Optimizing trade spend management

Discover why optimizing trade spend management is a critical investment for CPG companies and how your business can improve your trade spend decision making.

What is Trade Promotion Management in CPG?

Within the CPG industry, trade spend management is the process of planning, allocating and managing funds that a manufacturer invests into trade promotions for their products. Trade promotions are used to incentivize retailers to stock and promote products in stores.

Trade spend is often invested into promotional elements like:

• Discounts. Price breaks on products designed to incentivize retailers to purchase them

• Rebates. Financial incentives offered to retailers that attain a specified sales volume during a promotional period

• Slotting fees. Fees paid out to retailers to secure prime shelf space in retail stores

• In-store displays. Temporary product displays installed in retail stores that promote products and offers and are designed to grab consumers’ attention

• Merchandising support. Sending staff to set up and/or maintain promotional product displays in retail stores

Most CPG companies create a promotion strategy and carefully divide and invest their trade spend budget across a variety of trade promotions and promotional campaigns to drive sales for different products – hence the need for good trade spend management.

The key components of trade spend management

Trade spend management has two key components: transactional trade spend management and trade spend strategy and optimization.

Transactional trade spend management

In transactional trade spend management, a budget is created and earmarked for Key Account Managers (KAMs), typically individuals in sales and marketing teams, to spend on promotion plans and programs within their accounts. KAMs then create an annual plan by working directly with retailer partners. Their promotions are then executed and expenses are reconciled. Post-event, their promotions are assessed and analyzed. This can all be managed manually in spreadsheets or with a trade promotion management software solution. Using the right software can enhance speed, efficiency and accuracy and enable KAMs to make better decisions.

Trade spend strategy and optimization

This component of trade spend management is all about making the right decisions and investments for current and future promotions. The right data and insights help KAMs gain a deeper understanding of their promotions to effectively plan and modify them. Trade promotion optimization software solutions offer tools to measure and optimize promotional plans to drive good return on investment (ROI) and improve volume, revenue and margin.

Why effective trade spend management is critical?

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