Who owns the manufacturer’s baseline revenue and why does it matter?

In CPG, baselines provide a 'base' level of sales derived from regular purchasing behaviour without additional marketing or promotional activities. Setting accurate revenue baselines is crucial for measuring trade promotions effectiveness, forecasting inventory levels, allocating marketing budgets, optimising pricing strategy, assessing brand health and making strategic decisions. For New Zealand companies with global operations, establishing consistent baseline methodologies across different markets becomes even more critical for coordinated strategy development. The ownership of baselines can vary within an organisation, and different scenarios can arise.

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Demand planners: statistical forecasting and baseline accuracy

Demand planners are responsible for producing accurate sales forecasts based on historical data, seasonality, and market factors. They focus on generating and adjusting statistical forecasts before incorporating promotional uplifts. Accuracy is essential here, based on clean and consistent historical sales data, and effective communication with sales and marketing functions regarding upcoming initiatives impacting demand. On the plus side, Demand planners bring accuracy and objectivity, ensuring the baseline is neutral and less influenced by optimistic sales aspirations. There is usually a standardised process across all categories and markets, making it easier to roll up and consolidate forecasts. This standardisation is particularly valuable for New Zealand companies managing multiple international markets, as it enables consistent reporting and strategy coordination across regions. On the other hand, Demand planners may not have the same level of insight into account specific details and retailer strategies as the sales Key Account Managers (KAMs) do, which could lead to missing forecasting nuances.

Their standardised process helps to ensure accuracy and objectivity, but they may lack insight into account-specific details and retailer strategies.

Key account managers: retailer insights and promotional forecasting

Responsible for managing the retailer relationships, key account managers (KAMs) have deep insights into promotions, product introductions, and shelf placements that impact sales. While they may not own the baseline, they manage the promotional forecast on top of it for their accounts. This requires a clear view of promo calendars, deal structures, and expected uplift using trade promotion excellence tools which track promotional spend, profitability and ROI. Their understanding of specific retailers and market conditions increases accuracy, but they may be inclined to be overly optimistic in their forecasts which could distort the real baseline.

For companies with global operations, KAMs managing international accounts bring valuable local market insights that can significantly improve baseline accuracy in different regions.

Further, different KAMs in the organisation may have varying forecasting methodologies, leading to inconsistencies. And by focusing on key accounts, a view of smaller accounts or the broader market perspective may be lost.

Other stakeholders in CPG baseline management

Sometimes sales and marketing teams may have input into baseline and promotional forecasts based on planned initiatives. They should collaborate closely with both demand planners and KAMs to align promotional activities with brand strategies and ROI targets.

Likewise Finance plays a critical role in ensuring budgets are met and promotional spends are within limits. Finance needs accurate forecasts to inform budgeting, and clear visibility into trade spend and promotional ROI to manage profitability. International finance teams require additional coordination to manage multi-currency operations and varying regional budget cycles

The best approach depends on your organisation’s structure, culture and objectives. Some companies benefit from demand planner ownership for objectivity and standardisation, while others value the insights and alignment with sales strategies offered by key account manager ownership. A hybrid approach, where demand planners provide an initial baseline forecast using statistical methods and KAMs adjust based on their insights, can be effective. This requires clear communication and collaboration to ensure that the final forecast is both accurate and actionable.

Trade promotion management systems: neutral platform solutions

These systems serve as a neutral platform for baseline management, helping to get everyone on the same page. They estimate expected sales without promotions based on historical data and predictive analytics. Forecasted uplifts from planned promotions are layered on to provide a complete sales picture and optimise ROI. Trade promotion management and optimisation (TPMO) systems tracked by item and promoted product group can help allocate budgets for trade promotions and improve the accuracy of both baselines and promotional forecasts over time.

In conclusion, the revenue baseline is a collaborative effort between functions like Demand Planning and Key Account Management. Collaboration, information sharing, and the use of tools like trade promotion management and optimisation systems are essential for optimising sales and promotional strategies for maximum profitability. This collaboration becomes even more important for New Zealand companies coordinating baseline management across global operations, where consistent methodologies and clear communication channels are essential for success.

Key takeaways for baseline management success

Effective baseline management requires strategic coordination between demand planning, key account management, and supporting functions. Essential considerations include:

Success requires finding the right balance between standardised processes and local market insights, with technology platforms serving as the foundation for coordinated baseline management across domestic and international operations.