As more small and medium-size companies recognize the importance of having visibility into trade spend activity, the TPM space has reacted and in turn grown over the past several years. There are a variety of new options and applications that are very scalable for smaller manufacturers.  A Tier 3 company no longer has to take on a six figure contract with an ERP provider just to get a trade promotion management system.  Nor do companies have to build a custom application in an effort to avoid larger, more costly systems. For the first time, there are more economical tools available that offer the right functionalities for a smaller CPG manufacturer.

This is particularly exciting news for manufacturers doing business in the natural and organic category. While natural and organic companies are fast growing, they don’t necessarily have the resources to put behind a TPM implementation project. However, putting a trade promotion management system in place is something the business knows it needs to compete with category captains. Today’s Software-as-a-Service (SaaS) solutions are the perfect option.  Such cloud-based systems are easy to implement, low in cost and very scalable and user-friendly.

History shows companies who build and utilize complex Excel spreadsheets to manage the second greatest line item on their budget become dissatisfied with visibility into trade spend as their company grows.  There is no access to real-time data, identifying and challenging invalid deductions or chargebacks is impossible and no one in the company is sure if a promotion was profitable or not.  Manufacturers who rely on Excel to track trade dollars are essentially leaving money on the table each and every month. That adds up to thousands of dollars that could have been applied to the bottom line.

Any small to mid-size manufacturer can and should invest in a TPM system, especially if the company has gone national or is expanding with a broker network.  You need a reliable tool that will grow with the company and help manage the business activities that are critical for any growing CPG manufacturer to maintain success. Implementing a TPM system and putting best practices and processes in place before a problem occurs will keep your company ahead of competitors, attractive to investors and make the organization better and stronger as a whole.

You’re never too big or too small for a TPM tool and it’s never too late to relinquish spreadsheets and adopt a solution. With some research, a little guidance and adhering to industry guidelines, you can find a system that’s just right for your company.

Such meetings-of-the-minds are not always reserved for the boardroom. Sometimes the best “what if” scenarios and “here’s a crazy idea” brainstorming sessions occur around the espresso machine, during a spirited round of Pac-Man in the office game room or in the virtual land of Skype. I personally think the dome hockey table is the best place to put my fellow co-workers’ skills to the test.

While MEI has employees across North America, Montreal is the company’s official headquarters. When the weather permits, we will coordinate a baseball game at a nearby park or rent a volleyball court. It’s a fun way to blow off steam, de-stress and hangout. MEI values teambuilding activities and welcomes fun ideas that will stir-up the creative juices.

At MEI we are not afraid of cold weather, so we’ve traveled as a group to Mont Tremblant for annual company meetings and holiday celebrations. Not everyone is a fan of the rigorous cold winters here in Montreal, so as a true equal opportunity organization, MEI hosted its 2011 Company Meeting and holiday party in sunny Orlando, Florida. What an amazing time we had at Universal Studios theme park in the middle of December.

MEI is not your average software company. The international cast of brilliant characters that make up the MEI family continuously aim to break the mold and be game-changers in the industry.  We refuse to be an average company with safe goals and a ho-hum work ethic.  The culture is energizing and engaging and ultimately enables us to offer our clients the best Trade Promotion Management software solution.

Well, I’m off to challenge – I mean have a meeting with – the boss man at the Pac-Man table. It’s just another work day here at MEI.

According to the National Retail Federation, some 25,500 people packed the January event. It was the best turnout in years, maybe ever, and the atmosphere was electric.

As several fellow aisle walkers observed, NRF has become primarily a retail operations show. Apparently the austerity of the recent economy led to some pent-up demand among retail CIOs, and exhibitors were ready to jump in with solutions.

These fell into several thematic categories. Oft-heard attributes included:

• “Insights” (every retail software solution promises better ones)

• “Analytics” (every retail software solution promises faster ones)

• “Business Intelligence” or BI (how every solution promises to deliver the insights and analytics)

• “Big Data” (what accrues from gathering so many insights and analytics)

• “Cloud” (the place in cyberspace where more and more vendors propose to house Big Data)

• “Dashboards” (screens where retail practitioners are expected to access their BI)

• “Omni-Channel” (a state of retailing where online commerce coexists with mobile commerce and bricks & mortar, empowered by – you guessed it – insights, analytics, Big Data and BI.)

And of course, all of this know-how will  increasingly be accessed and manipulated over mobile devices.

