TRADE PROMOTION MANAGEMENT vs. TRADE PROMOTION OPTIMIZATION Add the Right Tool to your Workbench

TPMvsTPO-1

“When you are holding a hammer, everything looks like a nail”

Abraham Maslow

“Give a boy a hammer and he will find that everything he encounters needs a pounding." If you have ever encountered a small boy with a runaway hammer, you can probably relate. This was Abraham Maslow’s first wording which he later modified to, “If all you have is a hammer, everything looks like a nail," and this concept (a.k.a. Maslow’s Hammer) became commonly used to refer to over-reliance on a familiar tool to solve any and every problem.

Experience has shown that in CPG Analytics too, people tend to take the tools or approaches that have served them well in the past and try to force them to be the right solution for new problems.

Optimization of trade spend is one such area. Strategy teams, category managers, customer finance and trade marketers use “Trade Promotion Management” systems -  whose primary purpose is to manage funding and budgeting promotions - to Plan, Simulate and Evaluate the effectiveness of their Pricing and Promotion Strategy. They face significant limitations in doing so!

Comparing TPM vs TPO Systems

TPM Systems

Systems that acts as planners, enabling:

  • Manage funding and budgets for promotions
  • Forecasting of future activities… Feeds demand planning and operations
  • Record past and future data… Ties in to accounting systems

TPO Systems

Forward looking systems that apply prescriptive analytics, enabling:

  • Prescriptive scenario planning and testing of various strategies
  • Leverage elasticities, cross effects, competitive activity, trends, and cannibalization
  • Optimize pricing and promotional strategy across portfolio of products

Limitations

TPM Systems

  • TPM systems often claim to have TPO features
  • Complex and lacking intuitiveness… Can drive resistance from Sales

TPO Systems

  • Not intended to be an accounting system

Features to look for

TPM Systems

  • Forecasting ties to demand planning
  • Extremely easy user interfaces
  • Enable easy integration to other systems (ex. SAP, REST API capabilities)
TPO Systems
  • Extremely easy user interfaces
  • Visual tools…understand what is happening in a market and why
  • Integration of historic event and profitability analysis (ex. Promo ROI tools)
  • Accurately predicts cannibalization and cross effects
3 Keys to Success
  1. Do more than just covering overlaps
  2. Use TPO simulation and optimization tools to make bets on:
    • Products
    • Customers
  3. Implement findings using a TPM system

Recent Posts

To Subscribe to our Thought Leadership Mailing List Please Fill-Out the Following: