What is Trade Promotion Optimization (TPO)?
Trade Promotion Optimization (TPO) involves constantly enhancing trade promotion strategies by optimizing them based on your business objectives.
To adapt to changing consumer preferences and competitions growing more intense, many brands are turning to trade promotion optimization (TPO) as a solution to refine their strategies and achieve better outcomes especially when promotional spending accounting for a significant portion of a brand’s budget—often upwards of 20%. Hence the ability to maximize returns on these investments has never been more essential.
Subsequently, Trade Promotion Optimization (TPO) is becoming increasingly valuable as brands strive to enhance their market presence and drive sales. It has emerged as a powerful tool that leverages data analytics to inform promotional strategies.
Trade Promotion Optimization (TPO) involves constantly enhancing trade promotion strategies by optimizing them based on your business objectives and existing supply and promotion constraints.
| KPI | Description | How to calculate |
|---|---|---|
| Lift | Measures the effectiveness of promotions by quantifying the incremental sales generated compared to baseline sales. | (Incremental Sales/Baseline Sales) ×100 |
| Incremental Sales Life | It’s the percentage increase in sales during the promotional period compared to a baseline period. | (Sales During Promotion−Baseline Sales / Baseline sales) ×100 |
| Promotion Profit | Total profit generated from the promotion after accounting for promotional costs. | Promotion Profit=Incremental Sales−Trade Spend |
| Trade rate percentage | The total budget allocated for trade promotions, which helps assess cost-effectiveness. | (Total Sales/Promotional Sales) ×100 |
| Promotion profit | Total profit derived from a promotion, including both incremental sales and costs. | Promotion Profit=Incremental Sales−Trade Spend |
| Market Share Change | The change in market share during and after promotional activities. | (New Market Share−Old Market Share/ Old Market Share) ×100 |