Manufacturers of consumer products and packaged goods (CPG) often use trade funds to influence retailers as well as collaborate within existing marketing programs responsible for shaping the behavior of the consumers. Off course, the average consumer is oblivious to this, but special pricing, product placing, in-store promotion or bundling are funded, almost always, by the respective manufacturer.
Today, trade spending accounts for more than 15% of the total revenues that CP manufacturing records. This percentage is on the rise. As a result, the sheer spending volume has increased drastically and the processes are now extremely problematic to manage and frustratingly complex.
This comes at the backdrop of the re-emergence of store brands, increasing regulatory issues, expensive and complex demand data and a growing marketing mix, all further complicating the entire process. Not to mention the divergent goals between retailers and suppliers and an apparent deterioration in mutual cooperation. The result: the creation of a big, unmanageable problem called Trade Promotions Management.
Reluctance to embrace new technologies
Today’s business intelligence is revolutionizing the way we do business. That is why it is not overreaching to expect the improvements recorded in this front, plus the technological advancements thereof be used by many corporations to automate their operations as a way of solving this problem.
In fact, predictive analytics, which many companies can incorporate into their processes, is bringing new insights that were too lofty to attain just a few years ago. Many industry watchers believe using these two can help solve the Trade Promotions Management (TPM) problem.
Whether your business deals with custom engagement rings or building materials and construction equipment, one big consideration you ought to make is the use of packaged TPM software. As it stands right now, the adoption of this software is still low.
Available estimates show that over 60% of business organizations continue to use manual process together with PC spreadsheet applications like excel or their own custom software. Among the small-sized suppliers, packaged software use has even lower numbers. What brings this apparent disconnect?
Internal challenges with CPG manufacturers
Some of the first questions that would typically come to mind in answering this question is this: is the packaged TPM software in the market not advanced enough to effortlessly handle the increased complexity. The truth is that many of the programs in the market today can handle these processes, however complex they are. Look a little closer and you will discover that the problem is not with the existing technology, rather, it rests with the internal challenges that CPG manufacturers face.
Furthermore, there is a prevailing perception in price of TPM, with many entrepreneurs, especially small business people believing it is too expensive. Other believe it is too complex and will have a negligible effect on trade spending.
In any case, in an environment where everyone is holding on to their jobs with everything they’ve got, and status quo remains an awfully powerful force, it is not too hard to understand why only a small crop of CP executives would be willing to try new initiatives and embrace technologies that most can’t even touch.