CPG Manufacturers Evaluating Trade Promotion Strategies
The top 2 goals for CPG manufacturers this year are to improve profit margins (38%) and increase sales volume (34%). Producers of branded products have been hit especially hard by shoppers who are cutting costs and often purchasing less expensive store brands during the recession. CPG manufacturers market their new products directly to consumers, but their trade promotion efforts also make a difference for the bottom line.
Trade promotion includes price discounts given to retailers to obtain optimal shelf space locations. CPG manufacturers also provide coupons to consumers to improve product sales. Because trade promotions are the second largest cost item on the consumer goods profit and loss statement, more manufacturers intend to study the effectiveness of this line item. Current, manufacturer ability to understand their trade performance promotions looks like this:
- Assess large promotions with tools 40%
- Assess important promotions manually 37%
- No good understanding of promotions 12%
- Have comprehensive view for all promotions 11%
These findings are great news for the 11% of manufacturers who have good handle on their promotions. But the remaining 89% of businesses must address their situation. And 77% will have to improve trade promotion performance within existing budget constraints. Over half of managers say they lack good data and/or effective tools to understand their trade promotion outcomes.
Consumer Goods Technology analysts expect that CPG companies will invest in management tools to improve data accuracy, forecasting, and assessment ability. As they do, the nature of trade promotions may change. But the result should be more profitable operations for both existing and new products.[Source: 2010 Sales and Marketing Report. Consumer Goods Technology. 2010. Web. 30 Jun. 2010]