• December 5, 2023

Top Tips for Managing Trade Spend TO Maximize ROI

Top Tips for Managing Trade Spend TO Maximize ROI

Top Tips for Managing Trade Spend TO Maximize ROI 700 500 Vividly

Managing trade promotions is vital for CPG brands like yours. But are your discounts, coupons, and promos really paying off? We asked SKU partner Vividly for the best ways to make every marketing dollar count.

What is Trade Spend Effectiveness?

Trade spend ROI measures how well your promotions deliver returns. Effective campaigns boost sales AND brand awareness. 

To succeed, you need to:

  • Understand your audience: what motivates them? 
  • Pick the right promo mix: discount depth, promotion types, timing…optimize!
  • Analyze performance: spot trends and continuously improve!

Now let’s unpack how to track effectiveness, measure success, and analyze trade promotions.

Measuring Promotion Performance

Accurately tracking outcomes is crucial for trade spend optimization. Measuring the performance of your trade performance will help you:

  1. Quantify true ROI: Detailed performance tracking quantifies the hard ROI from promotions to justify and optimize spend. Without measurement, brands cannot accurately evaluate promotional productivity.
  2. Identify winning tactics: Response rates, incremental lift, and profitability metrics expose which specific promotional vehicles, offers, and target segments are most effective. This drives allocation towards what delivers results. Detailed analytics may also reveal pockets of high responsiveness to promotions, like certain regions or segments, that warrant additional marketing focus and innovation.
  3. Enhance future planning: Robust analysis of past promotions provides data-driven inputs for planning promotional strategies, budgets, production, inventory, and more.
  4. Optimize channel mix: Customer-level response rates highlight which retail partners generate the strongest promotional performance to guide channel investment. 
  5. Benchmark performance: Tracking metrics over time versus competitors gives brands an informed baseline to assess promotional success against, rather than guesses.

In essence, precise measurement provides the foundation for making smarter promotional investments, maximizing their impact, and driving growth. It transforms trade spending from a guessing game to a data-driven strategy.

The Most important Metrics

  • Baseline sales without promotions: It’s crucial to understand normal sales levels without promotional influence. This isolates the true incremental impact of promotions.
  • Incremental sales/revenue added by promos: Measuring the direct sales and revenue lift generated by promotions quantifies the hard ROI. This indicates whether promotions are truly driving growth. 
  • Whether promos steal sales from other products: Promotions that simply shift revenue between products and don’t expand the overall pie have limited value. Watch for cannibalization effects.
  • Sales lift during and post-promo: The sales spike during a promo is only part of the story. Post-promo lift indicates stronger brand affinity and loyalty. 
  • Competitor activities and impact: Your promotions don’t exist in a vacuum. Monitoring competitor promos shows if your sales lift is due to your efforts or external factors.
  • ROI – Incremental gain versus cost: Ultimately promotions must drive incremental profitability above their costs. Regular ROI analysis ensures profitable spend allocation.
  • Purchase frequency, loyalty, and brand switching: These metrics indicate if promotions are attracting deal-seekers or building lasting brand relationships, an important distinction.
  • Sales response to different promo tactics: Not all promotions are created equal. Measuring response rates guides spend toward the highest-performing promotional vehicles. 
  • Retailer collaboration and support: Retailer engagement can make or break a promotion’s success. Their support levels help explain results.
  • Optimal promo mix, duration, and timing: Regular testing reveals the most effective promotional blend, length, and launch windows for maximum impact.

Monitoring across these areas provides a 360-degree view of trade promotion productivity. This enables informed optimization to maximize results.

Tips to Optimize Your Trade Spend  

Start small to test effectiveness

  • Run short 1-2 week test promotions before committing to longer campaigns
  • Test in a limited geography or retail banner to contain risk
  • Vary discount depth, product selection, creative, etc. across tests
  • Measure incremental lift and ROI accurately for each test

Use short promotion durations to avoid fatigue

  • Limit promotions to 3-4 weeks for seasonal or limited-time offers
  • Have a compelling call to action to drive immediate purchases
  • For everyday value, use EDLP pricing vs. short-term discounts
  • Monitor sales before, during, and post-promotion to spot fatigue

Tightly track incremental lift

  • Isolate baseline sales to identify true incremental gain accurately
  • Calculate lift in both unit and revenue terms
  • Break down lift by product, customer, and geography
  • Update forecast models with measured lift for future planning

Shift budget away from poor-performing promos

  • Have clear ROI/profitability thresholds that determine promotion continuation
  • Be ready to pivot your budget quickly to better opportunities
  • Audit promotions periodically for consistent value delivery

Balance broad reach with targeted campaigns

  • Major brand-building promotions merit full distribution reach
  • For low-awareness brands, target key regions, retailers, demos
  • Test targeted promotions before scaling up investment

Collaborate closely with retail partners

  • Share forecast models, lift studies, and shopper data to align on your goals
  • Provide assets and support needed for optimal in-store visibility
  • Offer sufficient promotion funds and margins to drive retailer enthusiasm

How the Right Tools Can Help Boost Your Trade Spend ROI

Advances in technology and analytics enable CPG brands to achieve far greater visibility and insights into trade spend effectiveness. The right tools allow you to:

  • Access unified data for accurate performance measurement
  • Identify optimal spend allocations through real-time forecasting and modeling
  • Quantify true baseline sales
  • Reduce inefficiencies and the need for manual calculations
  • Update forecasts dynamically based on measured lift
  • Uncover trends, opportunities, and threats through analytics

For example, Vividly offers CPG brands an integrated platform to:

  • Sync promotion plans, retail sales, and consumption data
  • Calculate incremental lift and dynamically update forecasts
  • Analyze promotion performance through embedded analytics
  • Uncover optimization opportunities with benchmarking
  • Provide insights and collaboration tools to engage retailers

Vividly is a trade promotion management (TPM) software built by and for the consumer-packaged-goods industry (CPG). From campaign creation to deductions management and promotion measurement, we help brands like Perfect Snacks, Liquid Death, Quinn, and Hint Water manage every element of trade spend. Vividly is designed to fit the quintessential business model of small to midsize CPG companies. Vividly increases the end-to-end visibility and analytics required to maximize their trade spend productivity.