
Knowing the ROI of an individual promotion is a step in the right direction, but your goal should be to have a ROI metric across promotions. If calculated consistently, you will have a way to assess the relative benefit of promotions across products and customers. This, combined with an understanding of the tactics and timing, will enable you to understand what is working, and what’s not.
The purpose of Promotion ROI and other key performance indicators (KPIs) is to enable an “eyes wide open” view of your business. This doesn’t mean you simply use this to eliminate “bad” ROI promotions. There are plenty of reasons why you keep “bad” promotions.
When you have a library of actual ROI there are three important insight areas to leverage:
Your goal should be to continuously improve results. ROI analysis should be used to guide strategic planning and guidelines for the sales team on promotion frequency, discounts/price points, and tactics. Do more of what works, and less of what doesn’t.
You have two options. The first is DIY; building, updating and managing your own process and tools. The advantage here is cost and flexibility. And in early days, this may work for you. The disadvantage to DIY is the work required to execute the process and update Excel-based tools. As customers, products, and promotions grow, so does the possibility of unintended errors and risk of things like deleted spreadsheets.
The second way of working and producing ROI is with the use of a Trade Promotion Management (TPM) product like BluePlanner from UpClear. The advantage to BluePlanner is standardization and automation. The platform structures all of the data needed to produce ROI and delivers reports that enable you to assess performance across customers and products. With these improvements come process changes that your team will need to adopt, and the investment in the system- a fraction of your trade spending expense that quickly pays for itself.
Too often CPG manufacturers become interested in ROI only when there is a problem. Then, there’s a mad dash to calculate ROIs for promotions across the last [insert number] years. It becomes a massive project that takes an inordinate amount of time. Here, an ounce of prevention is worth a pound of cure. Set up your process and tools to include everything you need to calculate ROI. The sooner you do this, the faster and easier it will be to address that inevitable question: “What am I getting for all of the money I’m spending?”
UpClear makes software used by Consumer Goods brands to improve the management of sales & trade spending. Its BluePlanner platform is an integrated solution supporting Trade Promotion Management, Trade Promotion Optimization, Integrated Business Planning, and Revenue Growth Management.