As retailers and manufacturers gain sophistication and knowledge, the formulation of trade promotion management and optimization strategies (TPx) becomes increasingly complex, notes European Supermarket Magazine.

A key aspect

A key aspect of simplifying the complexity in this process is setting targets; however, some CPG companies make efforts towards a multi-target approach to trade promotion for their sales teams and key account managers (KAMs) - but does this method enhance performance or distract teams from achieving their primary objectives?

Setting multiple targets usually involves focusing on parameters such as volume, revenue, trade rates, funding, return on investment (ROI), manufacturer margin, and retailer margin.

Various studies have found that companies that set multifactorial targets for their sales teams often experience a decrease in overall performance.

This is attributed to the fact that the KAM element, in the effort to meet all the targets, may fail to focus on any individual target, negatively impacting desired results - hence the need for a more streamlined and convincing approach to setting trade promotion targets.

In this regard, we see that setting targets based on guidelines for trade promotions is gaining popularity.

Significant growth

Companies that use guideline-based target setting experience a significant increase in TPx efficiency.

This form of target setting focuses on determining the parameters of a successful promotion, using guiding aspects such as timing, type, and depth of the promotion.

For example, instead of setting separate volume and revenue targets, these can be combined into a single guideline, such as "maximizing revenue per unit sold during the promotional period."

This approach encourages holistic thinking, fosters a harmonious interaction between different objectives, and provides sales teams with a clear path to follow, enhancing their efficiency and likelihood of success.

While a multi-target approach may seem an attractive trade promotion strategy for CPG companies, it can often lead to a dilution of focus and lower overall performance. As the saying goes, "If everything is important, then nothing is."

Simplifying and focusing targets using guideline-based trade promotion goal setting is a key to unlocking superior trade promotion performance.