The past year has pushed manufacturers and retailers to work at a much higher level of technology sophistication in trade promotion management. Executives familiar with TPM say trends that contributed to this development will continue in 2014, but with more intensity
“Sophisticated strategies are required for this road ahead. To spend trade dollars more effectively, they are going to have to embrace this technology for the coming year,” says Joel Cartwright, trade promotion management solution engineer for AFS Technologies.
Based on feedback from customers, the company recently staged a webinar that presented 10 predictions for 2014. They are:
1. Economic growth will continue to be slow and steady.
There is no post-recession bump. Based on plans AFS is discussing with its clients, they don’t see a downturn, but neither do they see a big increase. There is heavy competition for shopper dollars, and TPM spend is being closely scrutinized. In contrast, supply chain is already heavily optimized, but trade spend is more of a gray area. It’s looked upon as an opportunity for more streamlining.
2. Manufacturers will continue to bear the burden of increasing costs.
Retailers are seeking specific cost certainties, which means they have to push overall margins back to manufacturers to increase competitive dollars for the shopper basket. Consumers have created purchasing options to help save money, so retailers need to further broaden that basket. As the cost of goods increases, trade dollars are going to have to offset this to maintain margins. The biggest enemy here for most CPG companies is private label: how to compete at pricing from a private label standpoint; that is, how to stretch trade dollars while not necessarily going toe-to-toe with pricing, but promoting brands to make them more viable than a private label.
3. The evolution of the “smart shopper” will continue.
Shopper insights are critical here. Consumers desire a more personal shopping experience within the grocery store, and this will show up in a specific post-promotion analysis. Manufacturers want to get away from doing one-off post-promotion analyses regarding the smart shopper, and want to look at an overall plan to entice the shopper. It is not necessarily a matter of looking at single promotions for the back-to-school event or the Fourth of July event, but rather how they can encompass the smart shopper across an entire plan.
4. Manufacturers who master the “app world” will gain the competitive advantage.
Consumers seek out mobile apps to empower their shopping strategy. The personal experience the shopper has with the retailer through one-on-one marketing is becoming a reality, so point-of-sale type events and interactive apps are becoming critical to manufacturers. They are seeing this not only on the marketing side of the business, but on the trade and sales execution sides.
5. Old school is not ready to give up its shelf space just yet.
Traditional grocery is still backed by big dollars. There is a lot of emphasis on technology, but major manufacturers are competing with natural foods and organics. They didn’t bury their heads in the sand in doing this, and they got creative. There will be more of that creativity seen in the coming years. There will be many more new item launches and line extensions. Meanwhile more non-traditional food manufacturers are coming into the TPM space. There are also more companies from the durable goods side coming into the TPM space, as well.
6. Trade promotion spend will be spread even thinner.
The annual operating plan is going to come to the sales organization as a call for increased top-line growth with minimal additional budget for the trade plan. For example, they may need to grow the top line 3% while keeping their trade budgets flat year over year. Meanwhile retailers want to expand their baskets and cover margin costs, and are pushing the cost back on manufacturers. Only
24% of AFS’ clients will spend more on trade promotion in 2014 compared to 2013, so the majority will be doing more with the same or less dollars.
7. Manufacturers will focus heavily on getting the most out of their trade spend.
For the 76% not spending more on trade dollars, improving trade promotion effectiveness is the biggest business challenge. To accomplish this, accurate lift analysis is mandatory. When clients analyze their promotional activity, much of the guesswork comes in the lift analysis. They can’t make that connection between the consumption data lift and back to the shipment data lift. They are going to have to shift dollars based upon performance. Many manufacturers are going to a tiered trade strategy based on what customers can drive the biggest bang for the buck.
8. Manufacturers will master their data.
Big data is here and everybody has to get on board. There are tons of data out there, and managing the big data is the big concern. Most manufacturer s are getting bombarded by data from multiple sources, such as syndicated data, shipment data, retailer point-of-sale data. They are able to sort it out, but they are struggling with the interpretation of that data. As a result, they are hiring external experts to build data evaluation programs to help them understand what the data is saying. The money for this is coming out of their trade budget.
9. Underperforming TPM tools will be jettisoned.
Some manufacturers are finding that their 8-10 year old TPM systems are not evolving with the company’s growth, and 44% of companies in this space are looking to change their TPM tool in the next 12 months. The old solution can’t provide the visibility that is needed into their trade plans. They need that to see how their business is growing and where to apply all this data. Also, as manufacturers push more work onto their broker network, they need to be able to give the brokers that same visibility.
10. Manufacturers will empower field teams with technology.
Technology is power. Manufacturers will be empowering field teams with key technology, such as smartphones and tablets, because the retail execution is greatest trade promotion challenge. Field teams will be better informed and positioned to make an impact, and provide very quick turnaround on events. Those field teams will be able to make promo deals on the fly. For example, they may be asked: “Can you participate in my back-to-school event because another company dropped out?” They can be right there with the buyer, pull out their tablet, and say, “Yes, I can do it. I can see where I am at from a spending standpoint, and I can afford to do it.”
In summary, the big focus in the year ahead will be on technology. “We haven’t seen a huge change in growth, but we do see that trends are evolving and becoming more amplified,” Cartwright concludes.
For more information: www.afsi.com. Written by Dan Alaimo for CPG Matters Website. Original Article can be located here: http://www.cpgmatters.com/TradeMarketing0214.html
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