JTTP: Global TPM Practices Study Finds That We Talk Better Than We Act
By Bob Houk and Michael Forhexz
Through a special arrangement, presented here for discussion is an excerpt of a current article from The Journal of Trading Partner Practices (JTPP), the official online publication of the Vendor Compliance Federation (VCF), the Trade Promotion Management Associates (TPMA), and the Federation of Credit and Financial Professionals (FCFP).
The results of a study on trade promotion management (TPM) implementation practices on a global basis, compiled by Trade Promotion Management Associates and Infosys Corp., finds that some much-discussed topics, such as predictive analytics and promotion optimization, are not being implemented as quickly as the talk might indicate.
The study, which will be released in more complete form this summer, was conducted over several months in late 2008, and includes responses from mostly larger companies, and mostly consumer packaged goods suppliers.
The objectives of the study were to identify the current maturity level of global trade promotion management practices, to identify best practices and benchmarks in use of analytics for TPM, to assess process and technology sophistication, and to identify challenges and opportunities in TPM initiatives and implementations.
Respondents said that TPM is important to their companies, with a median rating of eight on a ten-point scale. But when asked about things that were stopping or slowing implementation:
- Seventy-seven percent said they had problems with data availability, quality, and harmonization
- Sixty-seven percent have problems with lack of standardization in processes
- Fifty percent cite lack of alignment of goals among marketing, finance, and sales
These are substantial barriers, all of which are familiar to everyone in trade promotion. The nature of such barriers is further proof, if needed, of the importance of having senior management champions for TPM implementations.
As a result of the barriers, only 13 percent of respondents are using predictive modeling software, and a similar number are using pricing optimization tools. Considering how much talk there has been about these topics over the past several years, it is a bit surprising that only one-eighth of large CPG marketers have actually implemented such tools. Most respondents are using only the promotion planning and funds management modules of their TPM systems, with smaller percentages using modules for data management, post-event analysis, and execution.
The metrics used to track effectiveness of trade spending are another indicator that we may not have moved as far as we might think. When asked what metrics they used, respondents replied:
- Seventy-three percent: Actual spend to budget
- Seventy-three percent: Net incremental sales
- Fifty-seven percent: ROI (based on consumption or shipment)
- Forty percent: Incremental spend per incremental case
- Thirty-three percent: ROI (variable and fixed margin)
- Thirteen percent: Other
The survey suggests that the biggest challenges continue to be the most familiar: data availability and reliability, lack of system and process standardization, and a lack of clear goal alignment within the enterprise. While we have long known about these problems, practitioners are still struggling to overcome them.
Bob Houk is the executive director of the Trade Promotion Management Associates. Michael Forhez is a senior principle at Infosys Corp.
Discussion Questions: What's slowing the adoption of analytics in trade promotion management practices? What metrics should be used to track the effectiveness of trade spending? How can companies better align the goals of marketing, sales and finance to create a coherent TPM strategy?