Perspectives

A guide to reshaping commercial priorities for CPG manufacturers

Published by Deloitte Insights and the Promotion Optimization Institute

As a reimagined future sets in, CPGs with systems that enable flexibility—allowing adjustments to TPx strategies via scenario planning, increasing the use of more targeted promotions—are better prepared to partner with retailers on go-forward plans. Now is the time for CPGs to reevaluate trade promotion funding and spending strategies, and align their systems roadmap to fit new priorities and opportunities.

Introduction

A global pandemic, social justice advocacy, the ubiquitous rise of digital commerce, advanced last-mile fulfillment technologies, and sensitivities toward environmental and social purpose with brands—these topics are all changing how consumers think and interact with Consumer Packaged Goods (CPG) manufacturers. This ever-changing business landscape means CPGs must reevaluate their trade promotion funding, communication, and spending strategies, and align their systems road map to fit new priorities and marketplace opportunities.

Today’s political, economic, and environmental impacts have caused four disruptive forces to emerge that are increasingly impacting the CPG landscape. As a reimagined future sets in, these forces are likely to directly impact TPx strategies. CPGs with systems that enable nimbleness and flexibility—allowing planners to adjust their TPx strategies through scenario planning, reducing wide-sweeping promotions, and increasing their use of more targeted promotions—are better prepared to partner with retailers on go-forward category plans. Retailers need to have multiple promotion and plan options that they can trigger depending on the current consumer behavior and demand.

Those without the proper infrastructure may find growth more challenging, in part because of an inability to sustain the high levels of household penetration made possible through shelter-in-place orders, without a mechanism to convert product trial into loyalty and advocacy through more targeted efforts. Manufacturer brands who do not nimbly reset and replan to the current environment can quickly find themselves irrelevant in the minds of the shopper and retail partners. Brands, strategies, and technologies that are agile and support the consumer during this time of crisis and change can build consumer loyalty. Organizations need to increase the speed of decision-making, which, for many CPGs, means breaking down the organizational silos and increasing cross-functional collaboration. CPGs with revenue management teams and analytics/optimization capabilities are positioned well to lead during the demand and organizational planning shifts.

What is a TPx strategy?
Holistic enterprise planning, which delivers capabilities that encompass Trade Promotion Management (TPM), Trade Promotion Optimization (TPO), and Return on Investment (ROI), but are delivered in one seamless platform or via modules that work together and can be procured as business requirements develop. Platforms may use various types of models: predictive and/or machine learning (ML) or artificial intelligence (AI) to improve promotional outcomes. TPx platforms may also include Revenue Growth Management (RGM) capabilities, depending on the vendor—including pricing, promotion, and assortment components. Solutions may also include food service and IBP capabilities, depending on the vendor.

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A guide to reshaping commercial priorities for CPG manufacturers

Trends in consumer preferences and their impact on TPx

For a complete list of what to consider when replanning thorough COVID-19, please reference the POI 2020 TPx Vendor Panorama.

Visit the poinstitute.com to learn more.

Key considerations for your trade transformation journey

As CPGs consider the transformation that may be required to compete in this new marketplace, CPGs must not only navigate a complex external business environment, but also understand the priorities within their own organizations. To thoughtfully approach this journey, each CPG must understand how its business objectives and strategy shape the vision for a future trade system to be nimble in the face of unknown external forces. To accomplish this, CPGs can undertake an assessment of the below key competencies at the onset of a trade transformation, to align on priorities along each competency spectrum and select the solution that best aligns with that strategy.

Understand where priorities fall on each competency spectrum
Deloitte has worked with multiple CPGs to develop both process and organizational capabilities, as well as underpinning technologies to win in today’s marketplace. In each instance, both the client’s capability design and ultimate choice of technology were dependent on the factors summarized below. This framework for evaluating vendors acknowledges the vast solution provider landscape and the range of competencies each offers. Depending on the priorities of your organization, you may find the best vendor for your needs on one end of a continuum for a certain competency, but the other end for another. There is no silver bullet to selecting a TPx partner. Dedicating time to answering these key questions will enable your organization to be clear on internal business needs, so that when you begin to analyze the vendor landscape, you will know what you need from your TPx partner.

