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Description

Any discussion of collaboration between manufacturers and retailers would be incomplete without an examination of trade spending, a cash outlay that for manufacturers may account for as much as 25 percent of gross sales and is the second-largest item on the P&L, behind cost of goods sold.

Leading companies embrace trade spending as a strategic investment but are increasingly funding consumer marketing, product customization, and value-added services as well.

The goal is a collaboration between manufacturers and retailers to manage the trade-offs of investment decisions in a way that increases the return on the portfolio for both.

Although this shift to funding other initiatives expands companies’ options and may introduce changes in the overall marketing mix, it is not a panacea: Many companies continue to underleverage their investments in trade spending, despite its financial and strategic importance.

However, trade promotion spending can be optimized in a way that transforms it from a drain on return on investment (ROI) to a significant bottom-line booster.

Capitalizing on the opportunity requires an effort that integrates the appropriate analytics, systems, processes, and organizational capabilities in a way that focuses the entire sales organization on the bottom line.

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