Fast Moving Consumer Goods (FMCG) companies have been grappling with Trade Promotion Optimization (TPO) for years. The upside to be had, in terms of efficiency and effectiveness, is well documented, and for any given elite Tier 1 manufacturer, the financial benefits are likely in the hundreds of millions of dollars.
So, with all the energy, time and effort thus spent, why aren’t we any closer to a viable solution? There certainly is no shortage of software companies and consultants who “understand” the challenges and are willing to partner with FMCG companies to try to provide a solution. You would be hard pressed to say, however, that the industry as a whole is satisfied with the results to date.
Like peeling back the onion, when we begin to address all the variables and layers associated with TPO, the reality of the undertaking is almost insurmountable. The myriad of known data sources is only the first of many challenges. Another challenge is the continuous update of these same data sources. New data sources (consumer sentiment, health trends, weather) provide an equally arduous challenge, and one that will likely always be fluid. On top of all of that, the ever-changing role of products and their subsequent pricing introduces cannibalistic effects that need to be understood.
So, have we reached the point of just throwing in the towel?
Not yet…
The TPO conundrum has confounded the industry for years. Perhaps, however, there is a lesson to be learned from Tesla’s Elon Musk. When Musk decided to manufacture an electric car, he assembled non-automobile experts, so as to apply proven learnings from other industries that would lead to an automobile for the 21st century. Consumer Product executives could take a chapter out of the Tesla book to ensure that ALL facets of solving the optimization problem have been uncovered; otherwise, it might be time to reach for the towel…
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