White paper: Comprehensive Trade Management (PDF) - Oracle
White paper: Comprehensive Trade Management (PDF) - Oracle
White paper: Comprehensive Trade Management (PDF) - Oracle
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<strong>Comprehensive</strong> <strong>Trade</strong><br />
<strong>Management</strong><br />
Responding to the $1 trillion challenge of enhancing the value of<br />
trade promotions and other trade-funded initiatives across industry,<br />
distribution channel and consumer boundaries.<br />
An Industry <strong>White</strong> Paper<br />
October, 2009
TABLE OF CONTENTS<br />
Introduction ....................................................................................................... 3<br />
The $1 Trillion <strong>Trade</strong> Spending Problem ........................................................... 4<br />
Drivers of <strong>Trade</strong> Spending ............................................................ 4<br />
The Role of the Economy.............................................................. 6<br />
Evolving <strong>Trade</strong> Relationships........................................................ 7<br />
The Case for Collaboration ........................................................... 8<br />
<strong>Trade</strong> <strong>Management</strong> Challenges ........................................................................ 9<br />
#1: Establish an effective trade management process .................. 9<br />
#2: Invest in technology to automate the process........................ 10<br />
#3: Capture and harmonize disparate demand signals................ 12<br />
#4: Improve account planning and retail execution...................... 12<br />
#5: Transition promotion planning from an art to a science ......... 13<br />
#6: Get real-time visibility to trade plans and promotion results... 14<br />
Meeting the Challenges: <strong>Comprehensive</strong> <strong>Trade</strong> <strong>Management</strong> ........................ 14<br />
How the Process Works.............................................................. 15<br />
An Incremental Approach............................................................ 16<br />
Summary and Conclusion ............................................................................... 17<br />
2
Introduction<br />
Manufacturers of consumer products have always struggled to<br />
manage customer relationships, execute effective promotional<br />
activities and measure consumer response in their distribution<br />
channels. Over the past century and a half or so, trade funds, co-op<br />
advertising, market development funds or other “soft dollar”<br />
programs designed to stimulate demand have increased in both<br />
complexity and volume. The percentage of trade funds to gross<br />
revenues has risen from just slightly over 3% in 1930 to almost 20%<br />
today. Fueled by a nearly 3x increase since the mid 1980’s, trade<br />
spending is now the second largest expense item on most<br />
consumer manufacturers’ P&L's.<br />
New product introductions<br />
Survey of Most Important Demand Generating<br />
Activities Within Consumer Goods<br />
19%<br />
29%<br />
List price management<br />
Promotion <strong>Management</strong><br />
11%<br />
16%<br />
27%<br />
30%<br />
Sales incentives<br />
Consumer Mktg programs<br />
5%<br />
7%<br />
14%<br />
18%<br />
Product run-out strategies &<br />
merchandising<br />
7%<br />
9%<br />
<strong>Trade</strong> Incentives<br />
4%<br />
5%<br />
Food & Beverage<br />
Consumer Products<br />
Source: 2009 Sales and Marketing Report by AMR Research<br />
Where does the money go? Many industry pundits argue that the<br />
expanding cost of media, human resources, distribution and rising<br />
costs from retail consolidation are responsible for the increases.<br />
Others simply blame greed on the part of the largest retailers,<br />
prompted by reports that retailers’ profits from promotional funds<br />
often exceed their net margin on product sales.<br />
Understanding whether manufacturers have gotten any value<br />
from increased trade spending is difficult, because even the<br />
3
process of measuring the ROI of trade promotions is a relatively<br />
new science. Recent AMR Research surveys show that field sales<br />
teams measure ROI for just 43% of trade promotions; brand<br />
managers do only slightly better (55%). 1 These statistics are<br />
shocking, considering that leveraging these expenditures better<br />
could increase corporate profitability by 15% or more.<br />
Improving <strong>Trade</strong> Promotion Performance Can Substantially Increase Profits<br />
Manufacturer ’<br />
Return on <strong>Trade</strong> Dollars s Return<br />
Spent<br />
on <strong>Trade</strong> Spend<br />
Profit Impact of Improving <strong>Trade</strong> Performance<br />
0.8<br />
0.6<br />
0.4<br />
0.2<br />
0<br />
-0.2<br />
-0.4<br />
-0.6<br />
-0.8<br />
-54%<br />
-29%<br />
50%<br />
10% - 25%<br />
ROI<br />
Improvement<br />
X<br />
5% - 10%<br />
Net Income<br />
as %<br />
of Revenue<br />
15% - 20%<br />
<strong>Trade</strong> as %<br />
of Revenue<br />
15% - 100%<br />
Net Profit<br />
Improvement<br />
Min Median Max<br />
