I have spent close to 20 years working with sales team from FMCG companies around the globe focusing on Trade Promotion Management (TPM) and my general observation is that there are different levels of maturity amongst the people and the organisations. To best understand this, I have grouped these in four levels.
If you are a sales manager, or an account manager the results your team or your team produces can really come down to what level you have collectively achieved with your management of Trade Promotions. I define these as the four levels of Trade Promotion Management and as you move up each of these levels, the thought processes employed changes and most importantly you will see a change in results.
Today I want to take you through the different levels from the ground up, based on the different maturity of the account managers and the team they operate within.
Level 1 – Decision
This is the lowest level of Trade Promotion Management and typically where too many account managers are at. This is the process of simply making decisions about levels of discounts, how much co-op to pay, a volume forecast and which products to promote. The clear majority of the decisions are conducted in a reactionary manner, or simply just going through the motions of repeating decisions made in the past. There is little or no understanding as to whether the promotions are financially viable or not.
Level 2 – Plan
An account manager who has graduated to level two is doing some degree of planning; that is, simply starting to think about how they will promote and how often. At this level there is certainly more thought around the financial viability of promotions and the general timing of them. The focus at this level is on meeting the customer requirement of X number of promotions each year with little or no general consideration for the mechanics involved in promotions. The relationship with the customer is typically a one-sided conversation where the account manager is implementing a plan driven by the customer’s desires.
Level 3 – Vision
This is the level where most account managers will believe they are at; but sadly, most are really at level two. This level is where there is true vision put into the promotional plan. Modelling around price scenarios and different promotion mechanics are employed. A high amount of trial and true engagement with retailers via Joint Business or Joint Category Planning where there is true understanding and implementation of experimentation in cooperation with the customer to achieve mutually beneficial outcomes.
Companies at vision level have invested heavily in a commercial insights or a trade marketing team who analysis and provide insights into promotion effectiveness and efficiency to drive the greatest possible return on investment.
Level 4 – Purpose
Rarely is this level achieved, yet this is where everyone should be aiming for. It is the simple step of understanding the purpose of promoting your products. An account manager or sales team at this level will have not only plan for the current year but a clear strategy for five years. You will not only have a good strategy but understand clearly the purpose and the associated long term goals.
Every decision made in the business will be aligned and referenced back to the purpose.
How to level up
Once you understand truly where you are, there needs to be a commitment to level up. Taking the leap to level four may be too big a task based on your current level, but moving to the next level should be the first target.
To level up, you need to understand the purpose of each level. To do that, it is best to start at level four and work down to level one.
When you work from level four down to level one you will quickly see how much easier each level becomes once you have completed the other; but each time you start below level four every subsequent level becomes inherently more difficult to execute.
Level 4 – Why?
At level four, this is where you ask why am I promoting. Seriously, this is the first question every account manager should ask, but seldom is it asked. You could potentially take a further step back and ask should I even be promoting this product?
The “why” is all about the purpose; therefore at this level you are identifying the purpose of promoting and this can for some very simple reasons. You may want to grow market share; brand recognition; competitor blocking; range management; maximise production lines or various other reasons.
Every product will have a different why, so a good promotion strategy will require you to complete this process for all product groups.
Most importantly, the why should be set by product and be customer independent; hence this requires a collaborative approach in the business.
Level 3 – Where?
Here we are concerned about the “where” which is where you add vision to why. So the “where” covers off numerous things. Where can relate to the customer; but it can relate to where you promote with your customer and at high level where you deploy the majority of your trade funds.
Consider this; your purpose for promoting; or why you are promoting is to increase market share to 50%. Say your product has 50% market share in retailer A, 20% in retailer B and 35% in retailer C. Many of you would be thinking right now that the where would then be retailer B and C; but you would be wrong. The where is all three, just where you deploy most of your trade funds is going to be retailers B & C. Whilst retailer A has already met the stated purpose of promoting you still need to maintain it.
You furthermore need to consider where you will use the trade funds to achieve the stated purpose. There needs to be vision at this point as to how you will be able to best execute the purpose and this will be achieved by modelling different scenarios, using different mechanics and collaboratively working on Joint Business or Category Plans.
In defining the “where”, you are defining a clear vision on how you will be deploying your trade funds into a plan you need to execute.
Level 2 – How?
The “how” is about executing the vision; or simply building a promotion plan.
If the vision was to employ a high low promotion strategy of 12 promotions in a year, then the “how” is simply putting these on a plan.
This should be very straightforward as you are basically just plotting the vision to an executable plan, something every account manager does already, right? NO!! You are doing this with a clear vision and purpose so this is now an easy exercise. You now know your plan has been considered and the big questions as to why you are promoting and where you will be spending trade funds has been answered.
How you execute to achieve the purpose and meet the vision is now in a plan.
Level 1 – What?
Finally, you are back at level one. A place everyone has been but now this is somewhat a different place. What to promote, what price point, what deal do I give. So many decisions. Well, not really. If you have levelled up, then these are easy questions to answer as you know why, where and how. What is just a logical follow on from all the previous levels. This is where you previously spent so much time on making decisions and now you just placing the decisions in boxes as you know them.
In Summary the key for any sales team is to focus more time on level four; yes level four and progressively less time on each level as you work down.
- Understand the WHY, define a PURPOSE.
- Figure out WHERE, develop a VISION.
- Know HOW to execute, build a PLAN.
- Decide WHAT you need to EXECUTE.
Most teams are starting at level one and are acutely concerned about every single deal that they truly forget why they are promoting, where to focus their energy and how to execute the plan. Starting at level four every other level will make sense.
Consider when Apple developed the iPhone that the first they focused on was the why and look how successful that product has been. It shows that when you know the why, you have a purpose and reason to succeed.
Whilst this process noted here relates to trade promotion management, this strategy can be deployed in all facets of life.
Want to find out more about successful Trade Promotion Management? Request a consultation with one of our TPM experts.