How Trade Promotion Optimization Contributes to Your Retail Success

Every brand manufactures its products to get them to consumers. This is the most basic rule of any business but to do that, brands need channel partners such as distributors and retailers for successful route-to-market. But for them to accept your product and push it to consumers, you need to provide them with certain trade promotions to stand out from your competitors. And you would need a solid trade promotion optimization strategy to keep your promotions relevant and lucrative for your customers.

Focusing on retailers or dealers (your customers), it is clear that they are the frontline for your offerings and therefore the most important aspect of successful offtake. If retailers do a good job of buying from you and can then push out your products, you can consider that as “mission accomplished”. But how to make sure that your retailers are buying enough from you and also buying in range? Products in a distributor warehouse or company factories are products not available to consumers and must be on store shelves as early as possible. 

Unaddressed, these can soon pile up to be a major problem. This is where trade promotions can incentivise your customers to order in bulk and range from you. And to continuously improve your current trade promotions and introduce better ones, you need trade promotion optimization. Because nothing static remains useful for long. 

What is Trade Promotion Optimization?

Trade promotion optimization (TPO) is the continuous improvement of your existing trade promotions on the basis of brand goals and limitations. The primary purpose of any TPO strategy is to ensure every bit of investment you make towards your promotions pay off effectively. 

Say that you introduce a high discount on bulk purchases of a specific product by retailers. This is a huge price slash and of course it’s going to get you a lot of primary sales. But how long are you going to keep up this offer? Probably until your product has gained traction in the market whereby retailers will eagerly buy your product. To ensure that your promotion is well utilised and not misallocated where you don’t need it, trade promotion optimization is an absolute necessity. 

Remember, long-term TPO strategies can lead to:

• Better and accurate insights
• More realistic goals
• Obstacle prediction
• Less spending and more ROI

Importance of Trade Promotion Optimization

So, why trade promotions? We know they are useful to rake in more revenue via secondary sales and to ensure customers keep buying from you. However, business is a forever-evolving landscape where sticking to one strategy for an extended period of time may not be prudent. Instead, new strategies should be developed continuously to stay aligned to business goals and bring in positive results. The following points should tell you why you need to optimize your trade promotion strategy regularly.

• Rapid order to cash

Trade promotions are excellent measures to push your products to B2B customers. This significantly accelerates the order to cash cycle because a good promo can drive customers to place orders with you. Since trade promotions lead to more purchases and also in range, they provide the benefit of putting more and more of your products in front of consumers in the long run. Your route to market is positively affected and true enough, your order to cash cycle speeds up and you earn more, faster.

• Bigger order size

There is almost no brand or business out there who haven’t tried one form of promotional activities or another. It is considered by many to be an extremely potent tactic for bringing in more business by increasing demand. Attractive promotions and schemes can mean bulk orders or even a soft launch to test the waters. The point is that your products get put on more shelves and more consumers visibility.  Once you have a larger retailer base, you can expect even bigger orders, and with that you also get more renown, which translates to a competitive edge over other brands.

• Stock clearance

Unsold stock is a terrifying proposition for any brand. Products not up on store shelves i.e. not bought in a primary or secondary sale are products wasted or awaiting potential expiry. One of the best ways to get them out of warehouses is to offer customers great discounts and special offers to buy more of otherwise low-selling products.

• More on display

Visibility is the cornerstone of tertiary sales. Your customer may keep more than one brand in their store and this means to attract consumer attention, you must ensure that you take up the majority of shelf space in the store. This means more purchase and what better way than to persuade store owners by giving them an offer they can’t refuse – an offer too good but true. Slap a large discount for retailers on buying a 100 cans of soda or 30 packs of cookies free with every 60 bars of chocolate or something equally irresistible. See the magic unfold. 

• Customer engagement 

Trade promotions work on the principle of customers saying yes to them and as such, provides a significant opportunity in customer engagement. Companies can attract customers via sales reps or via app and based on what schemes work and what don’t, they can get a feel of customer expectations. 

What Comprises Trade Promotion Optimization?

Trade promotion optimization, as discussed above, is ensuring that your current trade promotion strategies don’t become outdated and continue to be beneficial to your customers. It involves a variety of measures to ensure the optimization is effective and we discuss these here.

Historical data

The first step to any successful campaign is to understand what happened in hindsight, learn from, and enhance processes going forward. Historical data could include volume of sales, expenditure, the type of past promotions, efficacy of past promotions, etc. The presence as well as accuracy of such data helps The availability, abundance, and accuracy of such historical data ensures your trade promotion software is able to carry out effective analyses and subsequent optimizations. Your software should have machine learning capabilities that helps assess data, allows for pattern detection, and allows for optimized trade promotions that actually helps your route to market.

