Trade Promotion Management & Optimization (TPM / TPO) has continued to grow as demand for data-driven sales planning increases. Compared to 2020, the market has increased by $345M, with 981 new entrants seeking to take market share from TPM / TPO giants like Exceedra, Eversight, Zilliant, and more.
According to the Promotion Optimization Institute, trade promotion activity accounts for ~20% of a company’s annual revenue, making it the second-largest cost item on the P&L. With such a high upfront investment, one would think it generates great results. Unfortunately, 92% of Trade Promotion solutions fail to meet revenue objectives within three years. What are the reasons behind this?
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CRM has existed in one form or another since the 1980s and experienced many consolidations over the years (like TPM / TPO is experiencing now). What was once a group of 30 to 40 public CRM companies has now slimmed down to only 5 to 7 meaningful vendors like Salesforce and HubSpot. How did these companies succeed where others failed? What lessons can TPM / TPO solutions like Exceedra and Zilliant learn from the shortcomings of CRM?
Let us understand why so many CRM systems failed:
#1: Disconnect Between Features And Process
Many substandard CRM systems use flashy features like a lure on a fishing line to hook customers toward purchasing their product. There is no logical reasoning behind the CRM’s conception and feature offerings – but they look good and sound great. That is, until you actually start to use it and find out it is completely incompatible with your organization’s process. Plus, with so many CRM solutions to choose from, how do you know which one to pick? The best CRM solutions are made with the user in mind, with features accommodating and supporting existing processes.
The same issue exists with TPM / TPO, where the average software has 20+ features. While loads of features attract customers initially, it is only the useful ones that will retain them. Every additional feature that does not bring value to users will complicate your solution. For example, some TPM / TPOs offer a feature that optimizes promotions for products. While a great feature on paper, the promotion may not account for real-life constraints like retailers who don’t run certain kinds of promotions or the fact that certain promotional tactics are not supported within the organization. To understand which TPM / TPO solution is right for you, it is important to understand your business process. That way, you know what you need to drive ROI and won’t be tempted by the feature-loaded options (no matter how cool).
#2: No Collaboration
One of the biggest reasons why CRM implementation fails is the inability of departments to collaborate with each other. Specifically, it is the lack of collaboration between Marketing and Sales teams that undermine success. A CRM system is most effective when Sales and Marketing teams use it together with a structured plan behind it.
TPM / TPO faces similar challenges. Marketing / Finance teams want fewer promotions to preserve brand equity and increase profit whereas Sales teams want more promotions to generate higher velocity to hit revenue targets. This lack of alignment creates an organizational disconnect that leads to missed opportunities, underperforming promotions, and additional costs. Managing these priorities and setting the objectives during TPM / TPO implementation is key to success.
#3: Poor Ongoing Training & Support
When you have been doing back of the envelop work for your entire career, the idea of learning a complicated software platform like CRM is daunting. You might as well ask your sales and marketing teams to build a rocket ship and fly it to Mars. For a CRM to be successfully adopted, there must be hyper support present.
Proper training / support is also the secret sauce to TPM / TPO success. Unfortunately, this rarely happens. Companies tend to hand off the solution outputs to their team and hope they will magically come to life in the market. In reality, TPM / TPO solutions often output recommendations that the team does not understand / like or thinks are not feasible with customers. There needs to be cross-functional support available to help the organization gauge whether these concerns are tangible or just emotional. If tangible, then the team can assess ways to modify the system or the internal process to create new guidelines for trade activity. If emotional, then coaching / culture shift is required.
#4: Terrible Data
What happens when CRM systems use inaccurate or incomplete data? As the saying goes, “garbage in, garbage out.” In fact, having bad data might be just as problematic, or more, as having no data at all. For example, your CRM system is intended to give you a better, more complete picture of who your customers are and what their pain points are. If your CRM is riddled with inaccuracies, you will probably focus on the wrong person and dedicate precious time and effort to someone who is not interested in making a purchase while ignoring a would-be customer.
Trade promotion analysis requires leveraging data from various sources - sales data, store delivery data, product cost information, reimbursements & discounts, etc. to get the most accurate insights. Unfortunately, correctly integrating these diverse data sources takes substantial time and oversight. Companies often underestimate the importance of this and do not take the proper steps to ensure it is done right. As a result, what would have been a high-value TPM / TPO solution ends up being a black box with misleading outputs.
TPM / TPO Will Experience The Same Fate As CRM
Having a TPM / TPO solution does not guarantee success. Like CRM, TPM / TPO will continue to fail organizations until vendors address the above challenges. As the market consolidates, it is the vendors who offer customizable and process-oriented solutions that will win. But the failure of TPM / TPO cannot solely be blamed on the software vendors. Organizations need to understand what gaps and opportunities currently exist and find TPM / TPO solutions that meet those needs.
When applied correctly, software solutions like CRM and TPM / TPO can be invaluable. However, a TPM / TPO solution should not be another tool to master. Instead, it should be a support system that serves as a launchpad towards business growth and prosperity.
If you would like to learn how to avoid TPM / TPO failure and want help finding the right TPM / TPO solution for your organization, reach out to RML today! You can also visit our Trade Promotion Management & Optimization page to learn more.
ABOUT THE AUTHOR Avy Punwasee is a Partner at Revenue Management Labs. Revenue Management Labs help companies develop and execute practical solutions to maximize long-term revenue and profitability. Connect with Avy at [email protected]