How poor trade promotion forecasting creates a deduction crisis
Executive summary
In-store execution is a critical lever for sales growth, yet it remains one of the hardest to control. For New Zealand FMCG manufacturers, fragmented tools, manual processes and delayed reporting lead to missed opportunities and inconsistent performance. This often results in a systemic "deduction crisis" where companies are caught off guard by unexpected retailer claims.
According to the Promotion Optimisation Institute (POI), 56% of organisations say their trade promotion processes are too manual and time-consuming. Without a robust strategy for trade promotion forecasting, the gap between planned spend and actual deductions creates a widening hole in the bottom line. At TELUS Agriculture & Consumer Goods, we provide the Trade Promotion Management tools necessary to bridge this gap and secure your revenue.
Optimise your trade spend
Why trade promotion forecasting is the key to profitability
Understanding your data is fundamental to a successful strategy. Accurate trade promotion forecasting allows teams to predict volume phasing and financial impact. According to PwC, trade spend can consume as much as 25% of gross revenue, meaning even small inaccuracies in your trade promotion forecasting can lead to million-dollar discrepancies. Mastering this process is essential to move from intuition-based to data-driven business decisions.
What is trade promotion forecasting?
Trade promotion forecasting is the process of predicting the incremental volume and financial requirements of an individual promotional event or a full-year calendar. It provides the baseline demand needed to determine the true ROI of trade spend.
What can cause trade promotion forecasting to fail
Failure often stems from misaligned assumptions between sales, finance and supply chain teams. According to SR Analytics, 83% of FMCG companies still rely on manual, spreadsheet-based planning, making the process too time-consuming and prone to human error. Without a "single source of truth," trade promotion forecasting efforts are doomed to rely on stale data.
How errors lead to deduction spikes
When forecasts fail, resulting financial discrepancies manifest as retail deductions. New Zealand triggers include:
Incorrect accruals: Underestimating spend leads to year-end liability surprises.
Mismatched expectations: Discrepancies between agreed promotional mechanics and actual billing result in overcharges.
Chargebacks: Major retailers like Countdown, New World or Pak’nSave with strict auditing processes will trigger chargebacks for shortage or overbilling if data does not synchronise perfectly.
What are the hidden costs of forecasting errors?
The financial impact of poor deduction management goes beyond simple math:
Revenue leakage: Invalid claims are often paid by default without validation.
Profit erosion: Unplanned spending reduces overall volume-driving funds.
Operational stress: Teams spend excessive time manually processing claims instead of focusing on strategic recovery.
Example: What forecasting failure looks like in practice
Consider Highland Baking, which struggled with manual processes that caught the team off guard with unexpected deductions. By implementing automated Trade Promotion Management, they transformed their approach to claims, resulting in over $2.3M in claims recovery over two years.
How better trade promotion forecasting prevents deductions
Automated workflows harmonise disparate data to deliver a unified, accurate view of trade spend. By integrating with ERP systems to track shipments and promotional liability nightly, brands gain visibility into true expenses. This allows for a deeper understanding of baseline demand and accurately determining which promotions to run.
How TELUS Trade Promotion Management software helps reduce deductions
TELUS Trade Promotion Management streamlines the entire sales journey:
Automate matching: Settle billbacks automatically when claim info matches the original promotion.
Real-time reporting: Identify invalid claims immediately to reconcile for repayment.
Baseline management: Improve forecast accuracy by integrating advanced analytics.
By standardising and automating deduction management, our solution helps FMCG brands boost profits and reduce losses.
Key takeaways
Promotion forecasting errors are a primary driver of unexpected retail deduction spikes.
According to POI, over 50% of FMCG companies lack the digital tools needed to support accurate pricing.
Trade promotion investment is typically the second-largest item on a manufacturer’s P&L.
FAQ
What are the most common forecasting errors? The most common forecasting errors are overestimating uplift, underestimating baseline demand and poor data quality.
Can trade promotion software integrate with ERP or finance systems? Yes, trade promotion software can integrate with ERP or finance systems. TELUS TPM integrates with ERP systems to update spend and expense events multiple times a day.
What results can companies expect? Companies can expect results like ACH Food that achieved 25-30% improvement in forecast accuracy through enhanced forecasting.