Most manufacturers lose nearly<br />
1/3 of the money invested in trade<br />
promotions<br />
Improving trade promotion<br />
performance can increase<br />
profitability 15% or more<br />
Source: “ <strong>Trade</strong> Promotion: A Framework for Growing Profitability ” by Booz & Company<br />
The $1 Trillion <strong>Trade</strong> Spending Problem<br />
The amount of money spent today in global marketing is more<br />
than $1.4 trillion dollars (USD). According to Deloitte, nearly one<br />
third of that number is trade promotion. If you add in the amount<br />
of money manufacturers spend on direct consumer promotion –<br />
such as coupons and the exploding phenomena of Internet<br />
advertising and marketing – the so-called below-the-line spending<br />
associated with channel promotion funding approximately $1<br />
trillion of that global market spend.<br />
This “trillion dollar problem” is not exclusively the domain of<br />
manufacturer and suppliers. It is a serious problem facing the<br />
channel as well.<br />
Drivers of <strong>Trade</strong> Spending<br />
The two real drivers of trade spending growth are 1) increasingly<br />
sophisticated consumers and 2) the massive, but resource-strapped<br />
1 AMR Research; <strong>Trade</strong> Promotion <strong>Management</strong> in Consumer Products:<br />
Trends and Market Opportunities; February, 2008<br />
4
etailers who must cater to them in an ever increasing number of<br />
formats and channels.<br />
The Changing Consumer<br />
Consumers are switching brands, retailers and channels more than<br />
ever before.<br />
• 68% are brand switchers. Only 5% are loyal to one brand.<br />
• 73% shop in five or more channels. Only 26% are loyal to a<br />
particular retailer. 2<br />
A new “thrifty” behavior is emerging with the economic<br />
downturn, so that consumer perceptions of value often trump<br />
loyalty. Social networks are emerging as a “source of truth” about<br />
brands 3 , fueling even more brand switching.<br />
In essence, the consumer has matured; and with that maturity<br />
comes a more daunting task for both manufacturers and resellers<br />
alike – doing more than ever to attract, deliver and maintain a<br />
loyal consuming public.<br />
According to a February 2009 <strong>paper</strong>, AMR Research pointed out<br />
that in the beginning of 2008, 40% of the decisions the shopper<br />
made took place at the shelf. By 2009, only 24% of the shopper<br />
decisions were being made there. 4 Retailers and Manufacturers<br />
differ in their opinions that this is where the trade spend should be<br />
concentrated (See “Evolving <strong>Trade</strong> Relationships, page 7). As<br />
such, consumers are researching, planning and executing their<br />
purchases more strategically in a recessionary economy,<br />
dramatically affecting the impact of trade promotions.<br />
The Changing Retailer<br />
Retailers continue to consolidate and increase their leverage.<br />
Whole Foods/Wild Oats, SuperValu/Albertson’s, Coles, and Ahold<br />
are just a few of the most prominent recent combinations.<br />
Meanwhile, company failures are becoming more commonplace<br />
against the perfect storm of both the competition and the economy;<br />
some of the victims include Circuit City, Linens N Things, Home<br />
Expo and Smith & Hawkins. Many consumer manufacturers now<br />
2 From Deloitte Consulting, Shopper Marketing <strong>White</strong> Paper, 2008<br />
3 Ibid<br />
4 AMR Research, Lora Cecere, C.J. Wehlage, and Jane Barrett; February, 2009<br />
5
serve only a handful of major retail channel partners – reducing<br />
their clout in the relationship.<br />
Sensing their increasing presence in the consumer’s shopping<br />
experience, many retailers have invested in their own brand image,<br />
expanded store brands, and implemented shopper marketing<br />
strategies, all of which affect the role of consumer brands. Target<br />
Stores’ Archer Farms, Wal-Mart’s Great Value, and Costco’s<br />
Kirkland 5 have all become major brands in their own right today,<br />
increasingly profiled along with consumer manufacturer brands in<br />
consumer ratings.<br />
But in spite of consolidation and private label competition, channel<br />
companies – especially the large retailers – are not always the ogres<br />
that they are made out to be. Retail margins have dropped to<br />
virtually nothing, especially when the products are promoted or<br />
when there is a contractually low discount applied to every<br />
product sold. 6 And while massive merger and acquisition activity<br />
over the past three decades has reduced the number of channel<br />
companies, it has also spurred tremendous growth of branch retail<br />
locations and retail channel formats that offer more opportunity<br />
for the consumer than ever before. New stores, more spacious and<br />
attractive interiors, more emphasis on product categories and the<br />
expansion from goods only to combinations of goods and services<br />
mean higher cost, higher complexity and higher concerns from<br />
both sides of the channel.<br />
The Role of the Economy<br />
In the late 1970’s, the center of power for financial assistance (co-op<br />
