Targets and trade spend

The idea

Every year a company sets a sales target and a budget to help reach it. The part of that budget spent in shops and godowns — not on TV or posters — is trade spend: schemes for stockists and retailers, payments for display, and offers for shoppers. Every rupee must be proven before it is paid, so the paperwork decides whether the stockist gets his money back.

How a target reaches your godown

Targets come down the ladder of chapter 3.4:

1. The company sets the year's national target.
2. It is split by region, area and month.
3. The ASM splits his area by stockist. Your primary target for October is, say, 450 cases.
4. You and the SO split it by beat and by DSR as secondary targets — so many cases and so many outlets for each salesman.

Against each target the company sets a trade-spend budget, which the SO uses as schemes.

Kinds of trade spend

In most retailer schemes the stockist gives first and claims later: the free packets go on Ravi Stores' bill today, and the company pays him back after checking.

At the counter: reading a scheme circular

A scheme arrives as a circular — a printed sheet, a PDF on WhatsApp or a message in the company's app. Here is a typical one, invented for this book:

TRADE SCHEME CIRCULAR — TN/OCT/26/07 Product: Glucose biscuit 75 g, MRP ₹10 (case of 96) Period: 1 October to 31 October Offer to retailer: 6 packets free on every full case billed Limit: Maximum 3 cases per outlet per bill Not valid for: Wholesale outlets; modern trade Budget for your point: ₹12,000 Claim: Submit by 15 November with the scheme summary and secondary bills showing free quantity against scheme code TN/OCT/26/07. Claims after this date will not be considered.

Read it like a contract. Four lines matter most:

• Scheme code — print it on every bill that carries the free goods.
• Limits and exclusions — free goods given to a wholesaler, or a fourth case, will be cut from the claim.
• Budget — anything you give above ₹12,000 is your own money.
• Claim date — miss it and the whole amount is gone.

How the company checks the spend

The company must prove to its auditors that the money reached the trade. So it checks:

• Bills against the scheme rules (period, product, limits, outlet type).
• Secondary data against the claim: if your report shows 140 cases sold and your claim is for 180, the gap is questioned.
• Photos and signatures for display.
• Random visits by the SO or an auditor to outlets named in the claim.

Preparing a claim that passes these checks is chapter 3.13.

Common mistake

Giving the scheme by word of mouth. The DSR tells Ravi Stores "take 3 cases, I'll adjust 18 packets next week", and the bill shows no free goods. The retailer gets the benefit, but no bill proves it, so no claim can be filed. The stockist has paid for the company's scheme from his own margin.

Where you'll use this

Chapter 3.12 shows how each scheme changes margins; chapter 3.13 covers the claim; chapter 3.16 turns DSR targets into incentives. In Part 4, the software can carry the scheme code on every bill and add up the claim at month-end from the bills themselves.

Check yourself

1. What is trade spend?
2. In the circular, a DSR bills 4 cases to one kirana in one bill, with 24 free packets. How many free packets will the company accept?
3. Why does the stockist usually carry the cost of a retailer scheme for a while?

Answers

1. The part of a company's budget spent in the trade — schemes, display payments and consumer offers — rather than on advertising.
2. 18 packets: the limit is 3 cases per outlet per bill, at 6 free each.
3. Because he gives the free goods or discount on his bill first, and the company pays him back only after checking the claim.