Improving the effectiveness of trade spend dollars continues to be the leading challenge for Consumer Packaged Goods (CPG) companies, according to a May 2012 research survey conducted by Consumer Goods Technology (CGT) Magazine. Successfully managing trade promotion activities (and budgets) are crucial for long-term profits, steady growth and increased shelf space. Interestingly, the approach to success differs greatly by company size.
That’s right. The new study reveals that 80 percent of CPG manufacturers over $500 million in sales have abandoned Excel® spreadsheets as a trade spend tracking tool in favor of packaged software, ERP modules and custom built TPM solutions. In comparison, 59 percent of manufacturers under $500 million in sales are still relying on simple tools such as static spreadsheets. As a result, bigger CPG companies are steadily pulling ahead of the small- and mid-sized companies who are not taking advantage of the benefits that a sophisticated TPM tool provides, including visibility into promotion effectiveness, ROI and profitable customers.
Driven by each manufacturer’s TPM tool of choice, the survey data also reveals a growing disparity among trade-related business challenges and key priorities. Seventy-one percent of large companies are turning their attention to analytic, predictive and optimization issues that come after mastering TPM fundamentals. Meanwhile, small manufacturers are continuing to struggle with basic TPM issues related to trade spend effectiveness (59%), visibility (53%) and reconciling deductions (36%).
Nearly all industry experts agree that as a company grows, Excel® can no longer keep up with the daily requirements and increasing complexity of trade promotions. In fact, 65 percent of small CPG companies who participated in the survey reported that their manual spreadsheets have become difficult to manage. And yet they continue to utilize this outdated tool?
The research shows CPG manufacturers are clearly divided on how to best manage the second largest expense on the company’s P&L. Large manufacturers have hurdled TPM basics while smaller manufacturers continue to stick with a tool that is admittedly hard to manage. Given the newfound affordability and continued market demand for easier implementation, companies of all sizes have access to reliable TPM solutions. In the end, a company’s size is not holding back a CPG manufacturer from TPM success; it’s the tools and the accompanying best practices that come with such change. Without an intuitive TPM system, even the most disciplined company runs the risk of falling behind the competition.