Today FMCG trade promotions – if price reductions are included – can weigh as much as 60% of the revenue in the FMCG industry. An effective promotion process design is critical for overall growth perspectives. Top level executives have to be certain that activity budgets are appropriately defined and that management processes produce incentives for top performance. This immediately arise two major challenges.
Firstly for meaningful go/no-go decisions on promotions decision-makers need filtered, processed insights on the dynamics of the promotional returns per account, promotion type, product, time period and competitive situation. Yet they do not have the tools to measure these systematically nor do they have the human capacity to process the immense mass of raw data.
Secondly teams involved in the process of creating and fulfilling promotions are severely overloaded: in many cases the mere execution of promotional activities consumes an average 80-90% of their time.* So without freeing-up a substantial amount of energy by redefining the processes to the point of automation (or at least to semi-automation), managers struggle with unexploited capabilities, worsening cost curve and a growing gap between the expected value and the actual cost of each promotion of any type.
The economy was very forgiving before, it is not anymore.
Leaking value due to sub-optimal distribution of promotional activities were largely outmatched by profitability and steady growth, but it is not anymore.
Companies could get by and operating profitably with less transparency and overall control throughout their trade activities, but that’s not the case today.
Increasing costs and lower returns just as the alerting rate of non-profitable promotions is neither the core of the problem, nor a mark of the current economic environment, but a symptom that can be and must be thoroughly dealt with.
Today – while it may appear safer for many strategic leaders to avoid facing these challenges – it is vital to understand that the long term profitability and growth perspectives of the company are at stake in the given region as well as the professional perspectives of the very individuals involved.
It is however possible to make these challenges go away without being overwhelmed by the sheer complexity of the task or by risking of the ending-up in a dead-end solution when starting the improvement process with a too simplistic approach or with a partner who has little experience in actually operating a real-life FMCG business.
Most of the challenges You as a Managing Director, Sales, Marketing, Trade Marketing or Supply Chain Director face in promotional profitability and efficiency are methodology related.
These challenges have been figured out and solved in a blueprinted approach. Best practices have been laid out and tested for most of the related areas – in promotional planning & forecasting, in promotional work flow & processes and in promotional evaluation & optimization. All these real-life-implanted process blueprints are ready for your company’s benefit if you are determined to act. Contact us for further information!