Trade Revenue Management (TRM) and Trade Promotion Management (TPM) are similar terms in that they are both solutions for increasing the overall profitability of a business.
However, as their core functionalities are completely different, they need to be looked at as separate, standalone systems with different target audiences and purposes.
In this article, we consider how TRM and TPM each play a different and separate role in improving efficiency and driving sales growth.
When we talk about Trade Revenue Management (TRM), we are usually talking about TRM software. TRM software is used to managing activities across the supply chain related to trade revenue, i.e. the money earned from the sale of goods and services to customers and vendors is managed by TRM software to maximise profitability and business growth.
Specific trade revenue activities handled by TRM software include (and are not limited to) Price Management, Promotion Pricing, Rebate Management (Vendor Rebates and Customer Rebates), and Claims and Deductions.
Where TRM manages trade revenue across supply chains, Trade Promotion Management is used to manage the lifecycle of trade promotions. TPM software is typically used by those selling through grocery channels, otherwise known as Fast Moving Consumer Goods (FMCG)/Consumer Packaged Goods (CPG) suppliers.
FMCG companies spend more on promotions than any other line on the P&L so TPM is a huge focus for them to help counteract competitor activity. Typical TPM software functionality includes tools for promotions planning, as well as forecasting and tracking to determine which promotions are producing the most ROI.
TRM and TPM systems use different approaches to manage trade revenue. The key difference between a TRM and traditional TPM solution is that TRM manages all of the revenue throughout the supply chain, not just grocery focused promotions.
TPM providers do not manage anything paid to or received from vendors while TRM manages all vendor pricing including promotions and incentives based on both purchases and sales such as chargebacks. TPM does not manage sales or purchase based rebates of any kind nor pricing and cannot handle the complicated pricing algorithms that TRM is capable of.
Promotions based on scan data - These are best described when manufacturers want to execute promotions that are for the end consumer not the distributor/retailer, and they base all discounts off what is sold to consumers and goods that are scanned at the register)
Promotional lump sums - These are flat fixed payments for specific store activity on top of a scan based discount to the consumer, for example a new product listing, or payment for a special display or flyer advertisement
Everyday low prices (EDLP) - Some retailers want to sell via an EDLP and in these instances, the discount offered is actually part of the manufacturer’s price
Specialty stores/distributors - A small part of the channel still asks for and receives spend calculated against sales order values, either as a discount or accrual, and a TPM solution can capture the promotional parameters and pass these on as reports for discounts
The above is all specialised functionality that is only appropriate for FMCG sales through grocery type retailers.