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Unlocking Trade Spend Visibility: Stoping Missing Budget & Start Driving Growth
21 Plays2 months ago
Did you know that up to 25% of trade spend gets wasted every year due to poor visibility? In this episode of The CPG Trade Spend Podcast, host Kyle Barnholt uncovers the hidden costs of staying in the dark and how you can take control of your trade spend strategy. Learn why trade spend visibility is the key to unlocking better promotions, higher profits, and fewer financial headaches. Kyle shares real-world case studies, the 10 warning signs your organization is flying blind, and one game-changing tip you can apply today to start making every trade dollar count. Tune in now to maximize your trade spend and drive sustainable growth!
Learn more about the Trade Spend Maximizer here.
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Transcript
Introduction to CPG Trade Spend Podcast
00:00:00
Speaker
Welcome to the CPG Trade Spend Podcast. I'm Kyle Barnholt, and I've spent years helping brands navigate the messy world of trade spend, deductions, and promotions.
00:00:10
Speaker
This podcast is all about breaking down the complexities of trade spend, uncovering hidden insights, and turning data into profitable decisions. Whether you're a finance pro, sales leader, or just trying to make sense of it all, you're in the right place.
00:00:26
Speaker
Let's dive in.
The Impact of Wasted Trade Spend
00:00:30
Speaker
Did you know that up to 25% of trade spend gets wasted every year due to poor visibility? Today we're uncovering the hidden costs of staying in the dark and how you can flip the script to make trade spend work harder for you.
00:00:43
Speaker
Welcome to the CPG Trade Spend Podcast where we tackle the biggest challenges in the CPG world. I'm Kyle Barnholt, an entrepreneur, CPG enthusiast, and a guy who's spent almost two decades helping brands thrive in a complex retail landscape.
00:00:58
Speaker
By the end of the episode, you'll know exactly why trade spend visibility is the key to unlocking better promotions, higher profits, fewer headaches, and much more. And I'll share one game-changing tip you can apply today.
Understanding Trade Spend Visibility
00:01:12
Speaker
Let's go. All right, let's start with the basics. What is trade spend visibility and why does it matter so much? For most brands, this term can feel abstract, but it's the foundation of everything else.
00:01:23
Speaker
Top line sales, profit, revenue, and so much more. So let me tell a quick story just to kind of paint a picture of what we're talking about when we say trade spend visibility.
Case Study: Overspending on Trade Spend
00:01:36
Speaker
So there was a company, they were consistently creating a trade spend plan to land at about 20% of their gross revenue. That was in line with kind of the industry average, and that was the budget that they were given for the year.
00:01:50
Speaker
So they did a bottom-up plan to plan their promotions and all their different spend tactics like advertising and demos in order to reach this 20% and of course, utilize tactics that would drive sales for the business.
00:02:07
Speaker
Each quarter, each half and each fiscal, year in and year out, they were consistently coming in at about 30% trade spend. That's 10% over what they were allowed and budgeted for.
00:02:21
Speaker
And it equated to about a million dollars in overspend for the company. As you can imagine, the situation was becoming a dire situation. They couldn't continue to sustain this overspend.
00:02:34
Speaker
And so they were kind of left with okay, how do we figure out why we continue to be overspent in the business? And so what they were able to do, and maybe just to give you a little more context, they were creating promotional plans with their largest accounts. And actually the way they were thinking about it was really good. It was quite sophisticated. They were utilizing a scale with A and B and C accounts, prioritizing those retailers and distributor partners,
00:03:05
Speaker
that had the best unit velocities, and that would partner with them on different merchandising tactics that could really move the needle and drive sales for the business.
00:03:16
Speaker
you You know, again, this plan was well thought out. They had good buy-in across their team, but again, they continued to be overspent each quarter and each year.
00:03:26
Speaker
And so in this particular situation, they were halfway through the year and they lacked the information and the insight around where their spend overspend was happening.
00:03:38
Speaker
They did have at the highest level with you know distributor A or distributor B, I'm overspent by x amount, but they couldn't drill down underneath to really understand what accounts were driving the overspend.
