Impulse spending is declining. Coupon redemption and “staycations” are up. TPM project failure rates are high (45%) and failure to meet expectations is almost ludicrous (87%). And the largest CG manufacturers -- those above $5 billion in annual revenues -- are suffering the most.

1. Cognizant White Paper
Trade Promotion Management:
Why Most Companies Fail and How To Avoid It
Executive Summary An added pain that has come with reduced
consumer spending is the rise of store brands,
Shopping has changed -- or at least the way which is causing higher tensions between
consumers make buying decisions. The manufacturers and retailers.
economy is resetting, but there are many
reasons to believe today’s shopping trends will Other factors driving the need for more
endure. effective TPM:
Impulse spending is declining. Most consumers n Huge money is at stake. To grow market
decide what to buy long before setting foot in a share, launch new products, and build brands,
store. Coupon redemption and “staycations” are the average CP company spends 14% of rev-
up. Newspaper readership is seriously down enue on trade1 according to AMR.
(affecting ad exposure). The list goes on. n More value to the consumer must be deliv-
ered in this hypercompetitive environment.
Fragmentation is the new reality. For consumer n Senior management is scrutinizing promo-
goods companies, that means unpredictability
tion funding more closely.
which, in turn, means that managing trade
promotions effectively has never been more n Costs must be driven out of CG supply chains.
important. n Prompt and reliable claims settlement is
imperative, with robust verification and vali-
The problem is that trade promotion dation to prevent fraud.
management (TPM) has to this point been a n Compliance is a priority with Sarbanes-Oxley
crude science. Software has been inadequate
and other regulations.
(and over-promised). Information has not been
well integrated with in-store activity or n Trade promotion effectiveness is mostly not
accessible in real-time. In fact, no single end-to- effective. Many manufacturers struggle to
end solution can meet the needs of find the right methods and metrics for meas-
manufacturers competing in our real-time world. uring event performance.
TPM project failure rates are high (45%) and And yet, it is no longer possible to achieve a
failure to meet expectations is almost ludicrous good return on your trade-promotion dollars
(87%). And the largest CG manufacturers -- without automation.
those above $5 billion in annual revenues -- are
suffering the most. TPM automation project success relies on these
proven best practices:
white paper

2. n Do not view TPM simply as a technology channels continue to fragment and choices
install. Consider business processes, organi- multiply, consumers are more cautious with
zational issues, and analytical needs. their spending. They want value above all and
n Map and benchmark current TPM practices. are leveraging market information to get it.
Including: processes, tools, and organization.
There is much confusion on how best to
Identify opportunities for improvement.
approach consumers with promotions that will
n Sketch out future requirements. Then get engender the loyalty of highly informed
agreement on how to prioritize them. shoppers and avoid alienating them.
n Before proceeding, set objectives and met-
rics for success. It pays to gain consensus on Further complicating the picture is the growing
where you are prior to launch and where you tension between manufacturers and retailers.
will be after implementation. There is no doubt that private label is one of the
big winners emerging from the recession. There
n Engage all relevant departments. Including:
has been a fundamental shift in consumer
finance, marketing, category management,
behavior and even as the economy improves,
sales, and IT.
private labels are not only here to stay but
n Identify other related initiatives and proj- growing with each quarter.
ects. Examples: POS data and Master Data
Management. How can you resist private label encroachment?
n Do pilot programs. For different business One way is to offer more value or the perception
units and geographies. of more value. An example: Godiva -- a high-end
CG manufacturer if there ever was one -- is
n Plan a phased rollout. Include strong change
offering lower cost versions of its signature
management.
offerings to entice value-minded shoppers hungry
In the first part of this three-part series, we look for a bit of luxury. (That $3 candy bar is at lot more
at trade promotion effectiveness, and how it palatable these days than a $50 ballotin.)
hinges on adopting the right solution for your
But that’s a guerilla tactic in the larger battle to
organization’s needs -- today and tomorrow.
earn a better return on trade promotions.
In the subsequent papers we’ll go deeper -- into
Billions are spent by CG companies every year on
challenges and pain points of today’s sales and
trade promotions -- dollars critical to staying
marketing managers. We’ll also look at how
ahead in today’s hyper-competitive environment.
advanced analytics integrating disparate data
The task is always the same. Identify target.
sources can help CG companies predict the
Engage. Convert. And done well, trade promotion
impact of promotional spending.
provides the consumer with exactly the value
In this white paper: she/he is seeking and provides the CG
manufacturer with a share uplift, more profit, and
n What’s Wrong With TPM? greater insight into consumer behavior.
n Sharp Tools Needed, Dull Ones Used
Unfortunately, “done well” isn’t done very often.
n There’s Hope in a New Generation of Solutions Most CG manufacturers admit their trade
n How Not To Fail promotion spending isn’t paying off. Only a
small percentage of trade promotions result in
n How To Evaluate a TPM Solution, Better
proven profit. Most provide little incremental
n Four Key Steps before you Start Implementation lift. And despite the billions spent, few
n Getting Started with your TPM Initiative manufacturers know what works vs. what
doesn’t work, or why either outcome happens
(so the cycle continues). Rubbing salt in the
What’s wrong with TPM?
wound, a significant percentage of trade
For decades, consumer products companies promotion activity accrues directly to the
have worked hard to understand consumers. retailer’s bottom line.
And the challenge is getting more difficult. As
white paper 2

