When TPM digitalization becomes a synonym for trade efficiencies

April 29, 2024

In the relentless pursuit of profitability, Consumer Packaged Goods (CPG) companies constantly seek ways to amplify the value derived from their trade spend. Despite the inherent challenges — such as managing vast data arrays, untangling complex market factors, and ensuring strict compliance — the digital era heralds a new dawn. Sophisticated digital processes and Trade Promotion Management (TPM) solutions are propelling CPG manufacturers to newfound heights of trade spend efficiency with significant bottom-line impacts. Leveraging an AI Enterprise Revenue Management platform that combines TPM with Revenue Growth Management (RGM) solutions opens a portal to much greater potential.

This article spotlights the key capabilities that catalyze this success and later, celebrates the triumphs of companies reaping these rewards.

1. AI-Driven Quality Data for Optimal Promotional Investment Decisions

It’s impossible to effectively measure current trade spend performance, let alone drive improvement, without timely, high-quality data, from multiple sources.
High-caliber, AI-enhanced data is the lifeline of effective trade spend management. By harnessing detailed historical insights and cross-referencing them with real-time and multi-source market data from – an AI-enabled system that deeply understands CPG’s specific business logic, can empower manufacturers to:

  • Craft more impactful promotions: Account managers can tap into comprehensive and precise historical data and use AI for predictive analyses and scenario planning to guide and hone highly impactful promotion events and calendars.
  • Account for causal and confounding factors: Understanding and accounting for external factors and their effect on promotions helps refine strategies for maximum impact. Considerations of cannibalization, forward buying, and post-promotion dips are crucial for an accurate and holistic ROI assessment.
  • Refine overall promotional tactics: Rich, detailed understanding of past and present trade spend performance data enhances the prediction of future performance.

Maintaining retailer synergy is critical as promotional strategies evolve. AI-fueled data and insights empower account managers to convincingly advocate for more efficient and mutually beneficial practices, modelling outcomes that create win-win strategies.

With a rock-solid data pipeline coupled with the power of industry-centric AI analytics, the opportunities to continuously enhance trade spend efficiency are plentiful.

2. Automated Promotional Guardrails and Compliance

Data insights alone can’t guarantee the delivery of trade spend efficiency improvements. Even with robust promotional guidelines in place, adherence, and compliance is essential to ensure delivery of the expected returns and efficiency of spending. When promotions are too deeply discounted, or the net price is pushed too low, ROI suffers and the efficiency of the promotional spend is diluted. Automated compliance is indispensable for ensuring that planned promotional activities conform to profitability benchmarks and other requirements. A robust TPM solution will offer real-time interventions and alerts for non-compliant promotions, detailing:

  • The reason for non-compliance
  • Necessary adjustments
  • Approval requirements

Preemptively addressing inefficient promotions fortifies and safeguards trade spend efficiency instantly.

3. An Iterative Customer Business Planning Process

Optimizing trade spend efficiency and promotional planning of course do not occur in a vacuum. They are an integral component of delivering the Customer business plan whilst achieving company expectations for growth and profitability. It is not a set-and-forget task; it’s a dynamic, iterative process that succeeds with real-time updates and a sound and reliable forecast for future performance. This ongoing cycle is essential for producing accurate customer P&Ls and allowing for mid-course corrections and adjustments to planned activities and trade spend throughout the fiscal year. A comprehensive TPM solution equips you with:

  • Dynamic planning and review capabilities: Regularly revisit promotional and overall customer plans with near real-time P&L views.
  • Scenario planning: Engage in strategic forecasting to anticipate and prepare for various market conditions.
  • Integrated top-down/bottom-up planning: Align strategic objectives with retail-level execution for cohesive planning processes.

These capabilities ensure that CPGs remain agile, adapting their planned activities and associated trade spend investments to secure delivery of the overall business plan, including promotional allowances and trade terms.

4. Modern, CPG-Specific Systems to Accelerate TPM in Alignment with RGM Strategies

Legacy systems with clunky interfaces pose significant obstacles to maximizing trade spend value. Account managers often grapple with disjointed tools and complex interfaces resulting in lower engagement and use of the capabilities at hand, while RGM leaders struggle to extract valuable insights from systems not tailored to their specific needs.
Investing in TPM capabilities designed by AI experts in Revenue Management and the CPG industry ensures that barriers to adoption are significantly reduced, productivity is maximized and users access the insights needed to make the most impactful decisions to drive growth and profitability. These solutions should boast comprehensive features, a seamless user experience, and a real-time data continuum to synchronize RGM strategies with promotional planning and execution.
Our TPM solutions are a case in point, centralizing all essential capabilities and merging them with high-quality AI-automated data pipelines and industry-specific insights needed to excel in every strategic decision related to trade spend investments by CPG manufacturers.

The Tangible Outcomes CPG Companies are Realizing

The return on investment from trade spend is substantial. A premier CPG corporation in North America reported a 10% surge in trade spend efficiency in just two years after implementing our TPM solution.

Smaller entities, previously constrained by limited TPM investments, often experience more significant trade spend efficiency gains. A CPG company in Europe identified a 30% non-compliance rate in its planned promotional spending, impacting tens of millions of trade investments. After implementing our solution, they improved trade spend efficiency by 14% within the first year.

For those seamlessly blending TPM with RGM solutions to steer optimal trade promotion strategies in concert with other commercial levers — such as pricing, portfolio mix, and trade terms — the benefits can be multiplied. A promotional ROI boost ranging from 10 to 25%, revenue increases of 1-3%, gross margin enhancements of 2-5%, and profit growth of 1 to 2% of total sales are all within reach when leveraging an Integrated Revenue Management Platform.

Our AI Enterprise Revenue Management platform, featuring the ADAM AI engine, transforms data into a strategic powerhouse, enabling CPGs to cut through the noise, unlock market advantages with data-centric strategies, and drive profitability and sustainable growth in an ever-challenging market. It is designed to evolve and scale with your business.

The Wider Case for Transformation

While a 10%+ uplift in trade spend efficiency is compelling enough to warrant an investment in new capabilities, it’s just one facet of the benefit spectrum offered by digitalizing trade promotion management and revenue growth management.
In subsequent posts, we’ll explore how TPM digitalization is enhancing productivity, forecast accuracy, and governance, along with other strategic advantages. Stay tuned.

For insights into AI for CPGs and how ADAM, our AI engine, can transform your data strategy, click here

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