A CPG company optimized its trade promotion spending and pricing strategies to drive higher growth

A leading CPG company, needed to optimize its trade spend to address rapidly evolving consumer behavior and increase buyer power. Multiple channels and an increase in price transparency were waning their brand loyalty at a time when retailers were trying to differentiate themselves by adding exclusive products to their shelves and changing product ranges.

Challenges

As CPG companies worldwide invest about 20% of their revenue annually in trade promotions, but stunningly 59% lost money in the process (In the US its 72%). Our client was unable to assess the performance of the trade promotions giving way for ineffective trade spend management.

• Lack of a unified view of the data delayed data consolidation and reporting cycle, ultimately delaying insight consumption. Responding to the market dynamics urged for faster data-driven decision-making.
• Forecasting capability and accuracy were limited and ineffective, thus increasing the Gap between POS & Expectations, Redemptions vs. Expectation, Accruals (based on shipments) vs. Payments (a portion of deals sold).
• Not all customers were on the trade management software and separate lists were created and maintained in excel sheets. This not only made the process error-prone but also delayed the analysis as more time was spent on data preparation.
• There was a considerable difference in Accruals vs. Actuals - Redemptions were lower than accrued or sold more than expected. Moreover, there were repetitive cases of double-counting of Trade Spend and Consumer Promotion Spend.

Solution

Applexus engaged with the client to design an analytics platform that would provide holistic visibility on trade spending and improve trade promotion management.

• A unified analytics technology platform on SAP Datasphere and SAP Analytics Cloud was designed to automatically integrate different sources of data such as Accruals from SAP, TradePRO Forecast, POS Actuals, Excel Data etc.
• Business use cases were built to extract actionable insights from actual POS vs. TPM software forecasting. Moreover, business users were empowered with the ability to drill down insights by Customer, Product Segment, Pack Size, etc.
• A visually intuitive “decision-desk” with KPIs, built-in exceptions, and alerts was designed for lucid consumption of insights and shorter decision cycles.
• Expected redemption percentage was estimated based on historical data or forecasted using statistical modeling. This considerably increased the accuracy of the forecasts and helped our client become more responsive and agile to the market dynamics.

Results

Our client acquired the capability to assess the performance of their trade promotions from a single platform and strategize better. With accurate forecasts and faster time-to-insights business users were also able to respond better to the market changes. This also enabled our client to conduct root cause analysis for the deviations and factor in new findings before continuing with the same trade promotion strategy. With the insights from root cause analysis, they could also decide or act on budget allocation (or reallocation), have faster communication on spending accruals, and know whether they have over or under-invested any trade promotion activity for any customer.