advertising and trade funds) moved from consumer goods<br />
companies to the retailers, causing spending to accelerate in the<br />
‘80s and ‘90s. Alarmed, numerous fast-moving consumer goods<br />
companies changed their funding methodology from lump sum to<br />
product-based accrued funds to provide more direct control of<br />
their expenditures. The effort initially had some success: over most<br />
of the decade of the 2000s, the growth of trade spend flattened.<br />
But the current economic problems in the U.S. and across the globe<br />
have changed the base of power once again. With private label<br />
5 From Deloitte Consulting, Shopper Marketing white <strong>paper</strong>, 2008<br />
6 Everyday Low Pricing (EDLP) structures popular with Mass Merchants result in<br />
an extremely low price markdown at wholesale in lieu of accrued and/or allocated<br />
trade funds.<br />
6
growth up 1% in the second half of 2008, 7 consumer goods<br />
companies are suddenly fighting to maintain, much less grow<br />
strong brands. The current recession not only straps the retailer for<br />
capital – it puts tremendous financial pressure on consumer goods<br />
companies in all categories to innovate and restore brand loyalty.<br />
Source: Consumer<br />
Goods Technology/AMR<br />
Research"2009 Sales<br />
and Marketing Report,"<br />
June, 2009<br />
<strong>Trade</strong> Tactic (Moment of Truth)<br />
"At the<br />
Shelf"<br />
Spending<br />
59%<br />
"Before<br />
the<br />
Store"<br />
Spending<br />
41%<br />
Evolving <strong>Trade</strong> Relationships<br />
Manufacturers and retailers prefer different promotion tactics:<br />
• Retailers prefer “before the store” tactics because they<br />
believe they have better spend effectiveness.<br />
• Manufacturers prefer “at the shelf” tactics because many<br />
shopper decisions are made in the store.<br />
Much of the trade spending mandated by the retailer is for “before<br />
the store” initiatives – promotion tactics intended to drive price<br />
discounts, provide pre-event advertising or other pre-promotion<br />
activity. More than 41% of the total trade spend involves this type<br />
of outlay. 8 Manufacturers argue that these costs, though a major<br />
industry competitive requirement, are less effective and, therefore,<br />
often wasteful.<br />
On the other hand, spending that is directed to generate consumer<br />
desire and purchase at the shelf is the most difficult to prove for<br />
performance compliance. The same study shows that the<br />
effectiveness of the spending (based primarily on the effect on<br />
ROI) is marginally higher for the “before the store” tactics by an<br />
average of 7.48 to 7.34 out of 10.0 for “at the shelf” spending. 9<br />
Fundamental differences in retailer and manufacturer beliefs about<br />
consumer response are the basis of much of the argument, mistrust<br />
and strained relationships that have existed between the Consumer<br />
Goods companies and the retailers.<br />
For years, the problems retailers and manufacturers faced were<br />
often transparent to each other, or worse, the channel wielded<br />
power over the manufacturer/supplier so completely that the<br />
“don’t ask” policy of the channel buyer prevailed. That meant<br />
giving more money and getting less in the way of true marketing<br />
recommendation opportunities. Manufacturers should focus their<br />
7 AMR Research, Lora Cecere, C.J. Wehlage, and Jane Barrett; February, 2009<br />
8 Consumer Goods Technology/AMR Research “2009 Sales and<br />
Marketing Report,” June, 2009<br />
9 Consumer Goods Technology/AMR Research “2009 Sales and<br />
Marketing Report,” June, 2009<br />
7
programs on gaining and retaining customers, while recognizing<br />
retailers’ needs to enhance their own image.<br />
Manufacturers are increasingly conceding to retailer-driven<br />
programs because retailers have become far more intelligent about<br />
their shoppers, and the retailers simply have more power in the<br />
relationship. Manufacturers need to improve their understanding<br />
of retail data to regain a seat at the table.<br />
One response manufacturers have made is to create dedicated<br />
cross-functional account teams. While a capitulation of sorts to<br />
customer consolidation, the increased focus of a dedicated team<br />
gives manufacturers the opportunity to become more attuned to<br />
retailing realities. So far, this fundamental shift in resources has not<br />
yet been matched by changes in companies’ functional<br />
organization / power structure, nor their IT environment. (For<br />
example, there is no “system of record” today for the strategic<br />
account team.) A new paradigm is required for management of the<br />
trade channel relationship.<br />
The Case for Collaboration<br />
With the channel often driving the direction, tactics, timing and<br />
funding, it is easy to believe that the manufacturer has little or no<br />
authority to make well-intended promotion recommendations. But<br />
to attract the loyalties of the consumer and garner ongoing<br />
prominence among the trade channel retailers, manufacturers are<br />