3. Sharp Tools Needed, Dull Ones Used happens, which is rarely, it can lead to
controlled trade spending, improved shelf
Real-time analytics is the golden fleece of TPM. visibility, greater fulfillment reliability, a more
But it doesn’t really exist yet, at least in a single responsive supply chain, and a better ROI.
end-to-end solution that gives managers a true
dashboard view of shelf activity and ROI. The fact that it happens so rarely, if at all, hasn’t
stopped investments in TPM technology. The
Most CG manufacturers choose a packaged average CG company spends 10 to 15% of revenue
application -- often delivered as a service - to on trade dollars, with technology accounting for a
avoid the high cost of developing their own large chunk. According to AMR analyst Steve
solution. Steutermann, quantitative studies find that the
average consumer products company with more
The available tools typically can’t see down to than $5B in revenue has implemented at least
store level, and demand data is far from real-time. three trade applications in the last five years and
Most companies understand what happened at currently operates multiple technologies across
the shelf only once the promotion has been the globe.2
executed, which hampers effective measurement
and eliminates any possibilities of making tactical The problem is failure rates. Based on AMR
changes to a promotion. A large number of Research quantitative studies, for companies with
companies are still dependent on home grown revenue of $5M and more, only 13% of projects
spreadsheets using which effective trade meet expectations, and 45% of projects fail.3 The
promotion management is near to impossible. greatest failure rates are found at companies with
more than $5 billion in revenues.4
Aberdeen data shows that 65% of
manufacturers currently use a combination of Why spend if it’s not working? Because CG
legacy trade promotion systems and companies are committed to growing market
homegrown trade marketing processes. Most share, launching new products, and building
glaring is the absence of collaborative tools and brands. For many, trade is the second largest
customer analytics for translating shopper line item on their P&L statement. TPM tools,
insights into optimized trade promotions. while flawed, are still seen to hold the potential
for large top-line gains.
Without a complete and single-source view of
customers, deals, programs, and profitability,
companies are executing too many programs There’s Hope in a New Generation of
without enough knowledge. Solutions
Vendors are well aware of the shortcomings of
The ideal is enterprise-wide collaborative data
their solutions.
sharing, planning, and execution. When it
Traditional TPM Solutions Emerging Trends
n Traditional TPM solutions have focused n What if Analysis - Simulation of various
primarily on managing the transactions such as: promotion concepts and subsequent analysis
> Budgeting > Approvals to decide on the suitable concept
n Collaboration - tight alignment between
> Funds Allocation > Payment administration trade activity and marketing objectives
> Pricing n Holistic Approach - Marketing mix analysis
n Systems for enabling compliance with regula- emerging as an important component in TPM
tions such as Sarbanes Oxley n Retail Compliance - Technology to close the
n No tight integration with demand and operations growing gap between retail planning and
planning actual store execution.
n Limited modeling or simulation capabilities n Optimization - Trade optimization and not
just trade management.
n Effectiveness of trade promotions are evaluated
post production n Unified Solution - A single unified
TPM solution across global locations.
3 white paper

