Managing trade promotions is crucial for retail suppliers' success. Promotions—such as discounts, special pricing, or other incentives offered to retailers or consumers—can drive sales, increase market share, and strengthen retailer relationships. However, trade promotions management (TPM) is a complex process that, if not executed properly, can lead to wasted resources, misaligned goals, and lost revenue.
This blog will explain trade promotions management, the common challenges suppliers face, and how to overcome them.
What Is Trade Promotions Management?
Trade Promotions Management (TPM) involves planning, executing, tracking, and analyzing promotional activities offered by suppliers to retailers. These activities might include:
Discounts: Temporary price reductions on products.
In-store promotions: Endcap displays, special signage, or sampling events.
Coupons and rebates: Incentives are directed at consumers and are often reimbursed to retailers.
Slotting Fees: Payments to retailers for shelf space or preferred placement.
BOGOs (Buy-One-Get-One): Consumer-facing promotions where retailers expect reimbursement.
Effective TPM ensures that every dollar spent on promotions delivers maximum return on investment (ROI), aligns with brand strategies, and meets retail partner expectations.
Why Is Trade Promotions Management So Challenging?
Trade promotions are often the second-largest line item in a supplier’s budget—just behind the cost of goods sold. Poorly managed promotions can erode profitability. Here are some common challenges suppliers face:
Lack of Visibility
Fragmented systems make it hard to track and reconcile promotions across retailers. Suppliers often lose track of how much has been spent and whether it has achieved the desired ROI.
Inefficient Processes
Manual workflows can lead to errors, duplication, and delays in reimbursing retailers or reconciling deductions.
Data Silos
When sales, marketing, and finance teams operate in silos, it’s challenging to gain a holistic view of promotional effectiveness.
Unvalidated Claims
Retailers often deduct for promotions upfront, and discrepancies in quantities, timing, or terms can go unnoticed, costing suppliers millions annually.
Measuring ROI
Determining whether a promotion drove sales or subsidized existing demand is a persistent challenge for suppliers.
Best Practices for Effective Trade Promotions Management
Suppliers can implement several strategies to overcome these challenges:
Invest in Technology
Use TPM software to centralize and automate planning, execution, and analysis. These tools provide real-time insights into spending, sales lift, and ROI.
Foster Cross-Functional Collaboration
Ensure alignment between sales, marketing, and finance to streamline processes and reduce inefficiencies.
Audit Retailer Deductions
Regularly review and validate retailer deductions tied to promotions. Many suppliers unknowingly overpay due to lack of scrutiny.
Develop Clear Contracts
To prevent disputes with retailers, outline detailed terms for promotions, including timing, quantities, and reimbursement expectations.
Analyze Post-Promotion Performance
Track sales lift, profit margins, and consumer behavior after promotions to determine what works and refine future strategies.
How HRG Can Help with Trade Promotions Management
At HRG, we understand the complexity of managing trade promotions effectively. Our team of experts helps suppliers:
Reconcile promotional deductions to prevent overpayments.
Analyze promotion performance to identify opportunities for improvement.
Streamline TPM processes with cutting-edge technology and tailored strategies.
We work as an extension of your team, ensuring every promotion contributes to your bottom line while strengthening your retailer relationships.
Conclusion
Trade promotions are a double-edged sword. When managed well, they can be a powerful tool for growth. When mishandled, they can drain resources and strain retailer relationships. By implementing best practices and partnering with experts like HRG, suppliers can maximize the value of their trade promotions and ensure long-term success.
Interested in learning more? Contact HRG today for a free assessment and to learn how we can optimize your trade promotions and reclaim lost revenue.
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