00:03:53
Speaker
And therefore they couldn't go either claw back, make adjustments, reallocate funds in order to kind of change the tide.
Finding Overspend Through Detailed Reports
00:04:03
Speaker
And so what they did was they rolled up their sleeves.
00:04:06
Speaker
They really dug in their heels to try to get out of these backup documents, the deductions. there were They dug in and really started to create some trade spend reports with indirect retailer spend, indirect retailer sales, and really what emerged as they went through this process was were very useful reporting that allowed them to understand what was happening in the business.
00:04:36
Speaker
So one thing was they were able to see that their top two largest accounts were overspent. And so if you think about the 80-20 rule, with those top two accounts being overspent, there was really no way they could reach the 20% ah mark that they had in the budget. They also were able to identify that they were getting hit with inordinate amount of fines and fees.
00:05:01
Speaker
So logistics fines for being late, different types of fines like that, as well as some spoils that were happening that they just didn't have their arms around. And it was not for a lack of effort.
00:05:14
Speaker
It was really, it came down to you know, we're all tight resourced. We're trying to grow the business and trying to get reporting out of these documents is extremely challenging. And so when we talk about trade spend visibility, that's really what we're talking about.
00:05:31
Speaker
Peeling back the onion, understanding where our trade is being spent and understanding some of the root cause so that we've got that highest level, but then being able to drill down and see layers underneath by category, by retailer,
00:05:47
Speaker
so on and so forth. So hopefully that paints a picture of why it's so important for us to have that visibility. Now that we know the why, let's talk about the how.
00:05:58
Speaker
How can you tell if your trade spend strategy is missing the mark? Again, I just wanna tell a quick story to kind of paint the picture. So there was a brand consistently overspent while seeing ah decline in sales.
00:06:12
Speaker
This is gonna be a common theme here. When we dove into what was happening, we found that they wanted to plan their promotions and trade spend better, but they didn't have the reporting they needed to diagnose where they were overspent.
00:06:26
Speaker
In a fast-paced business with tons of priorities, including category reviews, forecasting, managing the broker, so on and so forth, they didn't have the time to manually create reporting for the team to review the data.
00:06:42
Speaker
As a result, they copied the promotional plan from the prior year and tweaked a few things based on their gut feel. They ended up with even worse results the next year. Like i said, a decline in sales and continual overspend.
00:06:58
Speaker
So here's the big takeaway. If you're seeing any of these signs like over budget spending or a lack of retailer specific reports, it's time to dig deeper into your data because there really is rich data and insights there.
00:07:14
Speaker
You just have to be able to get to it. And so let's just talk about 10 signs. Your organization is in the dark on trade spend. One, pretty simple, you're consistently overspent.
00:07:27
Speaker
The other end of the spectrum is you're consistently underspent and in a bad way. So you're underspent, you're leaving dollars on the table that could be driving top line sales and pulling more of that product off the shelf.
00:07:42
Speaker
You're only reviewing your trade spend at the distributor level, not at the indirect retailer level. For example, Sprouts or Whole Foods cetera. Then there's kind of two accountability issues. The sales team is complaining about trade spend visibility and needing reports from the accounting team to see their trade spend. And the accounting team on the other end is complaining about not being able to clear up accruals because the sales team can't tell if the event ran and at what cost.
00:08:13
Speaker
So there's some finger pointing going on and a lot of ambiguity.
Signs of Poor Trade Spend Insight
00:08:17
Speaker
You aren't reviewing and optimizing your trade spend by working trade and non-working trade. We'll talk a little more about that in a minute. You're copying plans from the prior year because you're flying blind. You just can't get to the data you need to understand if these events were successful.
00:08:35
Speaker
You don't know your trade spend by category. You don't know your actual spend after promotional events run. And you know you're leaving money on the table, but you don't have time to analyze the root cause.
00:08:51
Speaker
So those are 10 signs that you can look at within your business. And if you're getting you know even one or two of these, you know that you're flying blind online.
