Multiple studies have been conducted over the years on the world’s best selling spreadsheet software and the results show that almost 90% of spreadsheets contain errors! A professor of IT Management at the University of Hawaii found that “in large spreadsheets with thousands of formulas, there will be dozens of undetected errors”. A Harvard economics study and the Roosevelt Institute review on the infamous economist paper “Growth in a Time of Debt” highlighted that there was a coding error in the spreadsheet as someone accidently didn’t update a row formula which excluded five countries resulting in completely inaccurate data.
Whilst we all agree that Excel is a powerful tool and reasonably robust, the real challenge is that anyone can create a spreadsheet and therefore it is proned to a multitude of sins. Firstly, there is no audit trail in what numbers or formulas have been changed, when they were changed and by whom. There’s also no easy way to test that the spreadsheet is working accurately. In a nutshell, spreadsheets aren’t always created by people who understand programming well and often there are multiple contributors to the development of a spreadsheet so not everyone follows the same methodology and the design and flow of the spreadsheet can become fragmented.
When it comes to spending millions of dollars on your Trade Promotions, the last thing you want is inaccurate data. It’s imperative that the numbers are right and that there is visibility to all stakeholders in the business of the effectiveness and efficiency of your trade promotions. The Supply Chain team want an accurate forecast of proposed uplift to ensure there are no out of stocks, the Finance team need visibility of the promotional programme to manage accruals and claims and the Sales team need to have all the information at their fingertips in order to secure the deals.
The Promax PX Trade Promotion Management and Trade Promotion Optimization (TPM/TPO) solution solves all of the above challenges. One closed-loop solution to effectively and efficiently manage your trade funds and ensure you are maximising your company’s return on investment. Download one of our White Papers on related topics to learn more.
Department store magnate John Wanamaker famously stated, “I know that half of my advertising dollars are wasted … I just don’t know which half.” At long last, technology to forecast and measure promotions is available to brands and retailers to significantly improve the fate of their marketing dollars. But many consumer goods (CG) companies are not reaping the full benefit of today’s trade promotion systems and continue to incur waste because they use disparate business processes for promotion planning, volume planning and annual business planning.
Enhanced, integrated business processes are critical to unlock additional value and ensure more effective, productive trade spend. Yet few CG companies are currently achieving complete integration, leaving opportunity on the table. According to Gartner’s Vendor Panorama for Trade Promotion Management in Consumer Goods, August 2012, an estimated 40% of CG companies still use spreadsheets to manage trade promotions, particularly in Tier 3. But this is changing rapidly. “The biggest development is the number of new projects that have been launched since early 2012 as CG companies have realized that they need to improve their ability to execute trade promotions independent of changes in the economy,” according to the Gartner report.
The success of early adopters is a big reason. In Aberdeen Research’s Top Five Reasons to Transform Trade Promotion Strategies, September 2012, companies with an upgraded TPM strategy saw 80% better gross margin and 121% better revenue uplift from their promotions.
Promax PX Predictive Analytics and Multi-Causal Modeling
Trade promotions Management is most commonly considered is the ability to plan and track promotional events to ensure that the payments that are made to the trade are within the contractual, budgetary and policy constraints of the business. Trade funds (spend) is the bucket of money allocated by a business to fund discounts and cooperative activity with the trading partners (wholesalers and retailers) in the supply chain from the manufacturer to the consumer.
In assessing the effectiveness of the trade funds it is fundamental to understand two components of the demand signal;
1. Baseline Sales Rate – this is the forecast sales rate when there is no promotional activity.
2. Uplift – this is the sales rate over the baseline that occurs when a promotional event is implemented.
Trade Promotion efficiency and Trade Promotion effectiveness can only be assessed if data streams of these two measures are available.
To optimize the utilization of trade funds it is important to have reliable demand signal data available that is sourced from a point that is as close as possible to the consumer. In most markets around the world this data is derived from Point Of Sale (POS) devices and is commonly referred to as “scan data”. Unfortunately, this POS data is not available for every customer and product that is sold by a typical consumer products company. This being the case, how does a CPG business tackle the optimization challenge if a large proportion of the data set is missing?
This paper will shed some light on how Promax PX can conquer this challenge and provide a stream of quality multi-causal demand signal data on which predictive analytics can be used to optimize trade promotions.
Don Nicol, CEO of Promax Applications Group is a Customer Management subject matter expert featured as a Roundtable Participant in the latest CGT Technology Solutions Guide – 2011 Customer Management Solutions (CMS).
This important publication offers Consumer Goods companies guidance for your sales and marketing initiatives in areas like nontraditional marketing, trade promotion optimization (TPO) and retailer collaboration. View a snapshot of industry credentials in the 2011 CMS Chart.