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Transforming trade promotion management

Driving profitable growth in a new era of commercial spend

In the face of escalating consumer, technology, and channel shifts, consumer products companies need to rethink traditional trade, advertising, promotion, shopper marketing and digital spend management practices with a focus on integration and innovation.

It’s time to reengineer

Most consumer products (CP) companies don't have the insights and decision infrastructure to deliver consistent personalized promotional experiences for their increasingly mobile and tech-savvy consumers. National in-store programs are typically planned months in advance and often lack the flexibility to accommodate targeted or personalized offers that can influence consumers' behavior on what is now a largely unscripted path to purchase.

The time is right—some would say overdue—for CP companies to re-engineer traditional trade promotion practices and use an integrated commercial spend approach to drive consumer engagement, build brand equity, and boost sales conversion. After decades of success using a model that revolves around brand-centric mass advertising and in-store promotion tactics, we believe that rapidly evolving consumer, technology, and industry forces are coming together to drive real and lasting change—and potentially more profitable growth.

Industry shifts are upending traditional approaches

The escalation of consumer, industry/operational, and technology shifts continues at warp speed, creating a new landscape of business and competitive challenges for CP companies.

Shift one: Consumers in control
Consumer tastes, preferences, and shopping habits have changed dramatically. The traditional linear path to purchase has largely been replaced by a “choose your own adventure” approach in which consumers use multiple channels and entry points on their way to the actual moment of purchase. The variety of options and evolving, often unpredictable, nature of consumer purchasing habits are upending existing approaches to traditional trade promotion management. As more engaged consumers increasingly opt-in to offers that can lead to disruptive, algorithmic-driven buying patterns, could CP companies be edged out of significant selling opportunities?

Shift two: Disrupted omnichannel business models
Thanks to pioneering e-tailers, most consumers now expect the digital and physical purchasing worlds to be accessible through an omnichannel experience. CP companies are challenged to support a multipronged approach for marketing and selling their products that provides a new level of convenience for consumers and doesn’t alienate their traditional retail partners. Determining how to use commercial spend to drive demand is an important part of this equation.

Shift three: Technology acceleration
The digital revolution is the primary driver for disrupting how consumers are contemplating and making purchases. It can also enable CP companies to engage consumers in more targeted and effective ways. New technology advancements such as algorithms, machine learning, and cognitive models are enabling CP companies to track, analyze, manage, and respond to consumer behaviors more rapidly and effectively. However, technology investment prioritization, and integration remains a key challenge for CP companies.

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A new perspective on commercial spend

We believe there are three key attributes of a successful next-generation commercial spend model:

Moving beyond traditional spend management: A model for the future

An integrated approach to commercial spend can help CP companies more effectively engage digitally savvy consumers in store and online. But what replaces the decades-old model? Based on our industry knowledge and experience working with leading CP companies, we believe the model for future commercial spend requires four fundamental pillars—all powered by a responsive, data-driven cognitive engine.

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A new model for consumer spend optimization

Define your strategy: Develop an integrated commercial spend strategy based on prioritized
moments that matter along the new, unscripted path to purchase, informed by the corporate and brand strategy.

Build the playbooks: Establish guidelines for operating in this new environment. Digitize and codify them into playbooks, funding, and budget structures so they are embedded into planning and execution tools.

Develop plans: Conduct multilevel spend and volume planning and assessment with new in-period response capabilities, bringing together key stakeholders from marketing, sales, revenue management, supply chain, etc.

Activate the programs: Create the infrastructure for faster response; improve quality and granularity of data capture; invest in machine learning and programmatic capabilities; and monitor and adjust activations as necessary.

Supporting all four of these pillars is a complex data set and the analytics platform—we call this platform a cognitive engine. Its components generate output and insights that power your day-to-day reporting and are used across the organization to support decision making.

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Overcoming obstacles to progress

CP companies must find new approaches to long-standing industry, organizational, and technology challenges—or consumers will take their purchasing power elsewhere.

  • Organizational realities. Commercial spend functions often operate in different silos, each with its own plans, objectives, budgets, and mentalities. Finding ways to bring these competencies closer together can help you drive commercial spend effectiveness, efficiency, and responsiveness—but it requires open minds, budgets, and teams.
  • Retailer relationships. Like CP companies, retailers are trying to adapt to industry shifts. CP companies should seek out “hungry” retailers who are willing to partner and move fast to pilot and test new approaches. These kinds of “win-win” collaborations can help mitigate the physical limitations of the traditional model and update the in-store experience for digitally savvy consumers. 
  • Technology adoption. Many companies don’t have the funds to invest in the technologies they need to ramp up a large-scale integrated commercial spend capability. It has also been hard for them to find the right technology leaders—particularly in data analytics. And new technology players are entering the arena every day. Focus, flexibility, and the willingness to embrace key innovations like cognitive and AI will help drive successful technology adoption at CP companies.

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Committing to change

Momentum is building for integrated trade spend management capabilities that enable CPGs to optimize spend and ROI. As the competitive environment heats up and the marketplace rapidly evolves, CP companies should step up their investment in these new models to engage digitally savvy consumers with personalized brand and promotional experience.

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