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TPM vs TRM: What’s the Difference?

Mon, Dec 10, 2018

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.

What is TRM?

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.

Outsmart your boss: This glossary of TRM terms will make you the smartest  person in the room!

What is TPM?

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.

What’s the difference?

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.

Use TPM software to manage any of the following activities:

  • Promotional planning:

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 sumsThese 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/distributorsA 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

  • Capturing and forecasting syndicated (scanned) data: Sales from stores to consumers (based on scanned sales at the register), versus shipment based sales data 
  • Volume forecasting: Forecasts based on expected consumer purchases, which are converted via formulae to planned shipments
  • Promotional analytics and prediction: Imported data from syndicated data providers can include mathematical models that can be used to assist in the forecasting of expected “lift” or promotional increases in consumer sales

The above is all specialised functionality that is only appropriate for FMCG sales through grocery type retailers.

 

Use TRM software to manage supply chain activities including the following:

  • Sales through multiple channels, countries or markets: Traditional TPM solutions only manage grocery channels and do not manage pricing. They typically only manage promotions based on lump sums or scanned data, while TRM can manage pricing across multiple channels and different prices by type of customer/channel/market/etc.
  • Managing vendor promotions: TPM solutions do not manage vendor incentives, chargebacks (ship & debits) or purchase based rebates of any kind. With TRM, vendor incentives can be based off of purchases or sales values, which require detailed record keeping of subsidies by type of customer, type of sale, calculation, etc.
  • Complex promotion pricing for non-grocery type retailers: Manufacturers/distributors typically sell to non-grocery retailers. For example, building supplies or hardware suppliers, who ask for types of promotions that a traditional TPM ‘grocery’ solution does not handle, i.e. receiving free goods, complicated mix and match discounts/promotions, rebates based on growth targets, etc.
  • Management of complicated pricing calculations: TRM can execute complicated pricing algorithms and manage pricing from end to end, with capability to manage pricing from list to dead net, after any/all rebates and incentives received or paid. A TPM solution typically just manages list prices, and only as an input for calculating margins
  • Rebate management (vendor and customer): TRM has deep functionality for managing rebates and longer-term incentives based on flat rates or percentages, or growth rates/tiers, that is not included in TPM

trade revenue management glossary

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