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Breaking the Cost Barrier of Trade Promotion Management–Best Practices for the New Economy

by Lorne Schwartz, MEI Computer Technology Group, Inc.Wednesday, December 02, 2009

Consumer Goods (CG) manufacturers rely heavily on the use of trade funds in order to more proactively shape demand.  Trade promotions are used to influence retailers and to collaborate on marketing programs to help drive consumer behavior.  While the average shopper may not be aware of it, virtually every product placement, price reduction, and end cap has been funded by the manufacturer.  For the average CG manufacturer, trade spending ranks second only to the cost of goods on the balance sheet and regardless of the recent recession trade spending has not decreased in most companies.  

Despite the sheer volume of spending on trade promotions, some studies estimate as many as 60% of CG companies are still relying on manual processes, desktop spreadsheet applications, and custom-built tools for promotion planning, tracking, and reconciliation.  Financial tools for managing regular invoicing,  and accounting, and customer relationship management (CRM) applications for account management are relatively mature and pervasive across manufacturing segments.  However, these applications are not built to handle the more specialized processes related to trade promotions.  Yet a recent survey  indicates that cost and risk are the most frequently cited objections to the adoption of packaged Trade Promotion Management (TPM) software.  But are these objections well founded, or simply an easy excuse to save costs and preserve scarce IT resources?

In some respects, TPM as a software category has suffered a bit of a perfect storm over the past ten years.  TPM applications share some of the tougher aspects of both an enterprise resource planning (ERP) and CRM implementation in that it requires integration to multiple back-end systems, and typically requires the involvement of numerous different departments.  Considered in this light, it comes as no surprise that adoption rates for packaged TPM aren’t higher.  But like any successful software deployment, there are many ways to reduce the complexity, cost, and risk associated with packaged TPM software.  The following represent some best practices for minimizing both the cost and risk associated with the deployment of a centralized TPM platform.

Understand the True Expense of Excel

Microsoft Excel remains the greatest barrier to centralized TPM today.  Excel can be a very difficult application to supplant in any organization, especially when most people consider it to be a “free” application.  After all, almost every desktop has a copy running on it in the basic business configuration.  The reality though is that Excel (or any spreadsheet application for that matter) is far from free.  Think about all the intellectual property built into spreadsheet formulas, and how many hours of manual manipulation go into maintaining and synchronizing data across this assortment of documents.  Worse, these “mission critical” spreadsheets are often never backed up, archived, or catalogued.  In order to truly maintain “enterprise-grade” data on desktop spreadsheets would come at an enormous cost –on top of all the already labor-intensive manual efforts that are required. 

The problem is, executives at most companies are kept in the dark about the spreadsheet fire drills, the crashed hard drives, and the army of Excel jockeys behind each report they see.  In fact, great lengths are often undertaken to hide this bucket brigade from the corner office.  As a result this “free” Excel application can get very expensive, very quickly.  On the other hand, packaged TPM maintains enterprise grade data, maintains a central repository for promotional data, and embeds best practices and reporting right into the application.  When you begin to evaluate the hidden costs of Excel, suddenly packaged TPM can actually start to look like the lower cost alternative.

Don’t Bite off More Than You Can Chew

One of the greatest benefits of TPM also represents one of its greatest challenges, as the application typically spans multiple parts of a CG organization including sales, trade marketing, finance, operations, and sometimes even supply chain.  As such, the derived benefits can be widespread, but taking on such a scope has proven time and time again as challenging at best.  Instead, successful implementations start small, and expand over time rather than going in “big bang” style.   Look for software packages that allow pragmatic modular deployments that mitigate the resource strain at any one phase of the project.  Also, start with the one or two departments that will likely gain the most benefit from the application.  Typically, achieving sales buy-in early in the process can pave the way for the entire organizations acceptance of the platform.  After all, if account managers aren’t building their plans and promotions in the system, operations, trade finance, and supply chain get no better visibility than they already have today.

Find a Gracious Host 

Choosing a hosted software package is one of the most common ways to reduce the cost and complexity from software deployments.  While quickly becoming the preferred delivery model for software categories such as CRM and Human Capital Management (HCM), even some ERP vendors are beginning to offer up their software as a hosted service.  Given improvements in internet based integration, performance, service levels, and enterprise-class hosting infrastructures, Information Technology (IT) departments have shifted from resisting the model to embracing it.  Considering that the average IT department spends more time maintaining existing software investments than building and implementing strategic systems, it’s no wonder they are happier than ever to leave the application management to someone else.

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