The secret to an effective trade spend program

Highlights

The impact on sales of an effective trade spending program can dwarf your other marketing efforts. The hard part is identifying what is effective and what isn’t, and quantifying that effectiveness so you can make good decisions about trade spending in the future. The right business software features can help.

This guide covers:

• The hidden costs of falling behind technologically when it comes to managing trade spending;
• What dedicated business software can do to help;
• What things look like when you have timely, accurate trade spend data.

Introduction

Retailers in the food industry have never had more bargaining power with their suppliers. Retail consolidation and the rise of behemoths like Walmart and Costco mean food producers aren’t just competing for mind space among consumers; they’re also competing for shelf space and retailer support, often in a zero-sum game against rivals in the same retail outlet or chain.

One of the most important tactical levers food companies can use to get a leg up is their trade spending (also called trade promotion). By spending money at the retail level, they influence customers right at the point of purchase, as well as influencing retailers to promote their product over the alternatives.

Effective trade spending is more important than ever before. It’s been a long time since food producers could afford to throw money at the problem while hoping for the best. Today’s retail environment is far too complicated and cutthroat for that.

A typical situation

Companies that fall behind when it comes to aggressively and effectively managing their trade spending suffer several typical symptoms:

• Bad data. Any trade spend report, analysis or forecast is only as accurate as the source data. Without the right systems and processes in place, your data is suspect.
• Multiple versions of “the truth.” This concept is closely connected to the previous point about bad data. If records are stored in an Excel file or with pen and paper, they’re probably never up to date. When you need to know which of last quarter’s programs was the most successful, it shouldn’t matter who you ask or where you look. The answer should be the same everywhere, but it’s very hard to make that happen when data gatekeepers each maintain their own records.
• Lack of skill in collecting and analyzing metrics. When a company relies on Excel, the value of the analysis and insights that follow depends a lot on the skill and experience of the person wielding the spreadsheet. It’s all on them to ask the right questions and formulate the answers, with lots of opportunity for error, even in expert hands.
• Data entry errors. Any time someone types something in to Excel, there’s an opportunity for typos, pasting to the wrong cell or missing things completely. Excel is great for analysis, but not data entry.
• Poor agility. It takes time to measure your sales, then time to analyze the ROI, then time to act on what you learned. By the time the company acts, circumstances have changed. Opportunities are missed.
• Inaccurate forecasts, with consequent inefficiencies and lost opportunities. A fuzzy picture of past trade spend activity and success makes it that much harder to predict the future with any precision.
• Difficulty generating trade spend reports and finding their hidden insights. In the absence of good systems to manage and measure trade spending, finding hidden insight means you first have to think to ask the question, then dig for the data and finally perform the analysis. Something this important requires a more methodical and practical approach.
• Excessive overhead costs. Inefficiencies in managing trade spend programs reduce a company’s return on their trade spending investments. The more complicated the program, the more resources are wasted.

Leading companies use specialized business software to help them attack these challenges in a variety of ways.

Maintaining accurate data

Bad data is like a wrong turn taken at the beginning of a long race. Regardless of how well you perform after that, you’re not going to end up where you hoped. Accurate data is your good start. It doesn’t guarantee success, but it is a prerequisite for it.

There are two keys to collecting and keeping accurate data:

• Centralize it so there is only one (correct) version of it. That’s where specialized software comes in. It can give you a single repository of information that anyone with permission can access any time.
• Use the same system for operating your programs as you use for measuring and reporting on them. The best software manages trade spending from end to end. You won’t have to begin by telling it what you spent and where. It already knows.

Generating the right reports

As well as providing accurate real-time data to anyone who looks, the best software can also create data links with other programs like Excel. You can continue to use Excel for reporting and analysis, which is what Excel does best. The difference is that Excel will pull information directly from the centralized database, accuracy guaranteed. No manual data entry.

But that’s often just where the reporting capabilities start. Look for business software with built-in dashboards and reports so you can leave Excel for the heavy lifting. With the right metrics at your fingertips you’ll be able to respond to emerging trends with much more agility.

Evaluate the ROI

So far we’ve discussed how to maintain accurate trade spend data and generate quality reports from it without too much effort. All that is just to get us to the next step: analysis.

• Which trade spend programs generated the best return on investment?
• Which programs generated the largest overall gains?
• Which programs consumed the most resources?
• Which programs lost money?

Making your trade spending more effective is all about making evidence-based decisions. The answers to the questions above, among others, are what you need to make those decisions. You don’t have time to call the person who looks after the files and then wait while they perform their analysis. And you don’t need to. Look for business software that makes it easy to get to the bottom of your performance ratios so you can keep doing what works and stop doing what doesn’t. Key to that is software that lets you tie expenses to your trade spend activities so you can fully account for their costs.

Plan and forecast

When you know what works and what doesn’t, you won’t just be more effective in the short term. It will also enable you to make better plans based on a more thorough understanding of the interrelationships among variables. You’ll also have a firmer basis on which to forecast the outcomes of your plans.

Conclusion

Don’t forget. If you want to make sure you’re doing more than buying market share with your trade spending, you need:

• Accurate data, stored centrally, that ties expenses to activities so you can evaluate the ROI;
• Timely reporting that tells you what you need to know before you know to ask for it;
• Plans and forecasts based in reality, created with the benefit of good cause-and-effect analysis.

There are several business software solutions out there to help you manage your trade spend programs. Given what’s at stake, it pays to take a look at your own processes and ask if they’re really good enough for the intensity of competition you face.