continuing to escalate the role of trade channel execution and<br />
promotion.<br />
The reality is that both partners have a common goal: motivate the<br />
consumer to enter through the doors and hold their loyalty once<br />
they do. Attracting the consumer is nothing new, of course. But<br />
today’s consumers sophisticated demand that promotion strategies<br />
evolve from art to science – bordering on rocket science.<br />
Industry initiatives such as VICS Collaborative Planning,<br />
Forecasting and Replenishment (CPFR) have demonstrated that<br />
retailers and manufacturers can work together to reduce<br />
inventories. Next they need to collaborate to address trade<br />
management challenges.<br />
8
<strong>Trade</strong> <strong>Management</strong> Challenges<br />
There are six key challenges that manufacturers must confront to<br />
enhance their trade management effectiveness:<br />
1. Establish an effective trade management process<br />
2. Invest in technology to automate the process<br />
3. Capture and harmonize disparate demand signals<br />
4. Improve account planning and retail execution<br />
5. Transition promotion planning from an art to a science<br />
6. Get real-time visibility to trade plans and promotion results<br />
#1: Establish an effective trade management<br />
process<br />
An effective comprehensive trade management process is part of a<br />
larger integrated sales and marketing process, and links strategic<br />
planning, tactical planning and execution. Ideally, there are seven<br />
“pillars” of functionality that span an integrated sales and<br />
marketing process.<br />
Innovation<br />
Integrated<br />
Sales and<br />
Marketing<br />
Demand-<br />
Driven<br />
Operations<br />
Business<br />
Mgmt and<br />
Control<br />
Brand and<br />
Category<br />
<strong>Management</strong><br />
Consumer<br />
Marketing<br />
Price<br />
<strong>Management</strong><br />
Demand<br />
Signal<br />
<strong>Management</strong><br />
Advanced<br />
<strong>Trade</strong><br />
Planning<br />
<strong>Trade</strong><br />
Promotion<br />
<strong>Management</strong><br />
Retail<br />
Coverage<br />
Planning &<br />
Execution<br />
Business Intelligence / Master Data <strong>Management</strong><br />
The specific pillars that are related to trade management include:<br />
<strong>Comprehensive</strong> <strong>Trade</strong><br />
<strong>Management</strong> is the core<br />
functionality that delivers<br />
the managed ROI of trade<br />
funds and spending.<br />
o<br />
o<br />
o<br />
Advanced <strong>Trade</strong> Planning – The processes of account<br />
planning that include forecasting, sales volume planning,<br />
predictive modeling and fund allocation.<br />
<strong>Trade</strong> Promotion <strong>Management</strong> – The processes<br />
surrounding fund management and accounting, claim<br />
audit and deduction management, and settlement.<br />
Retail Coverage Planning and Execution – The processes<br />
of trade and brand coverage planning, objectives planning,<br />
route scheduling, visit planning, and on-site execution<br />
functions of performance compliance, store audit, cash and<br />
order management. The latter is generally performed on a<br />
disconnected mobile handheld device.<br />
9
o<br />
Demand Signal <strong>Management</strong> – Using retail point of sale<br />
data as the primary source of intelligence, this process<br />
combines elements of category and brand management,<br />
price management, competitive tracking and retailer<br />
performance scorecarding to guide account teams toward<br />
more effective analysis of business operations and financial<br />
ROI.<br />
For most companies there still exists a problem across the<br />
remaining functional pillars within integrated sales and marketing.<br />
This problem is not unique, but seems to be universally shared<br />
across all consumer products companies in a number of industries<br />
including food, beverage, health & beauty aids, automotive<br />
aftermarket, consumer electronics, apparel/footwear,<br />
hardware/DIY and high technology.<br />
What often limits this reengineering of processes are the natural<br />
barriers that have been erected over the years by the various<br />
departmental constituencies such as brand marketing, category<br />
management, sales, administration, finance, demand planners, and<br />
supply chain management. For the most efficient and effective<br />
sales and marketing organization to exist, these barriers have to<br />
come down and be replaced by an integration of fact based<br />
collaboration, business intelligence and decision making.<br />
Moreover, what often disrupts this plan, even if the willingness<br />
and commitment to a more streamlined linkage between these<br />
functional pillars exist is the lack of a single unified technology.<br />
#2: Invest in technology to automate the process<br />
Most IT organizations have so far focused on improving the<br />
transactional technology that accounts for trade fund spending,<br />
emerging from three decades of manual procedures, spreadsheets<br />
and cumbersome internally developed solutions.<br />
Now, however, with many companies meeting transaction<br />
