TRADE PROMOTION
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The Truth behind Trade Promotion Management Deductions
There are lots of myths swirling around the Trade Promotion Management (TPM) space. One in particular
is about deductions, also called charge-backs. For many CG companies, deductions are either an ongoing
headache with no resolution in sight or an overwhelming pain point they chose to ignore. Many believe
deductions are simply the cost of doing business with retailers and are not a controllable expense. The process
of contesting improper deductions below a certain threshold is not a good use of company time or resources
and will not generate significant savings for the organization. This is false!
Here are the facts: Nearly 40% of deduction requests are invalided or preventable in some way. By successfully identifying and contesting improper deduction requests, and fixing broken processes that lead to deductions, organizations will generate significant savings that can be added directly to the bottom line.
In order to manage and optimize deductions, you have to face them head-on. A company must be able to quickly identify the following:
- “Agreed upon” deductions
- Unexpected, but valid deductions
- Invalid deduction requests.
Best-in-class companies look to optimize all three.
Also, savings don’t just come from identifying improper claims. Many deductions occur because of preventable circumstances that can and should be addressed, including late delivery, incorrect carton markings or no UPC.
The deduction management process must be a responsibility taken on by everyone. Yes, everyone. Sales, Brokers, Trade Marketing, Finance teams and Senior Management all have an impact on the process. Forming a cross-department team to develop best practices and identify policies in strongly recommended.
Implementing the right tool to effectively manage deductions is the final area of focus. The affordability of today’s Trade Promotion Management (TPM) software solutions allows most companies to see a positive return on investment within the first year. In fact, savings generated from improving the deduction management process often covers the cost of the TPM solution.
The bottom line: Manufacturers that don’t have a strong deduction-management process are regularly leaving money on the table. Improving deduction management effectiveness is not easy, but it is achievable and financially beneficial for most. By establishing a culture, implementing processes and adopting best-in-class technology, deduction management can actually strengthen an organization.
This article was provided by AFS Technologies. For more information: http://www.afsi.com/blog/trade-promotion-management/the-truth-behind-trade-promotion-management-deductions/#sthash.1xr8tEgA.dpuf
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SECTION THREE