Case studies in vendor selection

  1. A global Food & Beverage manufacturer embarked on a multiyear trade transformation journey, with the key objective of reducing the administrative burden on the sales team and consolidating planning across North America. In particular, it was looking to move quickly with a best-of-breed system for a comprehensive TPM solution (including deductions and claims-management capabilities) with the option to expand to TPO with subsequent enhancements. As a guiding principle, the solution needed to be first and foremost a sales tool, so all solutions considered focused on an efficiency-driven user interface with intuitive plan entry and sales-focused reports in the tool. While the initial go-live was focused on retail operations, which has the largest trade spend, the company also sought out a vendor that could handle cross-sector requirements in future releases.
  2. A fresh food producer with a highly complex data model and route to market wanted to enhance its existing trade management capabilities with a high level of customization (e.g., capabilities for Direct Store Delivery (DSD) planning). Seeking this level of customization, a platform solution was deemed the best approach to enable a system with comprehensive trade functionalities. Within the transformation, leadership wanted a renewed focus on data-driven decisions; the solution needed to integrate with other platforms to provide rich insights for account managers, with specialized reports for its account teams. Due to the highly complex implementation and level of customization needed, working with both an end-to-end trade solution provider and a system integrator allowed the company to create a solution fully customized to its needs.
  3. As part of its global trade standardization program, a toy manufacturing company was evaluating vendors to solve a core functional issue—to provide better financial control and enhanced visibility into trade investments. As a result, it was looking to leverage a best-of-breed solution with state-of-the-art budgeting and planning infrastructure out of the box with the ability to integrate well with its already established platforms. For this global rollout, the TPx functionality needed to cover all regions and user groups worldwide, which required the TPM vendor to have a global presence. Lastly, since the company was going primarily for speed, the choice was made to implement with an agile team that focused on the core templates from the vendor and achieved the goal of financial visibility.

As is true for any organization wide change, there are pros and cons that need to be considered when aligning on a strategic direction. The above case studies illustrate the different priorities that led to a completely different outcome in choosing a TPx solution and implementation partners that provided optimal outcomes. The one common factor across these success stories was that they equally relied heavily on preparation at the beginning to meet the objectives set out by the organization’s leadership team.

 

Case Study 1
Case Study 2
Case Study 3

Next steps

As we have illustrated, a successful trade journey evaluates both external forces and internal priorities to ensure the TPx strategy aligns with vendor capabilities. As seen in the early days of the global pandemic, companies with dynamic trade systems have the ability to proactively react in the light of uncertainty; those without them fall behind and sacrifice the customer experience.

To ensure your company’s TPx strategy is successfully positioned to take on changes in the consumer landscape, we encourage you to reach out to Deloitte to conduct an immersion workshop, during which experts can help you navigate through these competencies, paint a picture of the solution landscape, and help you customize your trade transformation journey.

Read about Deloitte Polaris Revenue Management Capabilities Suite in the POI 2020 TPx Vendor Panorama at poinstitute.com.

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About POI
POI brings together manufacturers, retailers, solution providers, analysts, academics, and other industry leaders with the specific objective of collaboratively improving Enterprise planning and the promotion & distribution of consumer goods. Members of POI share cross-functional best practices in both structured and informal settings. Additionally, members benefit through our industry alliances, the Certified Collaborative Marketer (CCM)™ program, and industry-leading summits around the globe.

POI aims to instill a financial and metrics-based discipline not typically found with other trade groups. The goal of our innovative approach is collaborative Enterprise planning and promotion optimization. The focus is on the customer/shopper through sales, marketing, and merchandising strategies. Executive advisory boards keep us apprised of industry needs and help us provide desired outcomes for members, sponsors, and academia. Visit poinstitute.com

Get in touch

Ed Johnson
Principal | Pricing & Profitability Management
+1 305 372 3104                 

 

Paras Agarwal
Managing Director | Deloitte Consulting LLP
+1 214 718 1191
 

 

Bailey Vertovez
Manager | Deloitte Consulting LLP
+1 312 783 9548

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