Leveraging Trade Promotion Management to "Win at the Shelf"

Demantra debuts solution to integrate demand, sales, marketing planning; Welch's refining "grape-shot" approach to TPM

Demantra debuts solution to integrate demand, sales, marketing planning; Welch's refining "grape-shot" approach to TPM

Waltham, MA — December 8, 2004 — Supply chain solution provider Demantra has rolled out a trade promotion management (TPM) solution integrating TPM with demand, sales and marketing planning with the goal of enabling the sales function to predict promotion effectiveness, manage account profitability and automatically communicate volume forecasts to supply chain for seamless fulfillment.

Demantra said it developed a TPM solution to allow players in the retail supply chain manage all aspects of their sales planning and trade promotion activity from annual budgets to daily execution. The solution provider also announced several customers that have been using the new TPM offering, including Welch's and Pharmavite.

According to the solution provider, Demantra TPM allows managers, based on analysis of market and sales data, to establish accurate baseline sales forecasts and design optimized promotion events to generate the additional sales volume to achieve revenue targets. On a daily basis, Demantra TPM provides each sales rep with event planning, volume and trade funds planning, and profit planning capabilities to manage their contribution to the company's goals.

In addition, automatic synchronization of volume forecasts and supply chain demand plans can help reduce out-of-stocks and increase revenue, Demantra said. "With Demantra TPM, manufacturers can achieve 'one-number planning' to place the right product on the right shelf at the right time to increase profitability, drive category leadership and 'win at the shelf,'" the solution provider said in announcing the new offering.

The Trade Promotion Challenge

According to Hand Promotion Management, manufacturers worldwide spend upward of $700 billion annually on trade promotions, also known as vendor rebates or promotional allowances (in other words, incentives and rebates to retailers for product discounts, coupons, etc.). Over $500 billion of that is spent in North America alone. Additionally, trade promotion expenses (which range from 14-20 percent of revenues) consistently rank second only to cost of goods sold on manufacturers' profit and loss statements, and, according to marketing and sales management consulting firm, Cannondale Associates, accounts for as much as 54 percent of total marketing budgets.

Yet despite the high costs incurred by consumer goods companies, trade promotion is often the least accurately controlled and managed major budget item, and often fails to impact the bottom line in any meaningful way. As vendor promotional allowances come under closer government scrutiny in terms of their impact on compliance regulations such as Sarbanes-Oxley, manufacturers must have a solution in place that will not only effectively track promotion spends, but measure their effectiveness.

"In an era where there's intense competition at the shelf and more scrutiny than ever on the bottom line, Demantra TPM helps companies grow category leadership and understand how to be more profitable," said John Bermudez, vice president of product marketing at Demantra. "Our TPM solution empowers [consumer goods (CG)] sales teams with easy-to-use tools that manage every aspect of the account planning process from annual sales forecasts to precise volume lift predictions of individual trade promotion events."

Bermudez added that the solution incorporates best-in-class analytics and optimization tools that give account managers insights on promotion performance with spreadsheet ease that they can use to forge better relationships with the retailers and grow revenue profitability. "For the first time, Demantra is unifying the entire CG sales and trade marketing processes, providing the integration with demand planning and eliminating the ad-hoc spreadsheets that currently tie these processes together," he said.

Welch's Refines "Grape-shot" Approach to TPM

Concord, Mass.-based Welch's, the world's top seller of Concord and Niagara grape-based products, has transformed its sales and customer planning process with the TPM solution to enable sales to more effectively and profitably manage their business, according to Demantra.

As with most consumer goods companies, the amount that Welch's invests in trade promotion is second only to cost of sales. Still, the process of planning, managing and tracking these funds was largely manual, labor-intensive, time consuming and potentially error-prone. Welch's recognized that, to secure a competitive edge, the company needed to refine this "grape-shot" approach to TPM by improving the management and cross-organizational alignment of its trade promotion process to stay close to its customers and be able to react nimbly to market changes.

Welch's primary goal for this broad transformation was to enable all corporate functions to effectively and efficiently plan, manage, execute, measure and analyze trade spending and demand.

"Welch's needed to do what we do faster and smarter," said George Jackman, director of customer marketing at Welch's. "After looking at almost a dozen different vendors, we found that most had a broad solution that did some things well, but only Demantra had the trade management product depth, along with the demand planning and analytics expertise, that we required."

Welch's looked to Demantra TPM to move TPM beyond mere transactional capabilities. The Demantra solution implemented at Welch's comprises three primary modules: Event Planner, which automates tasks associated with designing, funding, managing, and analyzing promotions; Volume and Fund Planner, which provides a summary of customer/geography volume and funding resulting from all SKU volume, authorized budgets and planned trade events; and Profit Planner, which provides a summary financial report reflecting the annual plan at the selected customer/geography.

With Demantra's help, Welch's is automating the sales customer planning process and linking sales, marketing, finance and demand planning functions into a system integrating forecasting, planning, monitoring and analysis. The Demantra software enables Welch's to work from a single, integrated trade promotion management, sales, marketing and demand planning solution throughout the organization.

Welch's sales teams can now spend less time in the office, preparing sales forecasts and managing budgets, and more time in front of the customer selling and building relationships, according to the company. When fully implemented in 2005, all departments will have access to the same information, including promotion plans, sales forecasts and figures, trade funds and supply chain data.

The benefits to Welch's of the Demantra solution include a single data entry point for field and corporate sales users that eliminates manual trade promotion processes; improved data integration by linking all relevant systems, sources and processes into a common database; accurate tracking of trade promotion dollars; promotion-driven volume forecast incorporated into production volume forecast in a timely and accurate fashion; and integrated volume and spending data to automate real-time profit/loss (P&L) visibility at all levels of the corporation.

Anticipated Return on Investment

Jackman said that Welch's anticipates seeing improvements in its trade promotion effectiveness and in efficiencies of its demand planning, production planning, logistics and inventories as a result of the Demantra implementation.

"With Demantra's unique functionality, we can better integrate the planning, execution, management and analysis of all of our trade promotions and marketing, for a holistic view of the effectiveness of our business plans," said Jackman. "With this better understanding of demand across the board, we are better equipped to meet our customers' needs, and we expect to see an increase in customer and retailer satisfaction and a much higher ROI on our trade promotions' spend."

Welch's also believes that the integration of event planning and demand management will yield a significant improvement in its ability to accurately forecast and plan production needs, resulting in additional savings through production efficiency gains and inventory reductions.

"Welch's early success with our TPM solution and the benefits the company expects to achieve are strong proof points of the value Demantra provides to consumer goods companies," asserted Bill Seibel, CEO of Demantra. "As manufacturers face increased competition at the shelf and as compliance regulations put companies under greater scrutiny, a robust TPM solution has moved from a 'nice-to-have' to a 'must have' on most organizations' priority lists. We believe that Demantra's redefinition of TPM is right for consumer goods leaders in today's marketplace."