There’s no guarantee that we get what we pay for. Especially if we have not been clear upfront about what we are paying for. Order cycles seem to get shorter every year; with just in time deliveries and pressure to achieve our annual volume targets. So we move onto planning the next promotion or activity as soon as the one before has been agreed.
Insights about what is working and why are invaluable – and so the discipline of monitoring customer compliance is an important way to spend wisely. If we don’t know what works, on what basis are we making investment decisions?
Often our promotional evaluation software (internal or external) is too complicated to use, we don’t have tools to help or we don’t ask for the right information we need: from customers or third party field service agencies. It is usually in retrospect that we receive the information and because it is in the past we can no longer take any action based on it, so we don’t digest it too deeply.
We can optimise our trade spend if we have robust customer promotion monitoring and compliance systems and activities in place and reduce spend for non compliance.
Once we have a performance based agreement with our customer we should have a clear upfront commitment on the promotional elements; for example, the number of points of purchase the promotion will run in. We are then in a position to reduce trade spend on a pro-rata basis if the promotion is not executed as per our agreement. In this way we pay for performance and reduce non-productive customer trade spend.
To ensure we get the promotional activities we have agreed with our Customer to pay for, we need to consider the following:
- What processes are in place to monitor our customer’s compliance to what has been agreed?
- How many more sales could we have achieved for the same trade spend that we will be saving as a result of not paying for non compliance?
- What will we do if there is repeated customer non compliance?
- What is the process to address this with our customer?
- Are our customer managers withholding payments for non-compliance?
- Where our customer managers choose to withhold payments for non-compliance, is this being done correctly according to the agreements in place with our customer?
By monitoring customer promotional compliance we can effectively reduce wasted spend and improve our trade spend return on investment.
Are we measuring it so we can manage it?
We hope you have found our ‘Top 10 Tips to Reduce Trade Spend’ series useful. We’ll recap all 10 next! If you have any questions or comments please get in touch.