We'll explain what trade spend management is, its key components and its benefits when done right. Read on to learn more or contact Propeller Industries today to learn how a trusted partner can help take your trade management spending to the next level.
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Before we delve into trade spend management insights, it's first important to define what is trade spend? Specifically, trade spend is the money a company allocates to drive sales and move products with specific retailers. Some examples of trade spend with retailers include the likes of discounts, rebates, promotional pricing, in-store displays and more.
Trade spend is a crucial part of operating any business, as firms will likely have to pick and choose what promotions have the best chance at moving as much product as possible. Firms will also have to pick and choose their promotional mix and what retailers they do business with. Trade spend is often weighed as a percentage of sales. Noting this, trade spend management can significantly impact profitability and overall business strategy when it's done right.
Let’s take a closer look at some of the key components of trade spend management.
A big part of trade spend management is knowing what promotions you want to take advantage of with the retailers that are going to be carrying your product. It's also important to know how any existing promotions are performing. To best do this, it helps to have key metrics in mind that you want any trade promotions to meet or exceed. Keep in mind that a good promotion maximizes your return on investment (ROI) and drives brand profitability. It can help to leverage data analytics and any market research to make better informed decisions on what promotions to take advantage of.
How do you optimize a trade promotion strategy to maximize ROI and drive profitability? Certainly, any analysis that you conduct will give valuable insights that help influence optimization, but there's more to it than that. You have to optimize resource allocation so that any investment that is put toward trade promotions can meet your goals. A lot of this involves predictive analytics and using the data and information you've gleaned to determine the most effective promotions to implement. The five most popular types of trade promotions include:
Planning and analysis are key in trade spend management, but proper execution is what really brings everything home. To execute properly, a lot of factors need to be aligned. There needs to be coordination between stakeholders and departments to identify trends and ensure that trade promotions have been properly implemented. Collaboration is often key at this step to track promotion performance and measure effectiveness and overall success.
Now that we've gone over the key components of trade spend management, let's spend some time discussing the benefits of successful trade spend management. From increased profitability to establishing new competitive advantages in the market, there's a lot to gain from a promotion that's done correctly.
Perhaps the biggest benefit associated with effective trade spend management is improved profitability. You've heard the old adage "you have to spend money to make money" - it somewhat epitomizes trade spend management. To increase profits, you have to invest in the right promotions to move your product off store shelves. Good trade spend management does more than just boost profits. It can also help improve brand awareness. Think of it as advertising, except within the store.
Take a cosmetics manufacturer that pays a retailer a sum of money to prominently display their product near the store entrance for some time. Ideally, this placement stands out more to shoppers than it would in the crowded cosmetics aisle. A placement like this isn't intended to just boost sales volume, but to increase brand awareness too. For instance, even consumers who don't purchase the store-front cosmetics would be exposed to the brand and product.
For brands to grow and meet profitability goals, they have to do more than just generate one-off purchases, but create repeat, lifelong customers. Good trade spend management and promotional strategies can help foster this relationship between brands and consumers and create stronger overall customer connections through targeted promotions, price discounts and incentives. These promotions can help enhance the brand experience with existing consumers and incentivize new consumers to try your product to turn any first-time buyers into repeat customers.
Finally, good trade spend management can also increase your market share and help brands establish competitive advantages. All you need to do is walk up and down an aisle at your local supermarket to see how much competition there is in any market. Crowded shelves make it hard for products to stand out. Trade spend management can help brands identify opportunities and optimize promotional activities to achieve results.
One example of optimizing a promotional campaign involves creating a well-rounded program that does more than just boost a brand's in-store presence. Take a craft beer brewer, for example. In an effort to increase brand awareness or promote a new type of beer, it may consider partnering with a trusted retailer to do more than just create eye-catching in-store displays in highly visible areas of the store, but also run advertisements in its weekly shopping guide to further drive awareness.
Trade spend management isn't as easy as it may seem. In fact, there are many challenges associated with getting the most out of any campaign so you can reap the benefits that we've mentioned above. Here's a look at three of the major pain points associated with trade spend management.
One of the biggest challenges in trade spend management is managing trade spend data. An effective trade spend program should have an organized system in place where it's easy to gain insight into how the specific campaign is performing. It can be a challenge to properly manage data systems, especially when brands and retailers may be using separate tools for such purposes. This has the potential to impact accuracy, integration and interpretation. Working with a good trade promotion management partner or the right tools can help brands overcome this point of pain.
Collaboration and communication are key - not just within the brand or between brand and retailer, but as it pertains to communicating the promotion to your target audience as well. It's a crowded market out there, with lots of brands jockeying for market share. Failure to run a proper campaign could confuse the consumer or even potentially boost sales of a competitor.
Clear communication and collaboration is important. Ensure all teams have access to relevant data to streamline teamwork and collaboration so more effective and profitable marketing campaigns are implemented.
Trade promotions aren't just something you do and forget about after the campaign has expired. Successful brands track and evaluate data to influence future promotions. However, assessing ROI isn't as easy as it may seem, underscoring the need for effective evaluation processes. To properly track and evaluate trade promotion strategies, it's important to ensure that data isn't siloed and is being tracked in connected platforms that can accurately forecast and assess promotional activities.
Propeller Industries specializes in helping brands optimize trade spend management. We work with more than 1,000 premier brands and businesses to implement our unique solutions to help them maximize ROI from any promotions or campaigns. The Propeller Industries team does this by streamlining processes simplifying the entire process, which includes extracting and analyzing trade spend data to offer actionable insight and advice to our partners. This process has led to tangible results for our partners, increasing more than just their profitability, but their brand awareness as well.
If you're ready to optimize your trade spend management, it pays to work with the right people to help you reach your goals, whether it's increased revenue growth and profits or improved brand awareness. That's where Propeller Industries can help. As a leading CPG financial advisor, we specialize in partnering with such firms to accelerate their growth.
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Don't let your trade spend management get complacent. Contact us today to take this important part of your business to new heights. We're standing by and ready to help.
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