaigns on bad data. “Too often brands accept inaccuracies in data as inevitable and jump to analysis, so results are inherently flawed,” it says. “Many also expend too much time and resources to manually align data. Trade promotions based on poor data miss the mark, and launch a vicious cycle of bad data driving future bad promotions.”
It offers this solution: “Clean, properly categorised and accurate data provides an essential foundation for the trade promotion measurement, insight development and event planning activities that enable brands to reap much better returns on their promotional spending.”