Every year, CPG companies from all over invest billions of collective dollars in trade promotions. Unfortunately, 55% of the trade spend allocated by CPG brands fail to grow their product in any meaningful way. All of this leads to a sad hostility between manufacturers and retailers, who feel like they need to constantly compete with each other throughout the negotiation process.
But the real reason behind this hostility isn’t negotiating space, it’s data.
A lack of visibility is the number one reason why most CPG trade promotion efforts fail — because manufacturers and retailers don’t have enough data or because they don’t know how to properly mine the data they have for valuable insights.
At Vividly, we help consumer goods manufacturers make the most of their trade promotion campaigns with better data visibility and improved data hygiene. That leads to less friction in the deduction process, which in turn leads to reduced spend.
Today, we’re sharing everything you need to know about successfully using data to handle trade deductions smoothly and easily. Let’s go!
Trade deductions are a form of payment that CPG companies make to retailers as an incentive for stocking their products. By providing incentives to retailers, CPG companies can help increase their product's visibility and market share.
In the world of CPG trade, errors in the deduction process are one of the most important reasons why manufacturers lose money. That’s why, CPG companies have to invest in a dedicated accounting system to dispute invalid deductions and clear deductions that are valid.
However, data in the world of trade promotion management is scarce. The current deduction management process is a bit like fumbling in the dark with no idea of what’s ahead. Thankfully, there’s a better way for manufacturers to manage your trade spending.
Deduction management is a complex process that requires collaboration between multiple departments such as trade, finance, and accounts payable. Here’s how it usually works:
Trade spend is usually the second largest line item in a CPG brand’s P&L statement, right after Cost of Goods Sold (COGS). However, most manufacturers treat trade deductions as the cost of doing business instead of approaching them as an opportunity for investment.
This problem is largely due to a lack of visibility and data, which makes the trade experience a bit like looking for a needle in a stack of needles. But, it doesn’t have to be that way.
At Vividly, we have spent years studying the trade promotion management process for consumer goods brands as part of our product research. With time, we have developed our own set of best processes that we recommend to all our clients for efficient trade management. Here they are:
Until now, trade deductions have been managed primarily using manual processes and cumbersome spreadsheets, which are prone to human error and have limited visibility in terms of data. However, data science has the potential to change all of that.
Using advanced analytics, CPG brands can now track trends in past deductions and develop predictive models to anticipate future deductions. They can also leverage machine learning algorithms to automate the resolution process, reducing the time and resources required to dispute and validate deductions.
But it doesn’t stop there. With a deep knowledge of retailer relationships, CPG manufacturers can now selectively prioritize invest opportunities and develop a long-term retail strategy that doesn’t rely on pure speculation.
The possibilities are endless. But without the right tools and data for the job, trade automation can quickly turn into an expensive disaster.
Vividly's trade promotion management software automates all stages of the deduction management process — from planning to reconciliation to reporting. We’ve helped brands like Amy’s, Perfect Snacks, and Liquid Death achieve a 90% reduction in deduction-processing labor and a 21% improvement in planning accuracy. “They have trade management for brands like us down to a science,” says Chris T., VP of Sales at Bulletproof.
Want to learn more about how Vividly can improve efficiency across your trade deduction management process? Request a free demo, today!