What is Trade Promotion Optimization? Problems Faced by TPO

What is Trade Promotion Optimization?

Trade Promotion Optimization can be explained in five distinct and different steps:

• Data harmonization: Aligning all the data sources like spending, sales data, qualitative information and performance dates for better analysing the results.
• Optimization: The mathematical model offers the capability to create the best promotion calendar spending on the set of constraints identified by the user.
• Planning: The procedure for planning the promotional activity for the future by implementing the learnings from the stages of strategic analysis.
• Strategic analysis: The aggregated view of specific events is analysed adequately during the measurement stages.
• Measurement: A formal procedure for measuring the outcome of specific promotional events.

Problems that hinder optimization of trade promotions

It is vital to break down the Trade Promotion Optimization in the method given below to enhance the ability of the business to act upon the collected data in the best way possible.

Businesses need to view the process of trade promotion as a multi-year, long-term opportunity to optimise the first process and improve the ROI.

However, you may have experienced some problems in implementing the trade promotion optimization procedure. These issues are what restricted the larger CPG companies from acquiring a minimum TPO capability. The hurdles or issues that a business needs to overcome include:

Better sale data

If you use the shipment data to determine the correctness of the trade spending, then you are already off to a bad start. So ignore it completely. The main reason is Diversion. Even if an individual doesn’t want to click on the post link for a diversion blog, which explains their rationale, the business needs to accept it as the reality that the data of retail sale points per week is the best way to measure the effectiveness the trade promotions perfectly. Furthermore, the business has to accept it as the truth that the supplier claims that the shipment data is essential for the TPO process. Because they are not experts with analytics, data or the CPG industry as a whole. The business can easily acquire the retail sales data either with the help of syndicated data suppliers or directly from significant retail customers or other medium and small retailers.

Obsession with acquiring spending data

The business could measure the effectiveness of the promotion and lifts in future model promotions without spending any data. Therefore, companies should ensure that the first strategic review promotional campaign has to be conducted without spending any data. This is because the main objective of the first strategic review was to find out the correct estimation of the effects of different promotional options. When the business does the assessment, they can then move back to the maximum amount that they are willing to spend to achieve a higher level of lift in sales.

According to the ongoing managerial matter, the business may want to acquire accurate spending and promotional ROI data to reaffirm that the promotions were implemented correctly. The first promotions review needs to be the no judgement zone wherein there is no negative consequence of a bad promotion execution. Therefore, businesses need to start from scratch and implement a strategic approach to their promotional campaigns.

Lack of data harmonisation skills

A majority of the software vendors can easily program the apps as per your specific requirements. Moreover, most developers possess advanced front end tools for proper data visualisation. However, you need to select the correct software vendor to access these advanced software tools, which could benefit the business because these advanced tools and the expertise of the developers can help you harmonise the disparate data sets.

Most software vendors generally lack two main elements necessary to harmonise the data: lack of understanding about the different business issues which require proper coding with the data and lack of expertise in adequate harmonisation of the data.

Organisational micromanagement

The majority of the big businesses would refer to organisational micromanagement as getting an alignment. About 20 people would be present in the steering or executive committee to create the TPO specs. The most extensive business has the resources and the necessary executive staffing to implement the TPO. Therefore, most companies with a turnover of $500mn to $1B get it much easier to implement the TPO. However, it is equally essential for small and medium businesses to implement the TPO to make the most out of their trade promotions.

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