performance, mandated internal business controls (e.g. Sarbanes-<br />
Oxley standards) and administrative goals, they have turned their<br />
attention to the end-to-end technology and application solutions<br />
that support the harder chores of integrating the functional<br />
processes and providing world class technology. This is<br />
accomplished by:<br />
10
o<br />
o<br />
Setting IT budget priority that matches the level of<br />
corporate spending and opportunity<br />
Evolving from desktop tools and homegrown legacy<br />
solutions to enterprise-class technology<br />
There has been, over the past few years, a trend toward allocating<br />
more IT dollars to the improvement of trade promotion<br />
management. AMR reported that IT investment in trade<br />
management averaged $6 million in 2007 and grew by more than<br />
9% in 2008. 10 Executive management has become more focused on<br />
<strong>Trade</strong> Promotion <strong>Management</strong> (TPM) funding and return – a clear<br />
sign that IT spending is needed in this area.<br />
The problem most consumer goods companies have is that the<br />
layer of components that operate and/or manage the trade channel<br />
are not equally shared, consistently managed or even under one<br />
organizational responsibility. Each such component is often at<br />
different stages of technical development or capability.<br />
Often there are “home grown” applications with management and<br />
maintenance that are inherited through the typical organizational<br />
attrition, so the understanding of how they fit into the service of<br />
the channel management spectrum is limited and often<br />
disconnected from the rest of the process and technology owners.<br />
The sales organization may own retail execution, the trends show<br />
finance owns TPM, the brand marketing typically owns category<br />
management and brokerage firms are often involved with the<br />
annual customer planning. But linking, coalescing, and<br />
reengineering these together is beyond typical transactional<br />
definition and operations management. Therefore, a new<br />
10 <strong>Trade</strong> Promotion <strong>Management</strong> in Consumer Products, Trends and Market<br />
Trends, AMR Research, February, 2008<br />
11
consolidated process, with combination of all functions detailed in<br />
the functional pillars shown on page 9 is the definition of<br />
comprehensive trade management in particular and integrated<br />
sales & marketing in general.<br />
#3: Capture and harmonize disparate demand<br />
signals<br />
Consumer goods companies are swamped with data - both internal<br />
as well as external. Manufacturers must deal with an ever<br />
increasing number of sources, from outbound shipments to<br />
syndicated market data to store level consumption data.<br />
The first step is to bring all of that data into one single source of<br />
intelligence. Multiple data sources, which are not aligned,<br />
synchronized, integrated or timely, hinder trade planning and<br />
management. Diverse data sources also create conflicting reports,<br />
putting data quality (accuracy and breadth) in question.<br />
The next major challenge is to mine and transform the data to form<br />
the base of knowledge and intelligence that enables more effective<br />
and efficient management of the consumer demand signals.<br />
Manufacturers who master these signals can monitor and modify<br />
ongoing events, conduct timely pre and post event analysis, and<br />
plan future events with greater precision.<br />
#4: Improve account planning and retail<br />
execution<br />
The ability to transmit marketing and promotion campaigns to<br />
actionable in-store performance continues to be a challenge in<br />
developed markets and almost an impossible task in developing<br />
geographies. Today, most manufacturers today rely upon a<br />
combination of spreadsheets and one or more data warehouses to<br />
plan and analyze their trade coverage resulting in:<br />
• Difficulty aggregating account plans or creating rolling<br />
estimates<br />
• Limited scenario modeling capabilities<br />
• Lack of tools and software conducive for mobile use, joint<br />
retailer planning, or sales productivity<br />
Integrated business planning requires a more comprehensive<br />
platform to combine the insights of the baseline demand plan with<br />
the effect of promotion through the sales & operations planning<br />
12
process. Sales executives today need to know both the baseline<br />
and lift to understand the incremental growth necessary to achieve<br />
the desired ROI.<br />
Retail execution is also not easily managed. Manufacturers face<br />
challenges in planning and executing at store level, including sales<br />
and merchandiser coverage, routing, order and asset management.<br />
Consolidating and tracking retail compliance on ads, display, shelf<br />
space, assortment and price is difficult. Limited scorecard<br />
capabilities reduce manufacturers’ ability to evaluate retail<br />
performance and profitability.<br />
The intent of<br />
<strong>Comprehensive</strong> <strong>Trade</strong><br />
<strong>Management</strong> is not only<br />
