The Trade Promotion Imperative!
By
Naresh Ramamurti
Practice Leader - SAP RETAIL
The perception of value lies in the imagination of those who chose to perceive it. The reality of price, unfortunately, is there for everyone to see - on the package!
Over the last few years, in and out of the greatest recession of my time, the Consumer Package Goods (CPG) industry has been plagued with an unprecedented variety of challenges. Rising commodity prices, a fundamental change in US consumer behavior, intense competition from private labels, and the insatiable demands of increasingly powerful Retailers, have all haunted the CPG ecosystem with unfailing persistence. And yet, the cream of the CPG crop has survived, and survived in style! In doing so, the CPG leaders have gone back to the basics - focusing on select leading practices and executing with intense discipline.
Not the least among these leading practices is the renewed focus and emphasis on the "art" of Trade Promotion Management (TPM) - which incidentally happens to be one of the largest cost centers for CPG, occupying anywhere between 10 and 30% of gross sales. A recent survey conducted by the Grocery Manufacturer Association of North America revealed that CPG companies that invested and executed on their TPM strategies achieved higher market share and operating margins, capturing significant sales lift from promotional price reductions.
The concept is fairly straightforward - you "trade" with your Retailers - often giving the Retailer a discount on the buying price to prominently display your products and to advertise your incentives to the consumer. The challenge in delivering value from this concept stems from the need for integrated, technology driven business execution, incorporating all aspects of the TPM ecosystem - from planning, to portfolio development, funds allocation, field sales management, order management, claims management and some. More often than not, companies tend to take a piece meal, fragmented approach to this value chain, resulting in a missed opportunity, an incorrect claim, or worse yet a promotion that does not result in an increase in sales.
SAP offers a fantastic array of solutions in the Trade Promotions space. Fully integrated with the core ERP for financials, and with the CRM and SCM applications, SAP TPM has helped several CPG companies enhance demand and supply planning. Important as it is to run a Promotion, managing and measuring the "Operational Efficiencies" and "Promotional Effectiveness" are equally imperative to eliminating waste, improving cost and increasing brand presence and profits. With recent advances in analytics and business intelligence, SAP is uniquely positioned to help deliver value from TPM investments.
As we emerge from the recession, the challenges will continue to exist. Focusing on leading strategies and effectively managing Trade Promotion initiatives can help CPG companies dramatically improve odds for profitability. Infosys has partnered with some of the world's largest and most successful CPG organizations in their SAP and TPM initiatives. Infosys is a Sapphire level sponsor of the upcoming SAPPHIRE NOW at Orlando. To learn more about how Infosys can help you overcome the challenges in today's complex marketplace, please visit our booth @ Sapphire. For more details on our sessions and forums, please visit http://www.infosys.com/SAP/news-events/Pages/sapphire-orlando-11.aspx
About Naresh: Naresh has over 17 years of experience in Information Technology and Consulting. His primary area of focus has been on helping customers to better manage their IT investments to meet their business objectives. Naresh has an established track record of incubating centers of excellence - focusing on ERP (SAP and Oracle) in the Retail, CPG and Financial Services industries, in North America, China and Australia.
Prior to Infosys, Naresh was Senior Principal with Oracle Consulting where he spent 9 years. He has a Bachelor's degree in Engineering and a post graduate degree in Computer Science from the University of Illinois.