00:09:01
Speaker
and you're in the dark on your trade spend, and there is a better way. So we'll talk about that. You might be thinking this all sounds great, but how do I even get started?
00:09:12
Speaker
Don't worry, we're about to break that down. Another quick story, this is a ah success story that I wanted to share because I recently saw this with one of the brands we're working with.
00:09:23
Speaker
They brought in a new senior sales leader who was focused on trying to get a better understanding of their trade spend and understand where their non-working trade was going, how they could free that up and redeploy it to working trade to drive top line sales.
00:09:42
Speaker
In this case, they leverage TrueUp to get their trade spend data by retailer down to the category and item. You can do this manually. It is possible. It's hard. It's time consuming. But if you want to just get started, actually have a trade spend maximizer framework that will link into this podcast.
00:10:03
Speaker
And you can go kind of review that and see how you can create this reporting for yourself and your team in order to get this information in a way that you can really take action. All right, so back to
Leveraging TrueUp for Better Spend Management
00:10:18
Speaker
the story. So they were able to you know get this trade spend data by retailer down to the category and item. So for example, retailer A, what is my promotional spend? What's my advertising spend, slotting and placement, but then also spoils, fair share, other things along those lines.
00:10:39
Speaker
to understand working and non-working trade. They did this at the distributor level as well to understand you know where there might be opportunities there.
00:10:49
Speaker
And as an outcome, they were able to do an in-depth analysis to identify where they were underspending And they found out that their two largest accounts were actually underspent.
00:11:03
Speaker
So back to the 80-20 rule, they found that these top two accounts that they work with, they were underspent. And they're smaller accounts that, you you know, while they're important in the business, they were overspent. So they were spending more than their fair share with those accounts.
00:11:23
Speaker
and therefore spending less with the large accounts that could really move the needle. And so this created a clear action plan for them to really be able to understand through their sales data and their deduction data, you know identify that opportunity and figure out how do we surgically go at this and really do it in a way that's thoughtful and can bring down our spend with those smaller accounts.
00:11:49
Speaker
Not that we're going to not focus on that business, but bring it in line to their fair share and then redeploy it with those large accounts that are going to lean in on promotions and merchandising tactics to drive growth.
00:12:03
Speaker
And it was an incredible thing to to see how they were able to transform their business and really transform the way they approach the market as they were able to get this data. And as a result, they were able to drive top line sales growth of 25% year over year while delivering their trade spend on budget.
00:12:25
Speaker
It was really cool to see. And i think this should hopefully paint a picture of just why this is so important. So kind of what is the key takeaway here? You don't have to have a complete system overhaul.
00:12:38
Speaker
ah You can start with what you have. The deductions and shipment data are gold mines waiting to be tapped into. It does take time if you're going to do it manually, but if you set aside time and you can drill into it, it's really worth the effort at the end of the day to get results like I just explained.
00:12:59
Speaker
All right, let's talk numbers. How much could these blind spots really be costing you?
Addressing Overspending with Strategic Cuts
00:13:04
Speaker
We recently onboarded a brand that's about 100 million in revenue. They have a spend rate currently at 35%, which is over their trade spend budget.
00:13:16
Speaker
And the math there is $10 million dollars overspent, which of course was a recipe for disaster. Now, just take a quick minute to calculate your trade spend if you're in a position to have these data points.
00:13:30
Speaker
What's your gross revenue? And what's your trade deduction dollar amount? Take the trade spend amount, divide it by your gross revenue.
00:13:41
Speaker
And with that, you'll get your trade spend rate, your percentage of gross revenue that you're spending on trade. Now, can you tell me how much of that trade is working trade versus non-working trade? And what do I mean by that?
00:13:58
Speaker
Working trade is, you know, promotions, events, spend that is helping to drive product off the shelf. right It's directly correlated with a purchase.
00:14:11
Speaker
Non-working trade is going to be fees, fines, ah spoils, other things along those lines that are not driving sales for your business. So can you tell me how much is working trade versus non-working trade?
