White paper: Comprehensive Trade Management (PDF) - Oracle

process of measuring the ROI of trade promotions is a relatively
new science. Recent AMR Research surveys show that field sales
teams measure ROI for just 43% of trade promotions; brand
managers do only slightly better (55%). 1 These statistics are
shocking, considering that leveraging these expenditures better
could increase corporate profitability by 15% or more.
Improving Trade Promotion Performance Can Substantially Increase Profits
Manufacturer ’
Return on Trade Dollars s Return
Spent
on Trade Spend
Profit Impact of Improving Trade Performance
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-0.6
-0.8
-54%
-29%
50%
10% - 25%
ROI
Improvement
X
5% - 10%
Net Income
as %
of Revenue
15% - 20%
Trade as %
of Revenue
15% - 100%
Net Profit
Improvement
Min Median Max
Most manufacturers lose nearly
1/3 of the money invested in trade
promotions
Improving trade promotion
performance can increase
profitability 15% or more
Source: “ Trade Promotion: A Framework for Growing Profitability ” by Booz & Company
The $1 Trillion Trade Spending Problem
The amount of money spent today in global marketing is more
than $1.4 trillion dollars (USD). According to Deloitte, nearly one
third of that number is trade promotion. If you add in the amount
of money manufacturers spend on direct consumer promotion –
such as coupons and the exploding phenomena of Internet
advertising and marketing – the so-called below-the-line spending
associated with channel promotion funding approximately $1
trillion of that global market spend.
This “trillion dollar problem” is not exclusively the domain of
manufacturer and suppliers. It is a serious problem facing the
channel as well.
Drivers of Trade Spending
The two real drivers of trade spending growth are 1) increasingly
sophisticated consumers and 2) the massive, but resource-strapped
1 AMR Research; Trade Promotion Management in Consumer Products:
Trends and Market Opportunities; February, 2008
4