Sunday, October 26, 2008

Of processes and systems

I have a lot of friends in the software business, selling trade promo systems, analytics packages, or enterprise software. Many of them are saying that it's getting tough to close deals these days. The rest are lying.

Wise marketers know they need to manage their trade promotion expenditures more tightly now than ever. Those who have good management tools know that they need the ability to forecast and optimize their pricing and promotion. A few weeks ago, I presented the argument for why optimization tools matter now more than ever (it's here), but it can be summarized quickly: If it's an advantage to be able to optimize pricing, then the more important pricing becomes, the bigger the advantage. How important is pricing right now?

So it would be wonderful if you had all the tools you need to manage, analyze, and optimize your trade promotion programs. But what if, as is true for most companies, you don't?

Well, you could go ask the CFO for a supplemental million or two to be added to the 2009 budget. In a few cases, in companies that have the ability to think long-term, you might get it -- there's no doubt that such an expenditure would pay for itself many times over in 2010, and keep returning benefits in the years beyond.

But the reality is that many companies, even many who pride themselves on taking the long view, will be focussed relentlessly on the short-term for at least the next few months. Any proposal that requires spending significant money in 2009 for a return (however big) in 2010 will not get far.

But that doesn't mean there's nothing you can do. Management of a trade promotion program involves both systems and processes. Too often, we focus on the systems because they are more glitzy and exciting, but the best systems will fail if laid on top of inefficient processes. In any well-run implementation project, the processes are fixed before the software is turned on. There is even a mathematical equation for describing the too-frequent cases where this is not done:

Bad Processes + New Software = Expensive Bad Processes

Identifying the bad processes and fixing them is not glamorous (to say the least), nor is it fun. But it also is not outrageously expensive. It can even (sometimes) result in fairly significant and fairly immediate savings. It also is something that should be done in any case, and very much needs to be done before you implement that new system that you want and need, but can't afford right now.

If you lay the groundwork now, you will be ready when things start turning around to act quickly and take advantage of the recovery

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