Using Analytics to “Trade Up” on Promotional Programs
Marketing professionals are finding more and more creative ways to use trade funds and promotions to increase product turnover and overall sales. However, no matter how creative the promotion, when the program is complete, marketers often aren’t able to accurately analyze how promotional funds were spent and whether those investments generated a return. That makes it nearly impossible to determine whether trade funds and promotions are effective.
Having intelligence to support and validate trade fund and promotional decisions is essential to sustaining the success of any marketing program.
Companies have to be able to track and (more importantly) understand the ramifications of all the data that promotional programs generate. They also must be able to move funds around from program to program quickly based on the performance metrics that analytic applications provide. If you cannot quickly realize how promotions are affecting sales and margins, your company’s competitive advantage can erode away to other players in the marketplace who are taking advantage of these types of solutions.
The Limitations of Traditional Trade Fund Tracking Methods
Despite the obvious growth and success of analytic software for measuring marketing and other areas of business performance, many companies today remain unconvinced that analytics add value to their marketing efforts. For instance, some organizations continue to import trade fund spending information from basic spreadsheets and then it is manually analyzed by a sales or marketing person in some back office at headquarters. In business intelligence terms, such a process is antiquated not to mention laborious, time-consuming and prone to out-of-date information.
Often, companies use ERP systems to track promotions. These systems draw data from several different areas: accounts receivable, accounts payable, general ledger, invoice history, purchasing, and customer orders. But the data is not always integrated before analysis, leading to poor tracking and poor awareness of the actual successes and failures of promotional programs.
Whether data comes from an ERP system or a spreadsheet, the information frequently never reaches appropriate people in the organization in time for them to take action. And at today’s breakneck business pace, a little time lost can be the difference between red or black ink. Sometimes, even when data is passed on quickly, the information is not summarized in a way that provides meaningful insight for the needs of each person and/or department.
How Analytic Applications Fill The Gap
The goal of planning and tracking trade funds is to prevent companies from pouring scarce dollars into faltering promotional programs. Analytic applications enable companies to identify promotional spending that truly boosts sales. This facilitates and accelerates the organization’s ability to redirect funds from failing programs to rewarding programs.
Like any application, however, analytic software for trade funds management and promotional planning has several requirements that make accurate analyses possible. Timely, easily obtained information is the most important key. ln addition, an application must be flexible enough to handle various aspects of trade spending and promotional planning.
In order for investments in promotions to be tracked and compared, trade funds must be easily broken down into different types. That means data should be available by subject areas such territories, brokers, product group, products, market segment or similar categories. Analytic applications that allow companies to compare this information to spending levels and sales information will provide the most insight into a program’s effectiveness.
What sets the “best” analytic applications for trade funds and promotional management apart from the rest?
The best analytic applications for trade funds management let users drill through data at multiple levels and across any dimension. Any department or functional area involved has the opportunity to analyze the viability of the promotional efforts from their own perspective. For instance, a territory manager might begin analysis at the territory level, while a marketing manager may start at a market segment level.
The best analytic applications help managers excise losing programs quickly. Those solutions that provide most value clearly determine how much of the trade funds have been spent and which funds have uncommitted budgets outstanding. Managers can then realign those budgets into promotional programs that have a better chance of improving sales and/or margins.
But there’s one caveat regarding analytic applications, as well as any data management tool: Data must be easily accessible to appropriate managers, not everyone in the organization. Good applications provide security options. Also, whenever possible, trade funds data should be managed within single application to minimize redundancies, data entry errors and any other inaccuracies related to frequent updating.
Any analytic application that handles promotional programs should include:
Funds – These are used to define a pool of planned spending. They typically exist at a high level, usually defined at the region or customer level by national sales management
Commitments – These are used to more specifically allocate the trade funds. For instance, they can be defined for bill backs and accruals for a particular customer and product combination by a territory sales representative.
Spends – This is the actual spending that has occurred against a fund or commitment.
Sales/Shipments – This includes the various amounts, units, costs (including gross margin), and returns information.
Market Consumption/Point of Sale – The volumes and amounts available through this information provide insight into consumer buying. This data evaluated in conjunction with sales and shipment data.
Keep in mind that any analytic application that incorporates trade funds management should allow companies to enter and maintain funds and commitments information at any level in the sales and marketing organization. Analytical tools should be designed so that data can be entered directly into the application or imported from other applications, such as spreadsheets and general ledgers.
The bottom line on marketing performance analytic applications and trade funds management is this: Companies that use analytical tools are able to improve revenue and gross margin, which eliminates poorly spent promotional costs. In a tough economy, that can mean the difference between success and failure for a product … and for the business.