Trade Activity Management is Critical for Manufacturers with Retail Distribution Channels
Targeting consumers with promotions is a practice that is essential in competing in today’s marketplace for manufacturers that sell products through retail channels. Promotions and trade spend an average of over 20 percent of gross sales, comprise as much as 65 percent of marketing budgets and rank as the second highest cost behind cost of goods sold. Yet determining if these costs are providing any return on investments or whether a promotion was effective is an extremely difficult task. It is estimated that every year on average, $8 billion is wasted on deduction management. And, on average, less than 30 percent of all promotions are profitable. With these numbers in mind, it’s obvious that having the ability to effectively manage the trade activities and promotions processes is critical in achieving success.
Overcoming Common Business Challenges
As you can see, trade activity management is vitally important for success, but manufacturers continue to struggle to manage this process and achieve profitability. Let’s look at some of the reasons this is such a challenge.
- Lack of Timely and Accurate Information and Data — Poor data integration across multiple sources, both internally and externally, slows the decision making process and forces decisions based on sub-optimal information. While sales and marketing managers are inundated with information related to promotions, critical questions relating to forecasting accuracy, performance and deduction resolution may go unanswered.
- Lack of a Closed Loop Promotions Evaluation and Management Process Enabled by Technology — Managing trade spend and promotions should be a collaborative process where policies and all activities are being revised and refined based on the results of previous campaigns, and on the market and customer data that is being gathered. Look at the diagram below — all critical business functions need to be involved in the process, and using the right tools. Evaluation of past activity and on future needs have to be considered in the planning for new trade and promotions policies.
- Lack of an Appropriate Reporting and Key Performance Management Framework — Running efficient promotional events is a win-win proposition for both manufacturers and retailers. The challenge that manufacturers face, however, is to measure bottom line impact to enable the fine tuning of future campaigns. This requires both real-time and post-campaign analysis. Promotion performance needs to be evaluated against pre-determined Key Performance Indicators (KPIs). KPIs are critical to enabling effective promotion planning, selection of promotion types and deployment of trade funds.
QAD is a Partner for Managing Your Promotional Needs
Trade Activity Management is a key component of a manufacturer’s category and brand management capabilities. An effective Trade Management process should enable companies to consistently achieve positive operational and financial outcomes. Combining the right processes with the right tools allow promotional success, and QAD provides a robust TAM solution as well as other tools to enable accurate product forecasting, scheduling, analysis and accelerated decision making. The consumers of today are always looking for a “sweet deal,” and the manufacturers and retailers that can increase profitability while satisfying their customers will be the ones who become Effective Enterprises.
For more information on QAD’s proven record of helping customers manage their trade and promotional activity, visit www.qad.com/solutions, and be sure to subscribe to the QAD Blog for notifications of articles like this.