Trade Promotion Management: All about that base(line)
In a consistently maturing marketplace with lower margins, and consumers who know more than we ever thought they would, how can CPGs forecast their volumes week in and week out? As the market gets more complex, do we really believe sales and demand planning can get on the same page and agree on one plan?
Look at the reality of the situation. Sales speaks to customers to understand what they sell. Demand planning consolidates total forecasts. The problem is clear: two major stakeholders with two different objectives. And not only that — but probably two different levels of granularity at which they wish to understand the data.
So, who is right? And how do CPG companies get to the desired “one-number forecast”? The answer is simple: They don’t. And while we’re at it: Why do we even require a one-number forecast when the departments have such different needs?
The sales team forecast based on discussions with its customers, with limited information about what else is happening in the market. But at the end of the day, sales are responsible for its number. Let them forecast, plan, and evaluate, or you risk overcomplicating Trade Promotion Management with very low adoption.
Demand planning is a different story. This team needs to understand not just one customer, but the total business forecast. The mantra is “the whole is greater than the sum of its parts,” but if the aggregate demand planning forecast is 1.5/2X previous volumes, is that still true? Of course not, so volumes get chopped across the board to make a more reliable number for the supply chain. On top of this, Demand planners aren’t interested in the planning customer forecast. They zero in on the sold-to forecast, which, in certain markets, is irrelevant has no relevance to a sales planning solution.
How will the two numbers match? They won’t. Then why do we expect sales to plan promotional volumes based on a demand planning baseline? Let sales control both baseline and promotional volumes and let demand planning control total volume supply forecasts outside of trade promotion management.
Which brings us to baselines, an extremely important idea when we consider ROI and nonpromotional weeks. But based on this discussion, who should manage baselines for trade promotion management? Without a doubt, you should bring statistical baselines to your trade solution as a starting point, but don’t restrict your sales team and allow them to manage their own baselines during the year. As we have already unpacked, the needs of sales and demand planning are completely different, and in the end, sales adoption drives a successful trade solution.
Collaboration is key, but not to the point where we restrict the sales community in terms of usability of trade solutions. In the end, reporting will call out major differences and allow sales and demand planning to eventually become more aligned.
Find out more about Trade Promotion Management
At Kantar, we strive to make trade promotion management easier for sales by bringing together different views in one application. Kantar experts have 20+ years of experience in TPx processes automation in the CPG industry. Click below to see how we can help you deliver more with less and unlock growth