00:14:26
Speaker
Okay, those are some of the numbers we want to be thinking about. So let's let's go back to the brand I just mentioned as an example. Again, they were spending at 35% on a $100 million dollar business.
00:14:39
Speaker
Their budget was 25%. And their senior leadership came and said, we need major cuts. This is... This is not sustainable you know as a business.
00:14:50
Speaker
If we don't cut our trade spend, we're going to have to take other more invasive steps. And of course, nobody likes to hear that. And so really what they were faced with is, do we take a hatchet and just slash promotional events, advertising, demos?
00:15:08
Speaker
Doesn't matter if it's essential or non-essential trade. Everything was on the table. or do we get more surgical? Right around this time, they had just joined TrueUp and you you know this all was kind of going down around them and it felt like chaos.
00:15:24
Speaker
And we were able to help them dissect their trade by working and non-working trades.
Differentiating Working and Non-Working Trade
00:15:30
Speaker
It turned out that half of their deductions were coming from non-working trade.
00:15:35
Speaker
Again, spoils, fees, fines, shortages, all these things that were happening from like more of a logistic standpoint, And this was just crushing their trade spend.
00:15:46
Speaker
And the interesting thing was when we looked at it even deeper, the working trade was obviously in line. So they were spending on promotions that appeared to be working pretty well and they were within their budget.
00:16:00
Speaker
But until we were able to peel back the onion and shine a line a light on working versus non-working trade and really bring context and visibility to their trade spend at a more granular level, they weren't able to tell how much was going towards those non-working trade dollars that again was just crushing their profitability.
00:16:23
Speaker
And so with this visibility, they were able to see their trade by category, by skew, by retailer, and they had complete clarity. And they were able to see exactly where they had holes in their bucket, right? Where they were leaking valuable dollars. They were able to root cause, analyze these deductions and address the problem at the source.
00:16:46
Speaker
And one example was their late fees. They were getting hammered with late fees. We were able to help them kind of gain some clarity around within their process. And spoiler alert, it was just changing, like they had to go in and just change a delivery appointment three days in advance.
00:17:07
Speaker
in order to save $100,000 a year in a cost reduction. And so they were able to kind of see what the problem was, see the root cause, and then understand what the process to work with your distributors was in order to find out how they can reduce those costs that are not driving sales. And of course, it's good for no one when we're late.
00:17:33
Speaker
And so it was just a really interesting situation to see shining the light on the working and non-working trade how quickly and easily they were able to attack it at the root cause.
00:17:47
Speaker
And rather than take a hatchet, they were able to get surgical, not pull back promotions with retailers, which of course is going to ruffle some feathers, which we don't want to do and could hurt their sales. And of course,
00:18:01
Speaker
their consumers in terms of trying to get more product into the hands of the consumer. And so I think the real lesson here was if you're not looking closely at where your trade dollars are going, you're just wasting money. You're leaving potential growth on the table.
00:18:20
Speaker
And that's what we wanna help you kind of think about how do we get better in this area so that we have the visibility to drive sales. Okay, so we've talked a lot about seeing your trade spend by working trade and non-working trade. And we've talked about a lot of examples of the non-working trade, but let's dive in a little deeper on working trade, those events and promotions that are going to drive product through the register into the basket and delight our customers, right our consumers.
00:18:53
Speaker
So one thing to think about here is we talked about the sales data, the deduction data, and how if we can get that into an organized fashion, we can see the granularity of each event and being able to see that granularity and do a post promotion analysis, we're able to identify what events drove profit and drove success for that event.
00:19:19
Speaker
So at the highest level, the most simple piece of this is just having visibility, you know, that trade spend visibility by retailer underneath our
Analyzing Trade Spend by Retailer and Category
00:19:30
Speaker
distributor. If we can have the trade rates by retailer by category, we can understand which accounts we're spending in line with the plan versus the ones we're not. Like the story I told earlier, where there were the lower accounts that were overspent and their largest accounts being underspent.
