Industry Research analysts from Gartner and Promotion Optimization Institute have long packaged trade promotions management (TPM) up in the Consumer Packaged Goods (CPG) industry box. However, we think that industries outside of CPG manufacturing can take advantage of TPM software functionality to address very similar issues. From building and industrial distribution to beer, wine and spirits manufacturing, companies can take advantage of the solutions CPG companies have discovered to address their pricing, rebate and promotion challenges.
The relationship between CPG manufacturers and distributors has changed with the steep rise of e-Commerce systems. Some CPG manufacturers are now choosing to sell direct to customers, bypassing distributor’s altogether or reducing their reliance on them. For manufacturers outside of the CPG industry like building and construction supplies, selling directly to retail stores and construction companies, they experience the same pricing challenges as CPG. With multiple access points, from online to sale representatives and catalogues, CPG companies have been able to update their pricing in real-time to keep all their prices in sync with advanced pricing functionality.
Rebates can cost up to approximately 15-20% of revenue in some industries, and in the building material industry distributor discounts can be as much as 90% off the list price. If CPG manufacturers don’t have a system that can track and manage this activity, it can cause problems later on when they realize a discount has been give where they’re actually losing money or narrowing margins.
The same can be said for automotive distribution companies for example, who are dealing with margins of only around 6%. Without the ability to see the potential impact of a rebate, margins could be put in danger. With rebate and promotion management functionality used in CPG, manufacturers and distributors in other industries can address their needs and protect their margins.
Whether you have hundreds of rebate programs or just a handful, improving their effectiveness and making the management of them more efficient is vital. You might be running a rebate program where if a customer orders 1 of 7 products in enough quantity they get a rebate.
How do you track this? What if there are customers or products you want to exclude? And can you see how effective the rebate program is on revenue? CPG manufacturers are able to use rebate management functionality, for buy-side or sell-side, to manage this activity and identify programs that are having a negative impact on margins.
CPG manufacturers realize that their highest cost of doing business, after making the product, is the discounts and rebates they pay to distributors. For distributors, it’s ensuring they are claiming the full amount they’re owed. With distribution channels consolidating to leverage volume purchasing power, it allows distributors to negotiate even more concessions from manufacturers. Without a proper way to manage their claims and deductions, manufacturers and distributors put themselves at a disadvantage in these relationships.
For CPG manufacturers, claims and deductions management functionality allows manufacturers to reject deductions that have either already been paid or do not qualify. For distributors, they are able to make sure that they claim the full amount they’re owed with an audit trail if evidence is required. For companies in other industries, they are able to retain control over their claims and deductions in the same way.