Author: Don Baker
Does your organization have an effective trade investment strategy? Given Trade’s place on the P&L most would say, “of course we do”. Then we ask to see the proof.
Now if I were talking about effective planning around activities related to Cost of Goods Sold I would see plant layouts, line configurations, proposed formula changes, plans for increasing throughput and eliminating waste and detailed distribution planning.
I almost never see the underpinnings and/or the application of such thinking behind the trade line. I do see data and PowerPoint presentations. But many of the facts don’t lead to conclusions and many disparate insights don’t lead to changes in direction.
So what would I hope to see? For starters, collaboration between the P&L owner, marketing, sales and the trade marketing team on 5 Strategic elements. These are simple in concept but challenging to implement in daily management. These are,
- Solid Portfolio Plans (Clear Brand and Category Investment Strategy)
- Customer Segmentation (Including Channel Focus)
- Price Architecture (Everyday Price and Promotion Strategy)
- Supply Chain impact on trade
- Fund Design (Key Business Drivers)
Each element enables the overall plan and allows a company to investment in the face of ever increasing competitive pressure and customer concentration.
The portfolio plan must outline the growth of the company’s brands but it should outline expectations for the category. Just as importantly, the brands should be valued across the company portfolio. Customer segmentation should be in place and actually used to drive decisions. Many companies take an academic approach to this exercise and no one understands how the outcome became the outcome. So a document that represents today’s reality with tomorrow’s plan for customers is crucial as a living document. Segmentation should be used to identify the winners and also those in the “on deck circle” who are performing well but are underdeveloped.
Price Architecture articulates the value of the Brand/Segments/Items within the category. This document should house clear price/promotion guidelines for your own items as well as gaps and key price thresholds to competitive items.
Many companies proficiently purchase commodities for COGS targets, but few deal with cost variances effectively. Organizations forecast finished goods and react, but many don’t monitor raw to finished good forecasting from a pricing and material availability perspective. So a broader plan for monitoring COGS variances and trade investment together is a critical practice.
Finally, a funding strategy is the key expression of how the first 4 elements are brought to marketplace. What performance-based funds are required to deliver your business objectives based on your brand’s key business drivers?
Simple – right. But there are many hands in the cookie jar! And many silo’s among the constituents. So how do the Trade Investment Strategic Pillars look at your company?
I will continue to build out these ideas in a series of future blogs. Next up – Building the Strategic Trade Investment Plan. Stay tuned!