Tracking the Trackers

As some readers may be aware, I am professionally obsessed with in-store. True to form, I hunted down solutions which can deliver better and more continuous in-store and shopper insights. There was a lot to choose from, and to my great interest, solutions that track, count, and even classify shoppers electronically were present in abundance. Notable players included Countwise, ShopperTrak, RetailNEXT (BVI) and Axis Communications.

Shopper tracking has a long history. Electronically tracked carts were a feature of the original VideOcart system,  tested in supermarkets between 1989 and 1994. It employed PathTracker® software used to generate graphic representations of many carts’ paths. The resulting chart was described as a “heat map” – areas with the greatest traffic were more densely highlighted, and less-traveled areas were less so. The information may be used to determine optimal locations for displays, to streamline traffic flow, and for other aspects of macro space planning.

At NRF, a variety of updated versions of this concept were on display. They employ a variety of sensing and people counting methods, ranging from digital video cameras and electric eye infrared beams to infrared cameras and the old standby – attaching a transponder to the shopping cart. The tech was definitely more sophisticated than ever, but the output was more often than not, that old standby, the heat map of shopper movement, on a vibrant color screen.

The application of digital video to this objective is probably the breakthrough here. Cameras are increasingly deployed in stores for both security and research purposes. Images of shoppers moving and dwelling in the aisles can be analyzed at varying levels of sophistication to generate those all-important heat maps. But that’s just the start.

Big Brother – Big Data?

Say you have 20 fish-eye cameras mounted in the ceiling of your store running 24 hours a day for this purpose. That’s 480 hours of video per day to analyze – way beyond human capability.  Algorithms can convert and collate that pile of unstructured data into something that can be housed in a data mart (that’s one reason why “Big Data” is becoming all the rage.) Then they can extract measures of shopper dwell times at key locations, sort shoppers by visible demographic traits, and relate in-aisle behavior to the contents of the shopping baskets.

How will all these insights be used? Simple answers involve setting efficient staff levels, queue management, and determining how to charge manufacturers for choice display locations. In-store media networks will use the data to verify audience metrics. One vendor showed off an empirical test of store layout impact on sales.

This area is moving very fast and it promises to deliver a trove of in-store sensing information to retail marketers and category planners. If retailers apply these insights to deliver a superior experience, shoppers will get past the feeling that Big Brother is looking over their shoulder.

Connect with James on LinkedIn or via email at jtenser@vsnstrategies.com.

I was particularly impressed with Mary’s viewpoints regarding the relationship between Retailer and Manufacturer and how it could be greatly improved by collaborating around Shopper Marketing.  In today’s challenging environment, relations can be quite strained.  Private label and specialty brands have more appeal and clearly impact the amount of shelf space available to Manufacturers.  The industry trends show that both Retailers and Manufacturers are seeking to better control shoppers through 1:1 marketing techniques.  The higher cost of goods also creates tense conversations about who will absorb price increases.

For a more thorough review and recap of 2011 industry trends, download this whitepaper.

As we have discussed many times in this blog forum, consumers are living and shopping smarter.  They do a lot of research in advance and create ‘consideration sets’ within categories of purchase.  Consumers go to store and make a final purchase decision based upon their research and what they see on the shelf in front of them.  This creates impulse buying combined with pre-determined buying.  The key to capturing share of wallet is to understand this new shopping process and learn a shopper’s attitudes and beliefs towards particular categories.

Here are some other noteworthy highlights that I took away from Mary’s webinar:

• The Consumer and the Shopper is not necessarily the same person.  It seems as if the Consumer has more influence over the shopper than ever before. This makes predicting the purchase process much more difficult for Retailers and Manufacturers to understand.
• While Customer Marketing and Shopper Marketing are clearly two different activities with different objectives, they must be integrated in order to create the most effective course of action.  Many CPG companies are looking at new alternatives for organizing their Customer, Shopper and Trade Promotion departments.
• Advanced Shopper Marketing competency is one of the things that set Manufacturers apart. Retailers truly appreciate a Manufacturer who can deliver insights on how to better meet crucial businesses objectives. 
• Shopper Marketing research is NOT one size fits all.  Shopper behaviors can vary greatly by Retailer, region of country and local consumer demographics.  Again, Retailers and Manufacturers who can educate each other are more likely to benefit.

