‘Working Trade’ vs ‘Non-Working Trade’

Non-Working Trade

Essentially, by non-working trade, we refer to dollars that do not get to the consumer, do not drive targeted distribution, and do not drive repeat purchase.

Examples of Non-Working Trade

    • OI’s & the Resultant Forward Buying
    • Non-Targeted Slotting/Free Goods
    • Administrative Fees
    • Short Coded Buy Downs
    • Unauthorized Deductions That Need to be Repaid

Working Trade

Working Trade is targeted spending with retailers to drive growth, your brand franchise/equity, and represent dollars reflected at the consumer level.

How Can You Measure This?

While short-term results may be difficult to measure, retailer level case growth is a barometer. Longer-term consumption growth, reduced spending per case, and reduced slotting are key metrics. Also, spending can be evaluated and measured by ROI, ‘cost per incremental case’, and customer profitability longer term.

So When Do You Begin to Evaluate This?

It is important to note that these are not ‘big company’ approaches – companies under $10M address some or all of these areas.

On-Demand Webinar - Working Trade vs Non-Working TradeNatural-Specialty Trade Spending Webinar (On-Demand)

Would you like to learn more about ‘Working Trade’ vs. ‘Non-Working Trade’? We have developed an educational webinar for CPG manufacturers in the natural-specialty segment, and invite you to join us at your convenience for this on-demand webinar. 

History of Trade Spending

In a 1971 effort to halt inflation, the Nixon administration froze wages and prices for 90 days. He froze them again in 1973. Manufacturers raised prices before the freezes—then didn’t lower them. Instead of reducing prices, they began giving discounts to retailers that could be passed on to consumers for limited times.

In the mid-80s, retailers began taking control. They launched programs aimed at boosting volume—and the dollars stores would earn as products passed through their shelves. This was the birth of today’s trade promotion programs and the fees retailers collect for them. Trade promotion costs have risen steadily since the late 2000s.

Today, trade spend is still a crucial aspect of doing business, but it helps brands manage their business rather than hurt them. The purpose of trade spending today is to encourage promotion via discount, secure additional distribution, or shelf space, or to drive additional volume. It can be in the form of a percent discount from list price, an amount per unit, or a fixed or lump-sum payment for merchandising provided by the retailer.

What is a TPM Software?

A TPM software solution enables businesses to better plan and operate in all aspects of trade. Adesso’s Flamingo TPM system helps you manage and control spending, as well as plan and forecast. Our system gives you visibility into your spending, accountability and control, offline scenario planning, and real-time reporting and analysis. Our Cloud-based model helps you relax and take charge of your trade spending. Adesso’s Flamingo Trade Promotion Management solution combines this standard system, which is built upon the industry trade process and best practices, coupled with our unique System Effectiveness Services that together dramatically improve our clients’ trade promotion spending and effectiveness.

What is the Difference Between TPE vs TPM?

Adesso Trade Promotion Effectiveness (TPE) Goes Beyond TPMTrade Spending is a major area to address for CPG manufactures both in the Natural-Specialty and conventional retail segments. Most companies have limited visibility and are spending a lot more than they think. Few companies have a comprehensive approach to address it. There is a much better alternative than using spreadsheets for addressing the complex issues surrounding trade planning and deduction management. So, what is the difference between TPE vs TPM?

Trade Promotion Management (TPM)

TPE vs TPM.. Trade Promotion Management is the industry term for the process of managing the entire life-cycle of trade promotions within a software solution. It includes the Annual Operating Plan, Customer Planning, Customer Execution, Settlement (Reconciliation) and Analysis.

So, Then What is TPE?

Adesso goes well beyond TPM to deliver the steps required to not only manage our clients’ trade spending, but to maximize its effectiveness. Therefore, we have developed a unique approach that includes a combination of business processes, best-in-industry and easy-to-use systems, as well as effectiveness services to help clients take appropriate steps that build upon each other to achieve Trade Promotion Effectiveness (TPE) so they can relax about managing their trade.

What is Trade Spending or Trade Promotions?

 Trade Spending, or Trade Promotions, are expenditures paid directly by a manufacturer to the retailer or distributor within the Consumer Packaged Goods (CPG) industry.  However, the purpose of trade spending is to encourage promotion via discount, secure additional distribution and shelf space. Also, drive additional volume, form a percent discount from list price, an amount per unit, and it can be a fixed or lump-sum payment for merchandising provided by the retailer. In other words, trade spending or trade promotions is everything a brand spends in order to have their product put on a shelf.

Examples of Trade Promotions include:

  • Off Invoice Allowances
  • Slotting Allowances (‘Free Fills’)
  • Retailer Promotions (Scan-Downs, Ad Fees, Display Allowances, etc.)
  • Administrative Charges, Late Fees & Other Distributors Deduct
  • Manufacturer Charge-Backs (MCBs)
  • Short Coded, Pickups & Discontinued Product
  • Distributor Food Shows & Promotions
  • Performance Allowances
  • Case Purchase Allowances
  • Rebates