to be more strategic, but<br />
also to leverage a<br />
growing wealth of point<br />
of sale data that enables<br />
more alignment between<br />
individual tactical<br />
decision making by the<br />
rep and the store buyer.<br />
Goals and objectives vary<br />
with so much more<br />
regularity, depending<br />
upon the combined<br />
environments of channel<br />
and supplier that the<br />
consumer-centric model<br />
must enable a better<br />
response to the<br />
marketplace demands.<br />
#5: Transition promotion planning from an art to<br />
a science<br />
Promotion plans are still too often the result of guesswork or<br />
inertia (minor revisions to last year’s plan). 74% of planned trade<br />
expenditures are based on history, perpetuating poor historical<br />
performance. 11 Data driven analytical models are already more<br />
reliable than traditional methods of estimating performance under<br />
most conditions, and more importantly, they make it possible to<br />
plan hundreds of localized promotions that would be beyond the<br />
capacity of manual approaches.<br />
What is often missing is the capability to generate insightful and<br />
appropriate decision making power without the stress, time and<br />
pain required in today’s analytical processes. The problem is<br />
complex, compounded and confounding. The primary post event<br />
measure is still sales volume, not profitability or ROI. Of 52% of<br />
companies that measure post event performance, only 48%<br />
measure ROI 12<br />
Analytics can help with promotion evaluation as well. Lack of<br />
analytics contributes to over-spending of trade budgets,<br />
misallocation of marketing resources, and inaccurate financial<br />
reporting. The problem most vendors have struggled with is the<br />
dynamic effect that environmental conditions (e.g. seasonality,<br />
weather, competitive deals, etc.) will have on the pre and post<br />
evaluation of performance. What is required is a sound attributebased<br />
statistical science that takes the pure historical facts and<br />
11 Consumer Goods Technology/AMR Research “2009 Sales and Marketing<br />
Report,” June, 2009<br />
12 Ibid<br />
13
Dollars in Millions<br />
Cumulative <strong>Trade</strong> Event Contribution<br />
$4.5<br />
$4.0<br />
$3.5<br />
$3.0<br />
$2.5<br />
$2.0<br />
$1.5<br />
$1.0<br />
$0.5<br />
$0.0<br />
41% of events<br />
175 350 575 700<br />
Number of Events<br />
<strong>Trade</strong> promotion effectiveness<br />
varies widely by event<br />
Source: “<strong>Trade</strong> Promotion : A Framework for Growing Profitability” by Booz &<br />
Company, <strong>Oracle</strong> Insight<br />
creates these scenarios as attributes that provide even more depth<br />
to the level of analysis that can be done. This attribute-based<br />
pattern or trend recognition contributes to a higher quality<br />
analysis of both pre- and post-performance analysis.<br />
#6: Get real-time visibility to trade plans and<br />
promotion results<br />
Companies generally lack the end-to-end view of financial,<br />
marketing and sales resulting from effective promotions. This<br />
partial visibility of market conditions results in multiple forecasts<br />
for revenue, volume, and trade spend. Differences in<br />
understanding among functional teams limit collaboration both<br />
internally and externally.<br />
Manufacturers also can benefit from more timely data. Some<br />
retailers provide near-real-time access to sales results, which can be<br />
critical in the first few hours of a promotion. Many companies have<br />
not exploited real-time visibility in a systematic way to plan and<br />
respond to consumer uptake of promotions. In fact, many<br />
companies are not able to interactively incorporate this data into<br />
planning assumptions to identify any “exceptions” of assumptions<br />
to reality.<br />
Meeting the Challenges:<br />
<strong>Comprehensive</strong> <strong>Trade</strong> <strong>Management</strong><br />
Implementing a true end-to-end integrated sales and marketing<br />
process that includes comprehensive trade management<br />
functionality can enable sales and margin improvements for both<br />
the consumer goods company and its trade channel customers.<br />
<strong>Comprehensive</strong> trade management starts with the consumer as the<br />
central focus. It enhances account and category management,<br />
productivity and collaboration to stimulate consumer demand.<br />
This multidisciplinary process requires an end-to-end suite of<br />
application solutions that are integrated together.<br />
For years, manufacturers have endeavored to assemble and<br />
integrate the appropriate components of a full scope end-to-end<br />
comprehensive trade management suite; but they have had to<br />
resort to a variety of different applications that often fail to fully<br />
and successfully integrate between each other.<br />
14
How the Process Works<br />
A comprehensive trade management process encourages bestpractice<br />
interactions of account team, administrative and corporate<br />
stakeholders. It combines nine disciplines:<br />
2<br />
Retail<br />
Category<br />
<strong>Management</strong><br />