Clear objectives

It is important to keep in mind that one promotion won’t work for every case and that this is an ever fluctuating process. Every product comes with its own set of challenges and solutions. This means that when you are going to optimize a trade promotion for a specific product, you must keep in mind the situation such as the retailer/dealer type, the purpose of the promotion, the product and your expectations from it, etc. 

Scalability

You are going to need to adapt your trade promotions according to the needs of each territory, each class of retailer in each territory, and probably according to the changes in seasonal demand of your products. To facilitate this, your sales enablement platform should be highly scalable, enabling you to quickly modify offers, target those offers by territory, class of retailers, and any other targeting criterion that makes sense for your business.

Communication

Communication is a two-way street in trade promotion optimization. While brands should be able to communicate ongoing promotion or changes or both to their customers i.e. retailers or dealers, these customers themselves should also be enabled by brands to give feedback on the trade promotions so that changes, if necessary, may be implemented in time.

Segmentation

No two customers are the same. Your trade promotions must therefore be extremely precise on what a particular retailer or dealer expects and go from there. Segmentation can be based on your product performance, sales, store type, product type, customer preferences, etc. If you crack what works best with each customer segment, your trade promotions will be truly lucrative and worth the effort as opposed to something general and pointless. 

Steps to Successful Trade Promotion Optimization

Data collection and analysis

Many brands store data in silos that prevents company head honchos or decision makers from looking at the whole picture. This visibility gap can severely undermine promotion optimization efforts and simply result in wasted resources and inappropriate promotional campaigns. Instead, an effective solution offers high-end, real-time, and accurate data from a variety of sources. Data-cleansing and multiple sources create a solid repository of raw data that can then be referred to for effective analyses into what needs optimization and what doesn’t. 

Data can be of two primary types, internal and external. We discuss these below. 

Evaluation and learning

All of the above data-gathering, implementations, forecasts, and monitoring activities contribute to a better and potentially bigger campaign next time around. When you develop an in-depth understanding of past trade promotion optimizations and their performance, you put yourself in a better position to make more effective decisions towards it. Use the past to inform the future and you have a winning formula on your hands where continuous refinement stemming from data is the norm. 

Promotion planning and forecasting

Any campaign requires a detailed analysis of its performance to ensure you can identify the issues and fix them for a far more optimized campaign next time around. Automation is an important aspect of data analysis and any manual effort in this regard results in overwork and errors. Evaluate past performances of promotions and identify areas of improvement, changing trends, new opportunities, etc. We break this down below. 

During planning, you need to: 

• Set up your objectives as in the purpose of each promotion
• Determine your target audience
• Determining time and span of the promotions
• Collaborate with store owners or retailers/dealers for best results

During forecasting, you need to:

• Predict sales uplift by looking at past data
• Plan for demand and ensure you are adequately-stocked
• Conduct financial forecasting and ROI
• Hypothesise and discuss scenarios to predict how factors like price, duration, and competitor activities can affect outcome 

Combining the above can lead to optimized promotions for extremely favourable results. 

Execution and monitoring

This the implementation and subsequent management of promotions followed by constant performance monitoring to assess efficacy and make data-based modifications. 

This includes:

• Team collaboration for seamless execution
• Clear communication to ensure everyone’s aligned to the goal behind the promotion
• Customer engagement across a myriad of channels to drive awareness about your campaign
• Store signage and displays that push your trade promotion among consumers
• Detailed analyses of multiple factors such as customer feedback, effect of your promotion on competitors, comparison between forecast and actual results to find areas of improvement, etc.

Benefits of Trade Promotion Optimization

Although promotions are critical to great sales, when done poorly, they can put a strain on your resources and route to market. Trade promotion optimization is performed after gathering the necessary historical data and then creating the next strategy based on insights gathered from these. Successfully executed trade promotion optimization enables you to align your goals to your promotional efforts. You could be spending less or more but will always keep your returns profitable. 

A myriad of data-based insights will be at your fingertips via advanced analytics that will help guide you to creating the most effective trade promotion strategies. As you simulate various strategies based on gathered data, you are able to fine-tune your efforts. You are able to allocate your resources in the right place at the right time, which goes a long way to maximise your returns while offering the expected result.

The most important ingredient to such optimization strategies is to keep the strategy beneficial for both brand and the B2B customer. After all, it’s your product that will sell on the market and your customer who will put it up on their shelf!

Remember, well-thought out trade promotion strategies lead to:

• Streamlining of the overall process
• Accurate forecasting and demand planning
• A serious edge over competitors
• Data-driven decision making
• Benefits for both brand and retailer/dealer

Challenges of Trade Promotion Optimization

While trade promotion optimization can be a big plus for B2B sales, certain challenges could plague it, requiring immediate attention.

