FMCG companies are looking to reduce delivery costs and maximise margins as mechanisms to bounce back from the pandemic. However, this is difficult when you lack visibility and integration within the retail execution chain.
A report from McKinsey & Company shows that more than 70% of trade promotions are unprofitable. Yet businesses spend up to 23% of their revenue on trade promotions. Here, Warwick Hopcroft, industry lead: consumer goods and retail at BlueSky, spells out how to change this.
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Traditionally, the trade promotions model works as such: A manufacturer sends out a field sales team to count stock, make sure that the retailer is exhibiting the promotion correctly, and is complying with the promotion’s rules. The representative takes orders, deals with queries and does a bit of merchandising.
Virtual trade promotions in the Covid-19 era
As a result of the Covid-19 pandemic, manufacturers have started conducting virtual trade promotions. But are these effective?
Worldwide, manufacturers are realising that they can do only so much virtually. Field sales teams must still visit retail outlets. Doing this safely, however, means it is impossible for them to visit every store. Instead, they must focus their energy on the outlets that perform. Representatives need to plan their visits strategically and the only way to do that is by using the intelligence that data provides.
Technology helps overcome barriers to profitability
The challenge with trade promotions is that companies run them to achieve a sales target or market share. But the finance department often cannot track real-time profitability, and the lack of instantaneous data leaves little or no space for the planners to be agile and change promotions early when it is not working.
For the effective management of trade promotions, manufacturers need real-time data. This is where cloud computing technology comes in.
Without getting too technical, cloud computing allows software applications to be hosted on a server in a data centre that is accessible to anyone with Internet connectivity and access rights.
Cloud computing technology has a number of advantages over the old model, where physical hardware infrastructure was hosted at a company’s premises. These include being secure, accessible, convenient and cost-effective. In the South African context, where there is often no Internet connectivity, essential data must be available offline to ensure that execution is not interrupted.
How does cloud technology aid your trade promotions?
Cloud technology provides an integrated solution — one platform — which you can set up for each of the departments. As they are easier and quicker to set up, it comes with a lower cost of ownership and allows businesses to more easily adapt systems to support ever changing business. More and more consumer goods companies are shifting towards a single coherent system that connects to the enterprise resource planning (ERP) system and unites finance, planners and field sales in one place.
A single retail execution cloud platform manages the entire sales promotion process, from planning to sales, store visits and delivery. The real-time data provided by cloud solutions like Salesforce’s Consumer Goods Cloud means that finance can see the actual promotion performance versus baseline and estimated figures. It allows you to know where you are potentially wasting trade promotion spend so that you can pull the plug on profitless promotions.
In addition, planners have a bird’s-eye view on promotions which means that they remain agile by tuning and optimising underperforming promotions. The real-time information that the cloud provides lets you reallocate energy, effort and funds to better-targeted campaigns.
A successful promotion is a profitable promotion, helping to strengthen the relationship between consumer goods companies and their clients.
BlueSky is a new-age boutique cloud technology business with a headcount of about 140 and based in Johannesburg and Cape Town. We specialise in a suite of cloud-related service lines, including cloud delivery and support, digital advisory, data and analytics, experience design, and a cloud academy. We currently offer AWS, Salesforce, Vlocity and Tableau, among others. We also have a strong industry focus in financial services, telecommunications, media, FMCG and industrials. Visit www.bsky.co.za for more information.
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