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Retail, CPG and Logistics

What role does data analytics play in optimising trade promotions?

Global Consumer Product Goods (CPG) companies spend about 20% of their annual revenue on trade promotions to stimulate immediate sales and product trials. They increase the marketing effectiveness through discounts, special offers, and incentives tailored for trade partners and distributors.

However, statistics show that up to 40% of promotions (not uniformly across all sectors)  lose money, and every three out of five promotions fail to deliver the expected ROI. Additionally, 87% of CPG businesses struggle to have an integrated and cohesive trade promotion management capability.

To address these gaps, Infosys BPM provides digitally enabled process transformations. The trade promotion management (TPM) services from Infosys BPM are aided by automation and analytics, cultivating an end-to-end view of trade promotions and boosting ROI.

This article covers the current challenges in Trade Promotion Optimisation (TPO), the importance of data-driven trade promotion strategies, and the steps to implement them.


Current TPO challenges and the role of data analytics

Marketing teams currently base their campaign budgets on ad hoc or intuition-based approaches. These promotion models have a few drawbacks since they:

  • Do not align with current market trends
  • Have poor inventory management
  • Miss sales opportunities
  • Provide a low ROI

These factors result in sales, general, and administrative (SG&A) costs of 15-20%.
Embracing data-driven trade promotion management and optimisation can significantly reduce guesswork, align trade promotion campaigns with consumer behaviour, and maximise ROI. With the power of analytics, businesses can delve into massive data, identify patterns, and predict the outcome of TPO actions, paving the way for a more efficient and effective future.


Trade promotion optimisation strategies

Grow Your Business with Managed Trade Promotions Services | Enahnce Your ROI Now!

Grow Your Business with Managed Trade Promotions Services | Enahnce Your ROI Now!

With the aid of data analytics in trade promotions, companies can now monitor the performance of their campaigns in real-time and make immediate adjustments. This level of control is unprecedented in the world of trade promotions, allowing businesses to swiftly identify underperforming campaigns and make the necessary changes to ensure success.


Targeted promotions

Brands can use data to segment customers and identify high-value ones to tailor the promotion campaigns that meet the customers’ needs and preferences. For example, to encourage customer loyalty, businesses can incentivise them with free shipping or a referral program. CPG businesses can also promote subscription-based plans for regular-use items.


Dynamic pricing

By leveraging the competitor pricing data and market demand, businesses can implement dynamic pricing strategies. For example, to handle demand spikes during festive seasons, they can offer time-sensitive discounts or flash sales to boost revenue. Pricing analysis helps businesses analyse its impact on demand and find an optimal range.


Promotion bundling

Businesses can analyse the customers’ historical purchasing patterns to identify complementary products and offer them as a bundle as a promotional offer. For example, if a customer regularly purchases a particular brand of hair care products, the CPG business can offer skin care products from the same brand as a bundle.


Seasonal offers

Seasonal trends, events, and festivals dramatically change customer preferences. While the priority for some customers may be a low price, for others, it may be sustainable and eco-friendly products. For example, the business can promote electric or charcoal grills before Thanksgiving Day to capitalise on cultural celebrations.

Data-driven trade promotions also help analyse profitability to establish procurement and cost guidelines. Other parameters such as price elasticity, social sentiment analysis, and demographics help the business in better product analysis and categorisation.


Steps to implement data-driven TPO

The right solution partner helps you build a strategy to adopt TPO through cutting-edge technology and analytics. It is best to implement data-driven TPO in phases and transition one step at a time:

  1. Step 1: Centralise the sales, marketing, promotions, and customer profile data by integrating the existing systems. If necessary, switch to a different software that supports integration.
  2. Step 2: Research and invest in a TPO platform that leverages technologies such as artificial intelligence, machine learning, and data analytics. The platform should meet your business’s specific needs.
  3. Step 3: Analyse the current customer, market, product, and promotions data to isolate revenue leakage, high-performance strategies, customer behaviour, etc.
  4. Step 4: Once you have data analytics working on existing and new incoming customer data, craft promotional strategies to make the most impact and generate maximum ROI.
  5. Step 5: Implement the promotions and monitor and adjust their performance in real time. AI and ML-enabled data analysis will make the TPO process agile and accurate by ingesting and processing big data for retail promotions.

Cutting-edge trade promotion management services focus on business process consulting, managed trade promotion, technology consultation and implementation, analytics advisory, and data consulting. Use these markers to choose the right TPM solutions for your business.


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