Ensuring Business Plan Compliance
Global consumer goods companies spend $1 trillion on trade spend annually, with it being frequently the second largest line item on the P&L after cost of goods sold.
For CPG companies, 67% of promotional investment fails to break-even and the trade promotional plan is one of the key pillars of a business plan. This has caused increased scrutiny on the promotional spend with brand owners investing in trade promotion management and optimization tools.
Joint business plans, or plans between consumer goods companies and their retail partners, have been around for more than a decade. In theory, they provide a platform for a constructive dialogue on delivering profitable growth for both parties inside the framework of mutually agreed long-term strategies.
In practice however, these lofty goals are often side-lined and the “business plan” becomes more like a simple trading agreement capturing the investment from the brand owner alongside the business drivers the retail partner is prepared to support. The business plans have joint KPIs, and are regularly reviewed by retail partners to ensure the brand owner is delivering their financial commitments. However, the retail partner’s execution of the business plan is often less frequently considered, and the performance assessed to ensure corrective action is taken to address any issues.
The underlying philosophy of joint business planning is about a strategic collaboration with retail partners to define a mutual growth strategy which ultimately delivers both parties’ commercial objectives. This approach requires significant investment in time and resources from the brand owner and a high level of engagement from the customer. Together the retailer and consumer goods company can make better investments to improve returns, rather than pursuing separate initiatives that are unaligned to each of their strategic goals.
20:20 Retail Data Insight deploys a data informed approach to measuring and improving compliance to joint business plans. With a team of expert consultants supported by our data scientists, we are perfectly placed to help CPG companies identify and realize significant revenue and profitability improvements.