4. Traditional TPM solutions have focused on trade optimization -- as opposed to just trade
managing transactions such as budgeting, funds management. And they are recognizing that CG
allocation, pricing, approvals, and payment manufacturers want to implement a single,
administration. There has been no integration unified TPM solution across global locations.
with demand and operations planning, and only
limited modeling and simulation. Trade Of all these coming-soon capabilities, greater
promotion effectiveness was evaluated post- visibility is the key. If information arrives soon
promotion -- often very post-promotion. enough, adjustments can be made in near-real-
time, which means a company will be able to push
The best vendors are working to build more lagging performance back to expected levels.
planning intelligence, optimization, and
integration into their tools. Example: an executive at a milk company sees
that sales at a particular food store are down for
Emerging TPM solutions include “what-if” that time period. He calls that store manager to
analysis and simulation of various promotion find out what’s causing the problem. It could be
concepts. Collaboration is starting to appear, as simple as a competitor’s cart positioned in
with tight alignment between trade activity and front of the milk case. Problem solved. Now,
marketing objectives. Analysis of marketing mix multiply that across 1,000 stores.
and integration with planning systems are also
coming. And there is new emphasis on retail The new generation of TPM technology will
compliance, with technology closing the transition manufacturers from reactive
growing gap between retail planning and actual browsing of old data to active, real-time
store execution. decision-making based on fresh information.
Other important emerging capabilities in TPM Success or failure can hinge on that alone.
solutions:
n Product price optimization How Not To Fail
n Visibility on trade dollars spent There are many reasons for the high rate of
n Impact of changes to promotion and pricing TPM project failure, starting with the lack of a
sensitivity standard, industry-defined TPM process.
Commonly, companies also underestimate how
n Predictive trade planning and promotion
much change management is needed in TPM.
n ROI calculation on trade spend Many view a TPM project as technology
n Localization to adapt to different scenarios installation when process and organizational
(currency, taxes, etc.) in a global implementation issues are the bigger challenges. Based on our
work with leading CG companies, the
In short, vendors are adopting the concept of importance of these factors is depicted below:
Degree of Importance Improvement Difficulty to
Payoff Effect Change
Process Organizational Technology
Improvements Changes Solutions
Promotional High High
Planning
Execution Medium Medium
Tracking Medium Low
Settlement High High
Post-Event High Medium
Evaluation
Legend
High Importance Medium Importance Low Importance
white paper 4

5. That’s the frame of mind to start with: TPM is chances of successful user adoption. (Few
not just a tech installation. In fact, as an companies today develop custom solutions
enterprise-level solution, TPM has many of the because of time, risk and money
same issues, pre-requisites, and benefits of ERP considerations.)
or CRM implementations. Multiple departments
are involved. Buy-in from many stakeholders is In choosing a TPM solution, once you’ve
needed. Business processes, information answered the four important preliminary
technology, and organizational issues must be questions, these are the next considerations:
handled skillfully.
n Needs. Be clear on your needs. A feature-rich
One of the most important steps toward success solution is not always best.
(and away from failure) is obtaining that crucial n Effort. How much work do you want to do on
buy-in. And often the greatest barrier is proving a base package? Before giving customization
the business case. It's a hard-sell to replace the green light, ask whether it will enhance
familiar systems and tools with a new your competitive advantage. Get a demo of
enterprise-level TPM. Spreadsheets are “free” the base model to understand the amount of
and many otherwise rationale people cling to customization work needed.
them tenaciously.
n Capabilities. Does the tool enable market-mix
optimization, better collaboration, and
Obtaining buy-in is not the purview of this
reduced deductions? Evaluate predictive and
paper; there’s much written on best practices.
simulation capabilities. And don’t lose sight of
The important thing is to understand why it’s
usability. A tool with complicated features will
important and go about it methodically in
be tougher to adopt and used less.
advance of launching any new enterprise-level
application, including TPM. n Integration. Identify all data sources that
need to be integrated to ensure they can be.
How To Evaluate a TPM Solution, Better n Location. Understand how trade promotion
processes work in different regions and coun-
Once you’ve decided to commit to a TPM tries. Will one solution work in all global loca-
solution, or upgrade what you presently use, tions.
evaluating solutions is the challenge. The n Features and functionality. Such as: event
existing ones have been lackluster and new planning and management, demand planning
approaches are evolving fast. inputs, trade fund management, deduction
and payment management, trade optimiza-
There are many questions to ask. These four are
tion, financial controls and audits, measure-
particularly important:
ment of trade spend effectiveness, revenue
growth tracking, handheld/PDA version, and
1. Should you implement a global vs. local solu-
post-event analysis.
tion?
n Technical factors. Such as: ease of system
2. Would an on-premises solution be the best
administration, speed/quality of new versions
fit, or would a managed-services offering
and patches, technical support provided by
work just as well?
the vendor, resources available for develop-
3. Should you stick with your existing CRM or ment and support, robustness, scalability, and
ERP vendor? security.
4. Can a custom solution be justified? n Support. What’s the maturity and sustainability
of the vendor and product?
Packaged solutions are popular because they
often incorporate best practices, need less Four Key Steps Before you Start Implementation
customization, and have a considerably lower cost
of ownership. But they tend not to be as flexible or With a solution in hand, launching properly is
customizable as a custom-built version. half the battle. Here are four key steps we
advise our clients to take.
Custom-built, or homegrown solutions, on the
other hand, can be aligned with an Step One is to set (with stakeholder consensus)
organization’s existing processes, improving the objectives and metrics for success and failure.
5 white paper

