Success Stories 2

Trade optimization

By July 2, 2019 August 30th, 2019 No Comments

Big Picture

CPG companies are under constant pressure from the rising competition, consumer demand, new digital modes of sale, rise of omnichannel and e-commerce, and shifting power balance towards retailers. To better adjust to this changing landscape, CPG companies have started to realise the importance of trade promotions. Trade spending is large and rapidly growing to reach 20-25% of their revenue. However, 40% of CPG trade promotions don’t drive the desired result. There are several reasons for underperforming trade promotions:

  • Lack of Transparency about previous promotions performance
  • High complexity on the mix of customers and brands
  • Increasing pressure from retailers and competition
  • Customer resistance on price changes
  • Retailers resist changes due to fear of damage to short-run sales

With 59% of Trade promotions not breaking even globally, it is important to invest in sound analytics and data-driven trade promotions management software.

Challenge:

Client is an American manufacturer of vitamins and nutritional supplements. Client was facing nearly 32% increase in trade spend without commensurate increase in sales. Client does not have any tool to check the impact of past price and trade promotion activities on volume and sales.  

Client wanted to optimize the spend on trade promotions and compare accounts across Key performance drivers. They wanted to have more focus on insight generation and decision making instead of report making.

Solution:

IA’s TradeSmart helped the client optimize trade spend by using five key levers:

  • Trade Spend Decomposition – Base vs incremental volumes along with “weeks of support”. “% discount” and incremental units by tactic
  • Drill down into key accounts performance – Performance change based on price change, tactics change, distribution change, etc, for all major accounts
  • Simulate and compare multiple tactic scenarios – Robust statistical modelling and intuitive UI to predict tactic ROI and compare multiple scenarios
  • Promo Calendar view– Intuitive weekly/monthly view of volume decomposition vs merchandising support
  • Reports and visualization – Predefined off-the-shelf reports and build custom reports to serve as the single source of truth for planning and marketing functions

Insights:

IA’s TradeSmart solution helped the client get the following benefits:

  • Plugged misuse of temporary price reductions
  • Linked trade spend allocation to performance criteria
  • Preempted performance challenges through predictive analytics
  • Prioritized trade spend allocation to “winning” retailers to drive profitable growth

Outcome:

The deployment of TradeSmart helped the client to achieve a 17% reduction in Trade spend.

Conclusion:

Impact Analytics performance oriented Trade Promotions management software enabled a vitamin and nutritional manufacturer reduce 17% of its trade spend.