JTPP: Changing the Game in Trade Promotions Planning and Analysis
By Todd Bortel, Senior Consultant at Cannondale Associates
Through a special arrangement, presented here for discussion is a summary of a current article from The Journal of Trading Partner Practices (JTPP), the official online publication of the Vendor Compliance Federation (VCF), Trade Promotion Management Associates (TPMA), and the Federation of Credit and Financial Professionals (FCFP).
Most industry observers would agree that if the practice of trade promotion today isn't "broken" it is at least seriously flawed. Far too much time is spent negotiating deals and running the treadmill required to put together the weekly ad. Far too little time is spent evaluating promotions that have been run and using the information to put together more effective plans for the future. The result is inefficiency.
Our research indicates that, with few exceptions, the three most applicable descriptions for current practices are "simple," inconsistent," and "biased." These findings were shared during the July, 2009 Trade Promotion Management Associates conference in San Francisco. During this same session, DemandTec introduced a recommended action plan that consumer products manufacturers should consider to improve their own success.
Excerpts from this joint presentation are included in the paragraphs that follow.
Both retailers and manufacturers have roles to play in overcoming organizational barriers.
For retailers, however, the first step is to eliminate the significant inefficiency caused by inconsistency within the organization. By establishing internally consistent approaches to planning and analysis, retailers can simultaneously raise both the quality of work being done and the productivity of the managers doing that work. Once internal consistency is established, retailers can then move on to the larger task of establishing consistency with their vendors.
Second, retailers must recognize that whatever their concerns about the lack of objectivity from their vendors, collaboration remains a huge opportunity, and is a risk worth taking. For collaboration to work, there must be equal participation, and equal control by both parties, and that work must be based on explicitly stated mutual goals.
During the joint TPMA presentation, DemandTec offered up a tangible example of how manufacturers are seizing this opportunity. To drive even greater value with retail category buyers, leading manufacturers are now developing trade plans that highlight total category performance metrics versus simply focusing on the impact on the vendor's own portfolio. These more objective plans call out the source of gain for items on promotion, including other national brands and even private label items. Time-starved category buyers appreciate the greater objectivity and comprehensiveness of this approach to trade planning.
Third, retailers need to be more aggressive about leveraging vendor resources (tools and knowledge) with respect to trade promotion planning and analysis. But it should also be noted that manufacturers have much more to offer; they can be a way to overcome organizational barriers as well. Vendors can be a valuable resource in improving the quality and quantity of work done by retail category managers by assisting with capabilities enhancement and process improvement efforts. Only by making fundamental changes in the work process and approach for their line managers can retailers hope to truly "change the game" for the future.
Discussion Questions: What should retailers be doing to improve the efficiency of trade promotions? What challenge does collaboration around trade promotions present versus other shared practices?