Trade promotions help CPG manufacturers increase revenue. But managing them well can be tough. Firms spend 20-40% of their revenue on trade promotions, but many don’t notice real profits. Poor promotions reduce profits, damage cash flow, and lead to flawed decisions. If your trade promotions aren’t working, watch for these six warning signs.
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1. You Don’t Have Clear Visibility into Promotion Performance
Many businesses run promotions without checking if they boost sales, profits, or demand. Without analysis, companies can’t tell which promotions help and which waste money. Without clear tracking, businesses waste money and struggle to improve promotions for better profits.
The Consequences:
1. Blindly Repeating Ineffective Promotions
Without tracking, businesses repeat promotions that don’t work. Without proper analysis, businesses keep running ineffective promotions, wasting resources without adding value. Promotions that don’t bring in new customers or boost market share waste money and hurt growth.
2. Overspending Without Clear ROI
Trade promotions take up 20-40% of revenue, but without tracking, companies can’t tell if they’re worth it. Unmeasured promotions lead to unnecessary discounts, cutting profits without real growth. Without clear data, businesses may keep offering discounts that don’t boost sales, wasting money and cutting profits.
3. Lack of Alignment Between Sales, Finance, and Marketing
Sales teams push for big discounts to cater to targets, while finance concentrates on profits. Marketing makes promotions that don’t match with sales or financial plans, resulting in wasted resources. Without shared data, teams operate separately, creating conflicting strategies that weaken trade promotions.
The Solution
- The accounting team must check plans and deductions for errors and unauthorized claims. By matching planned promotions with actual deductions, they can catch errors and stop revenue loss. Matching expected promotion costs with actual expenses ensures accuracy and better trade spend management.
- Implementing data analytics provides clear visibility into trade promotions. Tracking KPIs like sales lift, margin impact, and retailer compliance provides promotion effectiveness. Real-time analytics aid businesses in seeing which promotions work, permitting useful spending decisions.
- Aligning finance, sales, and marketing is vital for better problem-solving in trade promotions. The partnership confirms that promotions make both revenue growth and profitability. Checking promotions allows us to enrich future campaigns, prevent mistakes, and use budgets wisely.
2. Your Deductions Are Out of Control
Unmanaged trade spend deductions can quickly become a costly burden. Retailers deduct amounts for promotions, discounts, and marketing fees. But retailers often make unauthorized, miscalculated, or invalid deductions.
Finance teams struggle to verify countless deductions accurately. Without a clear process, companies lose money to unfair deductions. Manually tracking and disputing deductions wastes time and resources.
The Consequences of Poor Deduction Management
- Revenue Leakage Due to Excessive Deductions
Unchecked deductions lead to lost revenue. Retailers may deduct unauthorized amounts, apply wrong discounts, or lack proper documentation. This causes financial losses that add up and hurt profitability.
- Time-Consuming Disputes with Retailers
The finance team disputes unauthorized deductions to recover lost funds. This involves gathering promotional agreements, invoices, proof of performance, and other supporting documents. Resolving retailer disputes can take weeks or months, adding delays and extra work.
Disputes also put a strain on retailer relationships. Ongoing deduction disputes can strain relationships between manufacturers and retailers. Poor deduction management can lead to absorbed losses and increased revenue leakage.
- Cash Flow Uncertainty and Financial Forecasting Issues
Uncontrolled deductions make it difficult to maintain predictable cash flow. Inconsistent or unexpected deductions make it hard for companies to forecast revenue accurately. This can disrupt budgeting, investment planning, and operational decisions.
If finance can’t verify deductions in real-time, old ones pile up, making reports unreliable. Uncertainty leads to poor decisions, hurting business strategy and growth.
3. Aging Deductions
Unresolved deductions create further complications, delaying resolutions and impacting profitability. As deductions age, they become harder to confirm and recover, putting extra strain on accounting and finance teams. A structured review process for deductions can help businesses maintain control, cut revenue losses, and improve cash flow management.
4. You Lack a Post-Promotion Evaluation Process
Without review, businesses repeat mistakes and waste trade promotion budgets. Many businesses run promotions but don’t review their results. Without reviewing results, businesses may waste money on ineffective promotions.
Without evaluation, companies miss key insights to improve future campaigns. Was the promotion profitable? Did it drive incremental sales? Did it attract new customers or only benefit existing ones? Without clear answers to these questions, businesses cannot optimize their trade spend.
The Consequences of Poor Post-Promotion Evaluation
- No Learnings to Improve Future Promotions
If promotions are not reviewed, there’s no way to identify what worked and what didn’t. Companies may repeat promotions, thinking they work, even if they don’t boost sales or profits. Without data, businesses miss chances to improve strategies, adjust discounts, or target customers better.
- Difficulty Justifying Trade Spend to Executives
Trade promotions cost a lot, and executives expect a clear return on investment (ROI). Without proper analysis, finance and marketing teams can’t show how promotions affect revenue and profit. Without transparency, securing budgets and making smart decisions becomes harder.
- Wasted Budget on Ineffective Campaigns
Running promotions without evaluating success leads to wasted spending. Discounts, refunds, and incentives may not boost sales, attract clients, or build loyalty, resulting in wasted money. Without review, companies keep funding ineffective campaigns.
The Solution:
- Standardize Post-Promotion Reviews to Measure Success Metrics
To make trade promotions effective, businesses need a clear review process. After each promotion, they should check key factors like incremental sales to see if revenue increased. They should also measure lift percentage for sales growth and margin impact for profit improvement. They should also ensure retailers follow the promotion correctly.
- Create Feedback Loops Between Finance, Sales, and Marketing
Teamwork is key to better trade promotions. Finance checks cost, sales track customer response, and marketing measures brand impact. When teams share feedback, businesses can identify trends, adjust pricing, and align promotions with their goals.
Next Steps for Better Trade Promotion Management
To optimize your TPM process, start by auditing your current system for gaps. Using data-driven tools and automation enriches trade spend visibility and control. Encouraging teamwork between finance, sales, and marketing makes sure trade promotions drive business growth.
Conclusion
Good trade promotions boost revenue, but poor management wastes money and reduces profits. To fix this, businesses need precise data, better tracking, and firm teamwork between finance, sales, and marketing. Regular reviews, better deduction control, and team training help prevent losses and improve decisions. Expertise Accelerated simplifies trade promotions with data-driven solutions, boosting profits and long-term success.