Promax Applications Group is a world–leading specialist in Trade Promotion Management & Trade Promotion Optimization, Forecasting & Volume Planning, Customer Account Planning & Budgeting, Modeling & Optimization solutions.
Getting less and spending more is always an unsustainable situation and trade spend is no exception. Manufacturers are spending more on trade promotions but aren’t seeing an increase in sales, let alone profit. Most fast-moving consumer goods (FMCG) companies have made small concessions to increasingly powerful retailers over the years and are now struggling to regain lost ground to shore up their margins.
Data from a recent Neilsen report showed that the supermarkets’ reliance on promotions to shift volume has reached a new high with 40% of all sales coming from items on promotion – a record for the sector.
It’s a difficult process, but worth the effort: FMCG companies that improve the effectiveness and efficiency of trade spend can improve gross margins by 2 to 3 percent within a year.
Trade-fund budgets are running at an average of 15% to 30% of gross revenue. This represents one of the highest single costs in most companies. It’s therefore no wonder that Executive Boards are starting to demand better visibility into how the funds are distributed and how effectively they promote profitable sales.
In addition, new accounting and compliance regulations, including the Financial Accounting Standards Board (FASB) and the Sarbanes-Oxley Act, are making the process of trade-funds management a top IT initiative in the FMCG industry. Companies now realise they must invest in more sophisticated tools to manage promotional planning and trade funds if they are to prove compliant with the new regulation audits.
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