4<br />
Promo<br />
Modeling &<br />
Simulation<br />
5<br />
Promo<br />
Optimization<br />
1<br />
Marketing<br />
Resource<br />
<strong>Management</strong><br />
3<br />
Promotion Planning<br />
& Fund Mgmt<br />
6<br />
7<br />
Retail<br />
Coverage<br />
Planning<br />
8<br />
Retail In-store<br />
Execution<br />
9<br />
Settlement &<br />
Deduction<br />
<strong>Management</strong><br />
Business Intelligence and Analytics<br />
Retailer<br />
Performance<br />
Scorecard<br />
1. Marketing Resource <strong>Management</strong>: Marketing campaigns<br />
are created with promotion objectives and funds that<br />
tightly align with corporate business requirements and<br />
trade calendars are created and distributed.<br />
2. Retail Category <strong>Management</strong>: Brand and category<br />
managers analyze retail performance, pricing and share of<br />
all commodity volume (ACV) to ensure proper coverage of<br />
the company’s categories down the lowest hierarchy of<br />
product and to the lowest level of the retailer’s store<br />
organization. Also this is where the view of both the<br />
consumers’ habits as well as the individual branch store<br />
locations’ performance of POS data is analyzed –<br />
generating a significant portion of the story of “cause and<br />
effect” that drives consumer marketing.<br />
3. Promotion Planning and Fund <strong>Management</strong>: Key Account<br />
Managers will review the marketing, brand and category<br />
objectives and begin formulating the detailed plans for<br />
promotions to support the sales volume forecast and<br />
demand plan, including determining the right combination<br />
of in-store merchandising support.<br />
4. Promotion Modeling and Simulation: Promotion planners<br />
will be able to create multiple scenarios by performing<br />
simulation modeling to develop the most effective<br />
promotional combination.<br />
15
<strong>Oracle</strong>’s <strong>Comprehensive</strong><br />
<strong>Trade</strong> <strong>Management</strong><br />
Suite responds to and<br />
solves the CG industry<br />
business challenges<br />
Challenge #1:<br />
- <strong>Oracle</strong> domain experts help review<br />
and evaluate your company’s<br />
processes against industry best<br />
practice requirements, process and<br />
technology.<br />
- We help you reengineer and support<br />
a process that meets CTM standards<br />
and your company’s business controls<br />
Challenge #2:<br />
- <strong>Oracle</strong>’s phased approach to<br />
comprehensive trade management<br />
enables you to add applications<br />
separately or together, depending<br />
upon your needs<br />
Challenge #3:<br />
- <strong>Oracle</strong>’s DSR captures direct<br />
retailer POS and provides both the<br />
retail and manufacturer data schema<br />
to portray key category, sales,<br />
competitive and scorecard intelligence<br />
at the lowest SKU levels and the most<br />
granular retail outlet views<br />
- <strong>Oracle</strong> CG Analytics enables rapid,<br />
precise and trustworthy business<br />
performance insights that drive<br />
profitable execution of promotions<br />
Challenge #4:<br />
- <strong>Oracle</strong>’s Marketing Resource<br />
<strong>Management</strong> (MRM) module enables<br />
powerful marketing, brand and<br />
category programs to be created along<br />
with terms, rules and guidelines that<br />
flow through to execution and<br />
settlement<br />
-<strong>Oracle</strong>’s Advanced <strong>Trade</strong> Planning<br />
account planning coupled with<br />
Predictive <strong>Trade</strong> Planning and<br />
Promotion Optimization provides a<br />
sales volume planning and trade<br />
promotion management combination<br />
that is industry’s best of breed.<br />
- <strong>Oracle</strong> Retail Coverage Planning<br />
and Execution ensures full scope cycle<br />
planning, objectives and in-store<br />
compliance audits<br />
Challenge #5:<br />
- <strong>Oracle</strong> Business Intelligence,<br />
combined with the DSR and CG<br />
analytics will deliver a powerful<br />
foundation of knowledge that drives<br />
good decisions throughout the CTM<br />
process<br />
Challenge #6:<br />
-Integration with ERP enables real<br />
time financial liability and spending<br />
updates<br />
- <strong>Oracle</strong> mobile handheld retail<br />
execution monitors on-site in-store<br />
compliance to promotions and pricing<br />
tactics<br />
5. Promotion Optimization: To validate the promotion<br />
model, the account planner should be able to use a<br />
promotion optimization tool to develop the most effective<br />
scenario based on the planner’s individual objectives/goals<br />
and constraint criteria.<br />
6. Promotion Planning and Fund <strong>Management</strong> (2): The<br />
promotion plan accrues the fund liability, assigns the fund,<br />
and enables the planner to override the default funding by<br />
manually assigning and apportioning across multiple funds<br />
if necessary. Once the negotiation is complete with the<br />
retailer, the planner finalizes the promotion through an<br />
approval routing process that, upon completion, queues the<br />
promotion for execution and performance.<br />
