3 Trade Promotion Management Mistakes to Avoid at All Costs
Accurately and efficiently managing pricing, billbacks, program analysis, approvals, and planning cycles is critical to a winery or distillery’s profitability.
Most beverage companies’ systems for managing all aspects of trade promotion management are still done manually. This is not only time-consuming but prone to errors.
Given the stiff competition, supporting your sales team and distributor partners with promotional spending is more important than ever.
With this in mind, here are the three most critical mistakes to avoid!
1. Manual reports and tracking of promotional spending
There are many different aspects of trade spending, including:
- Promotions planning
- Pricing management and approvals
- Discounts
- Reconciliation of distributor billbacks
- Market analysis
- Post-promotion analysis
- Distributor incentives
- Depletion allowances
- Integration with finance and IT
To say that attempting to manage all of these processes manually is a recipe for disaster would be a colossal understatement.
The inefficiency of manual processes is only the beginning of the problem. When you factor in the potential for mistakes, you’re talking about serious “leaks” in profitability.
Another problem with relying on manual processes to manage all dimensions of promotional spending is the severe disconnect between all the stakeholders involved, such as sales, finance, IT, and your distributor partners.
Attempting to manage even ONE component manually costs you dearly. Imagine the negative consequences of managing most or all of them manually.
The good news is that it doesn’t have to be this way.
Imagine a world where everything is centralized, visible, and accessible. Now, envision a world where errors are eliminated and the time needed to manage every last detail is significantly reduced.
Imagine a world where the answers to every one of these essential questions is at your fingertips:
💰 How much did that wine-by-the-glass promotion cost me, and what was the ROI?
💰 Is every line item on every distributor billback in a pile on my desk accurate and consistent with the negotiated agreements?
💰Will this proposed price reduction on a priority SKU deliver a corresponding lift in sales (depletions)?
💰 How can I see my spending per case by discount bracket, state, distributor, and SKU?
💰 Which active programs are delivering the desired results, and which ones need immediate attention and adjustment?
The ability to have instant access to these questions and many more exists now! The end to your suffering is only a couple of mouse clicks away!
2. Relying solely on your distributors’ systems
Your company only has to plan, report, and reconcile ONE portfolio of brands. But the average distributor has tens of thousands of brands to manage billbacks for!
Even the best distributors with the most sophisticated systems cannot manage so many programs accurately despite their intent.
Every brand (large and small) must have a way to validate distributor billbacks quickly and accurately. The cost of not doing so is too great to ignore.
Let’s zero in on one aspect of trade promotion management, “depletion allowances.”
This should not be a set-it-and-forget-it process. If you treat it that way, you’re talking about thousands of dollars in lost profits and wasted spending.
At a minimum, every wine and spirits company should be able to:
- Validate that your price and promotion commitments agree with the chargebacks sent to you from your distributors.
- Confirm that the deals you have been invoiced for are “real” and 100% accurate (including the total effectiveness of each deal).
- Cover every detail of every deletion allowance agreement across all distributors and all markets for all promotional spending.
We are talking about TOTAL CONTROL of all promotional spending and the resulting ROI.
But this “control” of which we speak need not be siloed. It is paramount that your system be fully (and automatically) aligned and integrated with every distributor and every market, as well as with your internal departments such as finance, IT, sales, and marketing.
There is simply too much money at stake to leave this to your distributors to manage by themselves. What a powerful way to become a distributor’s preferred supplier partner!
3. Lack of robust post-promotion analysis on programs and incentives
Stop and think about your latest major promotion on one of your priority brands.
You may have planned a major new distribution drive that included depletion allowances, distributor sales team incentives, special retail pricing discounts, and sample allowances.
Perhaps you went “all in” by adding a crew drive or market blitz. If so, you must factor in the cost of plane tickets, hotel rooms, rental cars, and entertainment expenses.
We are talking about a serious financial commitment here!
But what happens AFTER the big push ends? Was it worth it?
✅ Did you achieve the depletion goals?
✅ Did you gain new accounts sold and points of distribution?
✅ What percentage of the new distribution remained in place one, two, or three months after the big push?
✅ Will you be hit later with “surprise” unexpected expenses such as free goods or excessive use of samples?
It is shocking how many companies tally up all of the “successes” and quickly move on to the next big promotion.
However, it is a colossal financial mistake not to take the time to analyze the results in detail.
This brings up the obvious question, “Who has time to conduct post-promotion analysis?” And the follow-up question is, “HOW do I do it?”
If you rely on manual entry involving dozens of spreadsheets being emailed back and forth, it’s no wonder that most suppliers cannot find the time to conduct post-promotion analysis.
Most beverage companies have the data. What they lack is a way to process the data meaningfully. A way to pull all of the disparate data from different sources into one fluid reporting system or dashboard.
Dream or Reality?
This article naturally raises the obvious questions:
❓ Does a system that can do all this even exist?
❓ What would a system like this cost?
❓ Would the juice be worth the squeeze?
❓ How quickly would the system pay for itself?
❓ How long would it take to implement this system?
❓ Will running this system require a new/additional headcount?
The answers to these questions and more will surprise you (in a good way).
We invite you to schedule a free, no-obligation demo today!
ABOUT TRADEPARENCY
Andavi Solutions acquired Tradeparency in March of 2022. Tradeparency is a cloud-based trade promotion management software and pricing data solution for the wine and spirits industry.
Tradeparency helps suppliers (and distributors) manage all aspects of trade spending, plan and optimize promotions, and manage pricing and depletion allowances to optimize profit margins.
Tradeparency is the only closed-loop trade promotions management system focused beyond simple price management.
ABOUT ANDAVI SOLUTIONS:
Andavi Solutions is building an integrated suite of technology solutions to provide insights and drive superior decision-making and ROI across the beverage alcohol and CPG supply chain.
Our Vision is to invest in leading software and technology companies, partner with best-in-class management talent, accelerate innovation and build an integrated technology platform providing connected insights to suppliers, distributors, and retailers.