• Over-dependence on syndicated data

Although some brands may look at data from information or media sources, exclusively depending on them isn’t advisable towards strategising or optimization of trade promotions. Instead, to ensure a reliable and a continuous source of data, you should have your own process of data collection and storage via software. You can access this to measure how your last trade promotional campaign did and improve your next based on your findings. 

• Complex data layout

Even if you have the best data to work on, unless it’s legible for you and your team, you won’t go far. That is to say, crowded spreadsheets and cluttered interfaces only make it hard for you to get what you need from a data set and instead efficiency takes a hit. On the other hand, a software with advanced data gathering abilities that also has a user friendly interface allows for easy analysis of data and consequently better planning.

• Specialised teams

If your trade optimization software is only operable by IT professionals and tech guys, it can be a major hurdle to accessibility. The ideal software must be usable to technical whizards as well as laymen, scalable, and highly modular to ensure anybody can operate as well as generate reports whenever necessary.

• Gut instinct instead of hard facts

Many brands even today shun the use of software to measure their trade promotion performance or feedback gathering and instead go with instinct and manual understanding of history. This is prone to erroneous analyses and leads to repetition of mistakes or even worse strategization. Naturally, this leads to losses in terms of money, energy, resources and of course, precious opportunities.

Best Practices of Trade Promotion Optimization

• A reliable tool or software – Before anything else, you need to get yourself software that is capable of handling and analysing complex data and maybe even providing recommendations based on its algorithm. 

• Insights and analysis – Collection of historical data and the use of advanced analytical tools to identify patterns, trends, and the relationship between past promotions and sales performance. Post-promotion analysis is important to learn from mistakes and consolidate on the positives, leading to far more successful promotions going forward.

• Collaboration – A collaborative approach between multiple teams such as sales and marketing for complete alignment on goals behind the promotions. B2B customers can also be made a part of this collaboration to foster trust and all-round satisfaction. A tool that promotes collaborative automation will help this agenda considerably and therefore you should make your software purchase prudently. 

• Defined goals – It is important to be clear on the purpose behind your trade promotion efforts so that your optimization can be tailored to it. You could be going for sales uplift, greater market share or customer retention; each could need different optimizations. 

• Targeting and grouping – Determine your customer profiles and design your promotions based on their preferences. Your promotions can be targeted to factors like geography, season, and even product types. 

• Simulating scenarios – Simulation is important to visualise outcomes before you actually launch a campaign. Once you have a clear grasp of what works and what potentially won’t, it will be easier to implement a successful promotional strategy. 

• Duration of promotions – Your promotion cannot be active forever or even for too long. Returns start diminishing after a while and therefore, you must leverage data analyses and simulations to figure how long a promotion would be profitable. 

• Timely communication – Your B2B customers must be aware of the promotions you are offering. Use social media and in-store displays to promote these; if you are successful at highlighting what makes these promotions lucrative to your retailers, there will be more customer engagement.

• Monitor competitors – Competitors also have their trade promotion strategies that they implement towards their goals. Some of these strategies may be game changers and when you adapt them, your sales will get a boost.

• Nurture relationships – Good relations with B2B customers can go a long way in making your promotions successful. Focus on building trust and reliability rather than simple transactional relationships.

• Trained teams – When your sales and marketing teams are well-informed and well-trained on trade promotion optimization processes, analytics, and how the whole thing works, they will be better prepared and more Agile to handle tough situations. 

Conclusion

As you understand by now, trade promotion optimization is inseparable from sales promotion strategies. Consistency doesn’t help when promotions are involved with ever-changing market trends that lead to vastly different products and retailer/dealer expectations. Be it cross selling or upselling, collaboration among all teams is a mandate to form a promotion that’s justifiably potent. 

At the same time, using software that can successfully launch your trade promotion campaigns, apply optimizations, and continue to provide useful insights for future promotions is an incredible advantage. You need something that’s scalable for changing scenarios and at the same time easy to use.

Why don’t you check out the Beatroute free demo? We know you will love it!

FAQ

1. How can companies align trade promotions with overall brand strategy?

Ans: By ensuring promotion support and pushing brand goals, offering value to all parties concerned, maintaining brand identity, strengthening relationships with B2B customers, promoting widespread collaboration across departments, and being adaptable to changes.

2. What are some common pitfalls to avoid in trade promotions?

Ans: Some common pitfalls are:

• Promotion not aligning with brand goals
• Focus on short-term gains
• Inaccurate data analysis
• Lack of competitor analysis

3. What are the emerging trends in Trade Promotion Optimization?

Ans: The emerging trends in Trade promotion optimization are:

• Data-based decisions
• Precise targeting a grouping of customers
• Artificial intelligence
• Omnichannel experience
• Agile strategies
• Collaborative mindset leading to more effective strategies