7. Retail Coverage Planning: The merchandising team sets<br />
retail execution objectives, performs trade and brand<br />
coverage planning, visit scheduling and determines on-site<br />
store requirements for the route sales rep, merchandiser or<br />
auditor.<br />
8. Retail In-Store Execution: Inside the store, the rep or<br />
merchandiser uses mobile technology to conduct the<br />
business activities mandated by the promotion.<br />
9. Settlement and Deduction <strong>Management</strong>: The customer<br />
service team handles claims and rebate audits, deduction<br />
management and settlement.<br />
The challenge a consumer goods manufacturer faces today is to<br />
make all of these individual disciplines work together across a<br />
framework of business intelligence, analytical tools and master<br />
data management. Account managers should be able to check<br />
performance using ongoing scorecard tracking of key performance<br />
indices such as inventory levels, distribution logistics, promotion<br />
compliance and an array of other important metrics. There must be<br />
a strong integrated analytics and business intelligence capability<br />
that supports the entire process through real time reporting, userconfigured<br />
dashboards and master data management technology.<br />
An Incremental Approach<br />
Combining all of these functions into the same foundation, while<br />
preserving the best-of-breed advantages of individual applications<br />
offers consumer products companies and their trade channel<br />
partners a powerful set of benefits. Achieving comprehensive trade<br />
management requires significant change management as well.<br />
16
The features, functions and benefits of a comprehensive trade<br />
management process and supporting technology are often thought<br />
of as a phased approach that begins with the basic transactional<br />
foundation that, with the pressures of regulatory mandates has<br />
resulted in a number of companies streamlining this foundation<br />
already. But where a comprehensive trade management initiative<br />
begins to produce more benefit is when you begin evolving toward<br />
more advanced capabilities to predict and optimize promotions,<br />
ending with the transformational capability to collaborate on<br />
events with channel partners.<br />
TRANSFORMATIONAL<br />
FOUNDATIONAL<br />
FUND, PLAN, EXECUTE, PAY<br />
• Optimization of speed<br />
and efficiency of trade<br />
management<br />
transactions<br />
• Implementation of<br />
spending controls<br />
ADVANCED<br />
PREDICT AND OPTIMIZE<br />
• Predictive modeling to<br />
improve trade spend<br />
efficiency & effectiveness<br />
• <strong>Trade</strong> & demand planning<br />
systems integrated for<br />
near real time demand<br />
forecasts<br />
• <strong>Trade</strong> & financial systems<br />
integrated for improved<br />
management and<br />
reporting on trade costs<br />
COLLABORATE<br />
• Near real time trade<br />
activity visibility across<br />
enterprise:<br />
–Enterprise collaboration<br />
on single sales forecast<br />
–Alignment of brand &<br />
trade marketing plans<br />
• Near real time<br />
collaboration with retailers<br />
on sales, marketing and<br />
demand planning<br />
• Proactive management of<br />
store level retail execution<br />
<strong>Comprehensive</strong> <strong>Trade</strong> <strong>Management</strong><br />
Summary and Conclusion<br />
.<br />
<strong>Comprehensive</strong> trade management addresses the Trillion Dollar<br />
Challenge of trade spending in the consumer sector. Case studies<br />
of manufacturers who have made this journey illustrate the<br />
potential: 13<br />
<br />
<br />
<br />
Reduction overspend by up to 20% one year after implementation<br />
15% reduction in stock-outs<br />
12 – 28% increase in efficiency in trade promotion management<br />
13 Various sources including AMR Research, Booz-Allen Hamilton and<br />
documented value attainment from existing <strong>Oracle</strong> customers, 2007 –<br />
2008.<br />
17
Increase trade deduction management productivity by 10% per<br />
year<br />
1.5% increase in revenues per year<br />
2.2% net profit increase with attribute-based promotion<br />
optimization<br />
11% reduction in excess inventory due to better promotion<br />
planning<br />
The primary purpose of the comprehensive trade management<br />
technology is to automate the end-to-end process of effective and<br />
efficient channel management activities.<br />
Bringing these disparate point solutions together is often more<br />
than an internal organization can do – even one with a large and<br />
talented I/T development staff. It will require a significant effort<br />
toward change management as well.<br />
The benefits gained from internal efficiency, communication and<br />
performance intelligence clearly results in one of the most<br />
significant returns on investment of capital any company can<br />
make.<br />
<strong>Comprehensive</strong> <strong>Trade</strong> <strong>Management</strong><br />
September 2009<br />
Authors: Rob Hand<br />
<strong>Oracle</strong> Corporation<br />
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