6. The group members should agree on where you 2. See your choices clearly.
are now compared to where you want to be. n Arrive at a short list of the most important
needs/criteria.
Step Two is to map and benchmark current TPM
processes, tools, and organizational structure. n Measure each vendor/solution against your
Identify improvement opportunities. Many criteria.
companies engage an external consultant at n Make preliminary vendor/solution selections.
this point. You also want map future n Score contenders against your criteria, then
requirements and prioritize them across the pick a winner.
TPM stack. Again, stakeholder consensus should
be secured before proceeding. Don’t try to do 3. Map the road.
too much at one time.
n Create a TPM roadmap and business case
with all changes.
Step Three is to identify related organizational
initiatives and projects ongoing, such as n Sequence projects/capabilities over a time-
consolidation of POS data or Master Data line.
Management. Based on your future needs, go n Include in your business case cost estimates
with a single- or multiple-vendor strategy. and anticipated ROI.
n Explain clearly the new capabilities and their
Step Four is a pilot installation with different
anticipated benefits.
business units across several regions or
countries. Plan a phased enterprise rollout with
Too much trade promotion money gets spent
a well-planned emphasis on change manage-
without adequate return. As we enter the next
ment and communications.
generation of applications -- designed to finally
provide the integration and visibility that
Getting Started with your TPM Initiative managers need to make real-time decisions -- it
will pay handsomely to get it right after years of
When beginning your TPM initiative, it can be getting it wrong. Good advice is the best place
useful to follow a three-step approach. It will to start, and an invaluable asset as you navigate
help you make informed decisions in the the road to optimal TPM.
complicated TPM landscape, and avoid pitfalls
that have plagued so many CG companies in the
past. When we help our clients with TPM, we use
this three-pronged methodology.
1. See the current TPM landscape clearly.
n Interview stakeholders and gather their
requirements.
n Identify industry leading TPM practices.
n Gather key metrics data.
n Identify and analyze gaps.
n Identify changes require to tools, processes,
and the organization.
white paper 6

7. About the Authors
Naren Karamchandani, Consulting Partner, Cognizant Business Consulting
Mohit Mohal, Consultant, Cognizant Business Consulting
References
1 AMR Research (recently acquired by Gartner, Inc.) How Do You Win the Race To Improve Trade
Effectiveness?, Lora Cecere, Steve Steutermann, November 2009
2 AMR Research (recently acquired by Gartner, Inc.) Picking the Best Horses To Win the Race for Trade
Promotion Effectiveness, Lora Cecere, Steve Steutermann, November 2009.
3 AMR Research (recently acquired by Gartner, Inc.) How Do You Win the Race To Improve Trade
Effectiveness?, Lora Cecere, Steve Steutermann, November 2009
4
AMR Research (recently acquired by Gartner, Inc.) Picking the Best Horses To Win the Race for Trade
Promotion Effectiveness, Lora Cecere, Steve Steutermann, November 2009.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting and business
process outsourcing services. Cognizant’s single-minded passion is to dedicate our global technology
and innovation know-how, our industry expertise and worldwide resources to working together with
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employees as of March 31, 2010, we combine a unique global delivery model infused with a distinct
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