Powerfully Simple Trade Promotion Optimization System (TPOS)
Support for planning and optimizing trade promotion effectiveness
If you activate in FMCG/CPG market and your products are delivered to the end customer through modern commerce (retail chains, discounters, cash&carry etc.), the main battlefield with competitors is represented by the promotional campaigns in stores, the last place where the consumer can be influenced. Big companies, big brands, provide a consistent budget for these promotions. It has come to such a situation that, because of the large number of stores, because of the diverse types of IKA networks and the particularities that have to be addressed, the peoples responsible for developing the trade promotions and assembling those in annual plans for each KA have major difficulties in decision-making support process to choose. If you find yourself in this situation, there are great chances that you are not sure how to plan your campaign: which products, areas, stores and formats to use etc. An additional problem is commonly the lack of information from the big retailers. This probably hinders your efforts in determining the impact of forecasts and the related ROI for your campaign.
Proposed solution: TPOS
The TPOS system takes into account all these types of problems, proposing an innovative and pragmatic approach based on the gained experience. In brief, TPOS offers methods to meet the following challenges:
1. An accurate statistical forecast for the set of variables that we follow when assessing promotions (on a certain period of time, SKU, retail chain – IKA):
Ø Baseline – the basis which we relate to when forecasting the sales volume estimated in the absence of promotional activities and
Ø Uplift (%)– the promotional lift is the increase in volume sales as a result of the promotional activities.
2. Understanding how collected data must be correlated with promotional activities and with the key elements that drive the sales through in order to be able to achieve the business goals and to maximize ROI.
3. Determining the Finance, Sales, Marketing and Supply Chain departments to collaborate and to use the same forecasts (the same data when operating with plans and forecasts for trade promotions).
What data gets into TPOS?
To improve the trade promotion forecasting process TPOS can take into account scenarios that use the following data categories:
- Promotion forecasting – a plan for predicting promotions;
- In-store analysis (at selling points – PoS , IKA stores) – data usually collected with own resources or provided by externalized services that include information regarding own products and competition products: presence (OOS), placement, exposure, attractiveness, planogram etc.
- Dynamic Market Modelling – data regarding the network structure of IKA stores, geographical coverage, modifications of property structure of stores;
- Syndicated & Sell–out – syndicated data provided by Nielsen, IRI or own market analysis, as well as sell-out data (sales volume to the end customer through each KA);
- Advertising – data regarding own products through printed and on-line catalogues edited by each IKA;
- Media Forecasting – data regarding plans and schedules for promoting the own products in classic media channels.
All this data is entered in the TPOS – Trade Promotion Optimization System, which by using machine learning (engine) and forecast models elaborated as a result of a lengthy experience in this field, provides support for:
- Trade Promotion Decision Support System by objective and ROI;
- Supply Chain Planning – forecast demand.
The 6 step cycle from TPOS
Step 1. Dynamic market modeling;
Step 2. Store-level campaign analysis;
Step 3. Baseline calculation and promotion modeling;
Step 4. Detailed profitability evaluation;
Step 5. Below the line campaign simulation;
Step 6. Promotional activity negotiation with retailers.
Structured on departments and internal functions, the value proposals (benefits minus costs) of a TPOS system implementation looks as follows:
- a better control of all costs and income from promotions;
- support in promotional campaign planning decisions;
- planning initiatives;
- tight control of all costs and income;
- what-if simulation for predicted promotions;
- up-to-date dynamic market model of IKA stores (network structure);
- provides a promoting guide for each KA;
- KA level performance analysis;
- best promo action profitability forecasting;
- improvements of indicators used to measure the results of promotional actions: net Uplift and net ROI.
- increased accuracy in demand planning;
- forecast details down to store level;
- reducing sales loss (due to Out of stocks – OOS);
- reducing old products stock (time expired).
TPOS – Trade Promotion Optimization System is a system developed from a joint solution between ToolsGroup and DSM Group – Transart:
Ø ToolsGroup has a lengthy experience in using an analytical approach and artificial intelligence technology / neuronal networks (Logical Machine Learning),for elaborating high accuracy forecast models, used in business for: product demand planning (Demand planning), (Trade promotion forecasting) and forecasting media events or promotional actions (Media Event Forecasting).
Ø DSM Group – Transart – comes with CCM Suite – Customer & Channel Management – an instrument for strategic planning mainly used by Sales (IKA) and Trade-Marketing departaments, providing support for planning and monitoring business plan execution, promotion plans, with each KA. Taking into account the up-to-date market model (IKA store network), CCM also provides specialized collaboration instruments (based on Microsoft Excel) that have the role to support the development and completion process of realistic plans, build on details and high-end models, making possible for numerous persons to contribute for their development, each in their working field.