As retailers and manufacturers gain sophistication and knowledge, formulating trade promotion management and optimisation (TPx) strategies becomes increasingly complex.
A key aspect of streamlining complexity in this process is target-setting, yet some CPG companies are pushing toward a trade promotion multi-target setting for their sales teams and key account managers (KAMs) – but does this method enhance performance or distract teams from achieving their primary objectives?
Multiple target-setting typically involves focusing on metrics such as volume, revenue, trade rates and funding, return on investment (ROI), manufacturer margin, and retailer margin.
Various studies have discovered that companies that establish multi-factor targets for their sales teams often experience a decrease in overall performance.
This is attributed to the fact that KAMs, in an effort to reach all targets, may fail to concentrate on any individual one, adversely impacting the desired outcomes – thus, the necessity for a more streamlined, cogent approach to trade promotion target-setting.
In this regard, we are seeing guideline-based target-setting for trade promotions gaining popularity.
Businesses utilising guideline-based target-setting are seeing a significant increase in their TPx effectiveness.
This form of target-setting focuses on determining the parameters of a successful promotion, using guideline aspects, such as promotion timing, type and depth.
For instance, instead of setting volume and revenue targets separately, they can be combined into a single guideline, such as ‘maximise the revenue per unit sold during the promotional period’.
This approach encourages holistic thinking, fosters a harmonious interplay between different objectives, and provides sales teams with a clear path to follow, boosting their efficiency and likelihood of success.
While a multi-target setting may seem an attractive trade promotion strategy for CPG companies, it can often lead to a dilution of focus and poorer overall performance. As the saying goes, ‘If everything is important, then nothing is.’
Simplifying and focusing targets using guideline-based promotion target-setting is one key to unlocking superior trade promotion performance.
For more information on TELUS Trade Promotion Management, go to telus.com/agcg/products/trade-promotion-management. [Image Courtesy: GamePH – stock.adobe.com]
This article was written in partnership with TELUS Consumer Goods.