00:19:50
Speaker
In that case, you can redeploy to your growth accounts. But also you can go deeper on each event with maybe a ah given retail partner to really understand Which of these events are driving a successful, either profitable ah ROI or you know the intended outcome of the event?
00:20:12
Speaker
And so just to share a story here, ah we had a brand who was able to, who had signed up for TrueUp and they wanted to drill into one of their specific retailers of interest.
00:20:25
Speaker
And they had analyzed the last five promotional events that they had run with them. And in that analysis, they found that only one of those five events drove a profitable ah ROI.
00:20:38
Speaker
And I understand not every event is gonna be profitable. Some events are gonna make an investment for a specific reason, to drive trial, something along those lines. But at the end of the day, we do run a business where making money is important to being able to continue to to deliver this great product to the consumers.
00:20:57
Speaker
And so with this, they were able to really drill into the data to understand you know By having the the deductions digitized, how many units did I sell? What was the scan per unit?
00:21:11
Speaker
Based on my COGS, what was my profitability? Were there any additional costs associated with the event, like a retailer fee or a distributor fee? Some of that can go unseen if you're just looking at register scan data. And so they were able to see across these five events, all the details in one place to understand their profitability.
00:21:34
Speaker
And here's the real win. They found that they could spend $1 less per unit on their promotion. So if they were spending three, they spent $2 on the promotion and They still got the same lift, so the same unit sold, and therefore they were able to drive more revenue and spend less on this event, which was a recipe for success and created a great ah ah ROI on that event. They were profitable.
00:22:02
Speaker
And so with that, of course, now they're able to say, okay, if I do five events next year, Maybe all five of those should be the same type of event. And so given the fact that they had this detail, they were able to do that analysis.
00:22:18
Speaker
They were able to really take an action for their next fiscal year to drive more profitable events for the business. You know, I think the key takeaway here is just to think about visibility as your opportunity to really see deep into the business, you know, what spend is driving what kind of outcome.
00:22:43
Speaker
And it can power smarter promotions, smarter decisions, and help you drive more results for your business. All right, well, I hope that was helpful.
Key Takeaways and Call to Action
00:22:53
Speaker
I think you know five key takeaways from this episode for you to be thinking about is trade spend visibility is critical to your brand success.
00:23:03
Speaker
Knowing the 10 signs your organization is in the dark on trade spend can help you understand if you need to really lean into this area of the business.
00:23:14
Speaker
Only seeing the distributor trade spend rate and not the retailer level underneath is it really equivalent to flying blind? Visibility to your working versus non-working trade is the unlock to reducing unnecessary costs that are not going to drive sales.
00:23:31
Speaker
And having deep, rich insights into your retailer and item level data will drive an increase in revenue and profit for your business. In this day and age, you are at a disadvantage if you're not getting to this level of trade spend visibility.
00:23:47
Speaker
It's giving your competitors an edge. You should be focused on this level of data like you are with your online advertising, as an example, such as ROAS and other key metrics where we're all really...
00:24:01
Speaker
analyzing the business and understanding the ah ROI of our programs. The same should be true for your retail and distributor business. So let me say it one more time. We're in a digital age, and if you're not leveraging deep trade spend insights and visibility,
00:24:17
Speaker
then you're at a disadvantage. Thanks for tuning in to the CPG Trade Spin podcast. If this episode resonates with you, don't just stop here. Take action. Reach out to your team to evaluate your trade spin strategies.
00:24:31
Speaker
Shoot me a question on LinkedIn if I can help at all. Think about those top 10 spots where you can really understand if your company is flying blind.
00:24:42
Speaker
And if you want to see how this works in real time, check out our free trade spend health check at trope.com. Till next time, keep spending smarter. Thanks.
00:24:57
Speaker
Thanks for tuning in to the CPG Trade Spin podcast. If you found today's episode helpful, be sure to subscribe so you never miss a conversation. And let's keep the conversation going. Follow us on Instagram, Facebook, TikTok, and LinkedIn at CPG Trade Spin podcast for more insights, updates, and behind the scenes content.
00:25:19
Speaker
See you next time.