Trade spend management: balancing control and agility

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Given that trade spend is often a more significant expense than traditional marketing, accounting for anywhere from 15% to 25% of a consumer goods company’s gross sales,¹ management of trade spend funds is a critical endeavour. Effective funds management can enhance trade promotion ROI and profitability, whereas the alternative can lead to budget overruns that diminish the overall performance of promotional activities.

But successful funds management can come at a cost, namely overburdening Key Account Managers (KAMs) and reducing their potency. Striking a balance between controlling trade spend and enabling flexibility for KAMs can be challenging due to the close collaboration required with retailers and the rapid, and often customized, promotion program evolution that results.

Trade promotions may be complex and multifaceted, requiring intricate planning, execution and monitoring. A lack of real-time visibility into funds can delay decision making, leading to missed opportunities. And ensuring that promotional funds align with the retailer’s strategies and capabilities is an ongoing challenge. As a result, KAMs may spend excessive time in trade promotion management (TPM) solutions. While TPM solution insights are crucial for post-event analysis, too much time spent can slow down decision making in fast-changing environments.

Balancing control and agility

CPGs must adopt an agile approach to funds management within a broad structural framework. Establishing well-defined objectives and measurable KPIs can streamline both planning and evaluation. Post-event analysis allows us to learn from wins and losses and adjust future promotions accordingly, but extensive analytics can be time consuming. Instead, provide your KAMs with real-time insights from advanced TPM solutions without bogging them down in analysis paralysis, and in turn, help them respond more rapidly to market changes and boost promotion effectiveness. KAMs should focus on the relationship with the retailer, rather than responding to continual requests for additional funds or complex analytics.

Effective trade spend funds management can lead to higher immediate sales and stronger relationships with retailers. But it requires walking a tightrope between rigorous control and agility. Companies must remain vigilant in monitoring promotional investments to ensure alignment with business goals, while fostering flexibility to adapt to changing circumstances.