The bottom line is this:  Manufacturers and Retailers who collaborate together on Shopper Marketing will be in a better position to succeed.  There is a strong need for market intelligence and synthesis of information.  By aligning efforts around each other’s business objectives, stronger partnerships can be formed.  Shopper Marketing budgets are expected to grow significantly over the next few years.  Winners and losers will be determined by those who spend it wisely and get the biggest return.

If you missed Mary’s webinar, click here to view a playback of her presentation.

Occasionally, the stars align and an outstanding partnership is born immediately. But most take time to develop and there can be many peaks and valleys along the way. So how can one create a high-performing Manufacturer-Broker relationship more consistently?

The secret is utilizing a strong collaboration platform that is intuitive, easy to use and provides a consistent view to all parties. A good place to start is with a Trade Promotion Management (TPM) system. Best-in-class TPM systems can be used not only to track and manage trade promotions, but to improve Manufacturer communication and coordination. Here’s how…

1. Get a real-time view into sales and spend forecast. By using information that is updated nightly, all parties clearly know if the company is on target to meet corporate objectives.

2. Know how much product to produce and when.  Improve coordination between Brokers and Production and reduce lost sales from short-shipments and out-of-stocks. Information = Prevention.

3. Improve the settlement and deduction process. By automating the deductions process, most items can be cleared and settled by the Finance team, eliminating the Brokers involvement. Manufacturers can arm the Broker with better information to defend and settle disputes more quickly and professionally.

4. Gain complete visibility into active and planned promotions. A Manufacturer’s TPM system should provide quick insight into every promotion that is running or slated to begin. This allows Brokers to better organize their activities around store checks, audits, building displays, performing resets and cutting in new items.

5. Improve leverage with retailers.  With accurate TPM data, a Manufacturer can educate Retailers as to the value of their products. They can prove how much of sales is driven by trade spend, not only by product, but by time period and promotion type.

With today’s soft economy and consumers showing less brand and store loyalty, competition for the shopper’s wallet will continue to heat up. Manufacturers, Brokers and Retailers will be successful if they seek out ways to collaborate. Using a TPM system as a CRM-like tool will be one way to get ahead.

With that thought in mind, I wanted to share some Trade Promotion Management (TPM) predictions and insights for the coming year:

1. While trade promotion budgets will likely remain flat, expect to see a more ‘optimized’ use of funds. That means more tactics on more products in more targeted periods based on a better understanding of what consumers want and which promotions are working.

2. Understanding the profitability of individual trade promotion activity will be important. There will be a lot less of ‘just do what we did last year.

3. Expect to see a lot of trade promotion activity in the Natural and Organic space driven by both Retail and Manufacturer desires. Many consumers are just discovering this space and sellers need to get their attention.

4. With the triumph of Software-as-Service (SaaS)-based trade promotion management solutions, expect to see more and more companies abandon static spreadsheets for software-based tools. The perfect storm is forming for buyers – tremendous improvements in visibility and effectiveness can now be gained at a low cost and high ROI within the first year.

5. Many companies will take TPM efforts to the next level with the incorporation of corporate objectives and sales planning and tracking. A good TPM solution will help Consumer Packaged Goods (CPG) companies run business better (and be aligned with how they operate their business.)

6. Eventually there will be a marriage between trade promotion and consumer marketing. The courtship is now beginning (in many cases reluctantly.)

As the economy and technology continue to drive change, expect both CPG companies and consumers to continue to be resilient and focused on how to get the most out of the situation. Trade promotion activity will get even more intense and those with the best visibility into effectiveness will emerge as winners. Look for a big shift from Excel® to purchased SaaS solutions over the next two years. Also look for both manufacturers and retailers to invest heavily into 1:1 marketing. At some point, this will likely create a convergence of shopper marketing activities and trade promotion activities.  Now won’t that be interesting to watch!

One of the audience members challenged me during this point of the presentation, citing, in his opinion, that trade promotion negotiations with Retailers is a zero-sum game. Meaning any gain by a participant is equally offset by a loss.

Let’s explore this further.

Game Theory goes back to the time of Plato and remains a popular educational topic at the college level. How does the zero-sum game theory work when applied to trade promotion negotiations?  For every new promotion that is secured the Manufacturer would also lose a corresponding event either at the Retailer or potentially elsewhere in the marketplace.  Thus, any gains from the Manufacturers’ efforts will eventually be offset by lost opportunity down the road.  So while your collaborative efforts seem to be achieving its initial goal, zero-sum game theory contends that the Manufacturer will eventually give back the gain. Obviously, this is a troubling concept.

