Much of the technology buzz in the Consumer Products (CP) industry today revolves around the notion of Trade Promotion Optimization (TPO). Trade magazines, the press, business consultants and analyst firms continue to extol the potential virtues of optimization and predictive analytics tools, yet few take the time to clearly define what this means or more importantly what it requires to achieve success.

On the surface the promise of TPO, which is defined as the ability to predict which promotions will work and each will affect business results, can sound extremely compelling. However, the true usage of TPO, even among large enterprises, remains extremely limited. In fact, nearly 60% of CP companies are still relying primarily on Excel spreadsheets or other desktop tools to collect and harmonize data to calculate promotion effectiveness. If most aren't even using enterprise software for post-analysis, few are in a position to perform good pre-campaign predictive analysis and "what-if" scenarios. Further, market indicators have shown that the vast majority of manufacturers still have a long way to go to get there.

Trade Promotion Optimization Defined

Despite the constant buzz about TPO, there remains a general lack of consistency in the definition of the term. According to leading independent research firms, optimization typically involves some combination of predictive simulation and math-heavy what-if analysis. In essence, optimization takes the human guesswork out of the equation by using advanced algorithms to crunch large volumes of data to provide likely outcomes. The process is actually not that different from the weather models meteorologists use to predict hurricanes.

A look at the various business consulting firms will show a slightly more process-oriented approach to the problem. Rather than concentrating on the technology and math, the consulting firms generally describe TPO as an...