2006 | VISION STATEMENT

T rade Promotion Management forConsumer Product Companies hashistorically been a majorchallenge. One of the key reasons

for this was confirmed in a September 2005survey from Clarkston Consulting and CGT.Their findings indicate 63% of companiesdo not have a computerized system in placefor trade promotion planning andevaluation. Only 6% of the companiesreporting used sophisticated practices fortheir TPM.

In 1978, 5% of sales were spent ontrade promotion. By 1995, spending hadincreased to 13% of sales. Today, annualtrade spending is approaching 20% ofsales for many consumer productcompanies. From a P&L perspective, TPM now ranks second only to COGS as the second largest expense or most companies.

A.C.Nielsen reported recently thatmanufacturer’s estimate that 30% of TPMdollars go straight to a retailer’s bottomline. This is “real money” that is notworking to drive your business objectives.

How much of an opportunity would thisrepresent to your company? What if youhad the visibility to identify and redirectthese funds? What if you had the ability toidentify inefficient trade promotions andstop repeating them or identify your most

efficient tradepromotions andclone them?

When developing an Annual OperatingPlan, many companies effectively replicate70% or more of the trade promotions fromthe previous year. Without a tradepromotion system to evaluate promotionaleffectiveness, you risk repeating failedprograms. Post promotion analysis is bestdescribed as a manual process typicallylimited to your top customers and keyproduct lines. In reality you only review asmall percentage of your overall spendingand have no ability to benchmark all ofmetrics involved that may include off-invoice, check payments and deductions.This information is typically found in

multiple places and systems within anorganization without a “closed loop” view ofthe data or process. The commonspreadsheet approach to Trade PromotionManagement offers only a one point in timestatic view of a very dynamic process.

Therefore, with so much at stake, whythen do so many companies seem toneglect aggressively managing and

optimizing their TPM? If you are one of the63% of companies without a TPM solution,there may never be a better time than nowto get started!

SAP utilizes an integrated approach toCustomer Relationship Management thatfoundationally links TPM to all other Salesand Marketing functions. Functional areassuch as Brand Management, CategoryManagement and Retail Execution allinteract with TPM. Other CRM functionalareas such as New Product Developmentand Introduction and a Demand DrivenSupply Network all benefit when applicationfunctionality is inherently integrated.

Collectively the entire business suite of CRMfunctionality seamlessly interacts with yourback office ERP systems. This ability toautomatically update data across yourorganization in real time will reduce youremployee’s administrative time andincrease their available time to utilizecurrent data to make business decisionsthat will grow your business!

ConAgra has recently implemented TPMfrom SAP and seen significant benefits.These benefits include the installation of adisciplined process and controls that haveled to record levels of invoice pricing andpromotional pricing accuracy. Deductionbalances have been reduced by 55%. Theynow have visibility and profitability to thecustomer level. TPM analytics can be doneat any level of customer or product.Wrigley, Colgate-Palmolive and othercompanies are also utilizing TPM in newways that help them improve their businessprocesses and gain a competitive advantagein the market place.

Effective TPM: When evaluating existingTPM installations, the most effective andsuccessful ones involve high levels ofintegration vs. siloed point solutions. Large Enterprise and Mid-Marketcompanies can each benefit from anintegrated TPM solution. If your companyis seeking to implement a TPM solution,engage vendors and consulting partnersthat have a deep knowledge of TPM and asolid track record of accomplishment. SAPand our partners such as ClarkstonConsulting have that level of knowledgeand demonstrated accomplishment.

EFFECTIVE TPM

SAP Americawww.sap.com/usa/industries/consumer/index.epx

To gain a competitive advantage, you must do thingsbetter than your competition. Focus on optimizingareas offering the greatest potential impact to yourbottom line. Effective TPM can both grow yourrevenues AND reduce your expenses!

By Chris Wiesen, CRM Solution Principal, Consumer Products

**CGT 06-06-P61 Vision-SAP 5/24/06 12:27 PM Page 61