Now I suppose if you look at the industry in aggregate, including ALL Retailers and Manufacturers, one could make the argument that there is a zero-sum game.  But the Manufacturer and the Retailer who are collaborating don’t have to be the ones who give back the gain.  By focusing on profit objectives, variable-rate funding allows a Sales Manager to pursue new opportunities or re-engineer a Manufacturer’s investment to grow your sales and maintain your profitability rate, but also increase the investment with the customer.

Now, this increased investment with the Retailer does not necessarily need to come at the expense of a competitor.  Of course, in some instances that is a reasonable tactical objective — to not only gain a new promotion event, but also take one away from a competitor.  However, dispositional negotiations are very challenging to win with the Retailer.  There are many factors influencing that Retailer’s decision to promote certain products that you may not have full visibility to and therefore will not be able to negotiate on.

Any economic or social scientist would be proud to know former students are stretching the strategic thinking of today’s leading organizations by bringing game theory into the conversation.  We hear so much talk about collaboration, but what is the real impact? Interestingly, a “CPG Year in Review” survey conducted by TradeInsight revealed that almost 40 percent of Manufacturers felt that they had improved their relationships with Retailers in 2011.  But at whose expense, I wonder?

Other trends of 2011 included:

• Higher food costs that are now being passed through the supply chain
• Introduction of higher quality private label products
• Significant growth and impact of social media
• Increased use of digital marketing and a desire to move towards 1:1 marketing
• Tremendous growth for natural and organic products
• A strong commitment from many consumers to shop and live smarter

Consumers are very focused on finding the best value and Manufacturers and Retailers are relying heavily on trade promotion to help capture more wallet. Unfortunately, many Manufacturers have outgrown their Excel-based Trade Promotion Management (TPM) systems. As a result, there is a deep dissatisfaction and ongoing frustration among CPG companies to gain more visibility into sales in order to meet their goals. Many have begun to replace homegrown trade spend tracking methods with TPM software solutions.  And a year-end survey MEI recently conducted shows they are very pleased with the move.

These are just some of the insights from looking back on 2011. You are invited to join us this Wednesday, December 14 for a complimentary web event reviewing and discussing all the industry trends in full detail. This one-hour webinar will also reveal predictions on what’s to come for 2012.  Participants will gain useful insights as well as receive a complimentary Whitepaper on the topic just for attending.

Don’t miss our most popular CPG Online Learning Event of the year!  Register today to attend “Trade Promotion Insights: 2011 Trends and 2012 Predictions” taking place at 2:00 p.m. EDT/ 11:00 a.m. PDT this Wednesday, December 14, 2011.

All you have to do is look at Black Friday and its record shattering $52.4 billion weekend.  Spend increased a whopping 16% over the  previous year.  Given the current environment, does this make sense?   ABSOLUTELY.  Many of today’s consumers have changed their approach, building on strategies they have been refining since the 2007 recession. These consumers have taken control of the situation and have adopted a lifestyle of ‘smart living’.  They purposefully planned and waited for Black Friday and the savings and value that could be gained.

Today’s younger generation now realizes that they need to making smarter choices — healthier, sustainable, environmentally friendly and so forth. They are willing to pay more in some cases, and that means allocating monies from one place to another. The same is true for the baby boomer generation. They have seen the reports predicting a lower life expectancy due to eating habits (amongst other things) and they are now looking for healthier choices to try to ‘better their odds.’

Because ‘better’ choices often cost more in the marketplace, it has become all about tradeoffs. There is less loyalty to one particular brand. Instead, shoppers build a ‘consideration brand-set’ such as I am willing to buy Jif or Skippy peanut butter, but not x,y or z brand.  As consumers plan and shop, they choose the best value from among the set.

Consumers also are planning meals more carefully, creating each meal with a ‘target’ cost. The more spent on meat, the less spent on side dishes or desserts. They also do research ahead of time and have a pretty set shopping list going into the store. Shoppers are willing to change their mind based on seeing a better value on the shelf, but the purchase still must fit into the overall plan.

For retailers and manufactures to gain a competitive advantage, marketing and trade promotion are critical.  They must understand this new way of thinking and be very visible throughout the consumer’s planning process.  Expect a lot more targeted campaigns, especially among different types of buying segments.  Timely information about sales and promotion effectiveness will be more critical than usual.  Are you ready to deal with the ‘Smart Living’ consumer?