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 US CPG 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 Optimization Institute (POI), 61% of manufacturers report facing difficulties executing promotions as planned, making the financial fallout immediate and severe. 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.
Why trade promotion forecasting is the key to profitability
Understanding your data is fundamental to a successful strategy. Accurate promotion forecastingallows teams to predict volume phasing and financial impact. This ensures that promotional investments are optimized for maximum profitability. Because trade spend can consume as much as 25% of gross revenue, according to PwC, 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.
Optimize your trade spend
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 consumption data 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 CPG companies still rely on manual, spreadsheet-based planning, making the process too time-consuming and prone to human error. These disconnected business processes prevent teams from seeing real-time visibility into actual spend. Without a "single source of truth," the forecast trade promotion efforts are doomed to rely on stale data.
How errors lead to deduction spikes
When forecasts fail, resulting financial discrepancies manifest as retailer deductions. In the US market, common triggers include:
Incorrect accruals: Underestimating spend leads to year-end liability surprises and unplanned spending.
Mismatched expectations: Discrepancies between agreed promotional mechanics and actual billing result in overcharges.
Chargebacks: Large retailers with strict auditing processes will trigger chargebacks for shortage or overbilling if the PO and invoice data do not synchronize perfectly.
What are the hidden costs of forecasting errors?
The financial impact goes beyond simple math:
Revenue leakage: Invalid claims are often paid by default if documentation is not systematically validated.
Profit erosion: Unplanned spending and over-accruals reduce overall volume-driving funds.
Operational stress: Specialists spend excessive time manually processing claims and pulling backup documentation instead of focusing on strategic recovery.
Example: What forecasting failure looks like in practice
Consider Highland Baking, which served major distributors like Sysco and US Foods but struggled with manual processes that caught the team off guard with unexpected deductions. Before adopting a modern solution, they priced every customer uniquely, making deduction validation difficult. 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 harmonize 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 that are owed but not yet expensed to the general ledger. This allows for a deeper understanding of baseline performance and accurately determining which promotions to run with which customers.
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, reducing manual intervention.
Real-time reporting: Identify invalid claims immediately to reconcile for repayment in a timely manner.
Baseline management: Improve forecast accuracy by integrating advanced analytics that account for seasonality and external market factors.
By standardizing and automating the deduction process, our solution helps CPG brands boost profits and reduce losses. With pre-built dashboards and AI-driven insights, your team can finally move beyond the spreadsheet and take confident action.
Key takeaways
Promotion forecasting errors are a primary driver of unexpected deduction spikes and chargebacks.
According to POI, over 50% of CPG 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 after Cost of Goods Sold (COGS).
Deductions in the US often take the form of complex chargebacks, allowances or rebates with major retailers like Walmart, Kroger or Costco maintaining strict auditing processes.
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 a 25-30% improvement in forecast accuracy through enhanced forecasting.
