Wait a Second ...... For those who are maybe still completing their education TM&D, Primary & Secondary Targets & End Market Execution might sound familiar to what their textbooks contained but what do these things actually mean for an upcoming professional like yourself or maybe someone whose gotten into this field and still feels its rather difficult understanding the hardcore matters of TM&D.
For such people I have decided to start this blog so that I can share my 2 cents with them and maybe it could be of benefit to so many young professionals out there.
TM&D is somewhat similar to Sales but it has the added responsibility of ensuring end market execution (Trade Marketing Part). For a TM&D Professional it is of utmost importance to understand things from the base up and than steadily build their foundation.
I am Dividing the Basics into the Following:
- Primary Targets ( Invoicing)
- Secondary Targets ( Retailing)
- Off-take ( Measured through Retail Audits)
- Distribution Management ( Managing Time, Finance, Staff, Good Warehouse Practices, Stock Management)
- Market End Execution ( Availability + Visibility )
Primary Targets
Primary Targets is invoicing of Company Distributor from Company Warehouse. In some Fast Moving Consumer Good Companies (FMCG) Invoicing is done on Cash Basis only while in others Credit Basis is also extended. In addition the credit extended by the Company to the Company Distributor has various rules attached to it. ( We will discuss this and other in-depth topics related to FMCG sales in follow-up posts on this blog)
Primary Targets are mostly TOP-DOWN Targets i.e. The Regional Manager splits the Target for his respective region as per Base Volume/Value sold Same Period Last Year . Mostly the base volume is multiplied by the factor by which nationwide the company growth target for example if Company Plan is to gain Volume Growth by 12% than Regional Manager would want a 12% growth ideally every month so that Yearly Growth Averages out.
In the real world though this is not the case and month by month an equal percentage of growth is neither normally possible nor feasible. You must be thinking there must be reasons for this not being possible? Yes the reason is in Sales Terminology called "Seasonality".
In the Pakistani Market this Seasonality factor is different depending upon the Company and the Industry Involved. In the Tobacco Industry Major Seasonality months are Pre-Budget ( Growth Season) , Post-Budget ( Targets are hardly ever met during these months) , Ramdhan (Further slowing of sales) and Eid Holidays etc.
While if you move towards the Food and Beverages Industry major Seasonality appears in Ramdhan for the most part. Also for Beverages Players Winters is a tough season where sales see a drastic decline regardless of brand strength or discounts offered to retail/wholesale.
Ok so now know the main reason for Distributors facing difficulty to meet targets in certain months. Any other major reason for Invoicing Targets not being met by Distributors? Yes there is one other major reason as well!
Return on Investment (ROI)!!!!!!!!!!!!!!
When any such distribution is setup the Company demands that the business party show a healthy and size-able Capital Investment which can sustain the Companies Business as well as the Distributors Business in the long run. So Depending upon the Area demarcated to the Distributor he has to come up with certain amount which can not only sustain initial stock investment as per Base Volume Estimate by Company of the Distributors Area but also manage day to day invoicing as per stock norms of the Company. ( Future Follow-up Topic: Stock Norms ) as well as daily operational costs i.e. Distribution Set-up Rent, Utility Bills, Expansion Costs if required, Vehicle Fuel Costs borne on account of Vehicles completing daily Beats, Investment in Vehicles i.e. Vans, Motorcycles, Qingchi, Staff Salary etc,
But even if the Prospective Distribution has the required capital investment and Operational Costs Covered from where will the business become sustainable for him ? What are the requirements and How does the Distributor Achieve them ?
The success factor for the Distributor while deciding whether to take up the setup or not in largely dominated by :
- Channel Strategy
- Category Strategy
Channels are largely divided into two main sub-categories: Retail & Wholesale. Retail Channel is normally further sub-classified into many other different sections namely : Key Accounts, Large Groceries, General Retail, Petromarts , Kiryana Shops, General Stores, Tobacco Kiosks etc.
In Case of Wholesale Channel they are mostly classified further into Urban Wholesale & Rural Wholesale. In some cases companies have approved certain Wholesalers for the Distributor to sell at preferred conditions because of the longevity of the relationship and trust built.
So here's the part which is most dicey for a prospective distributor to make.. What Ratio of Retail/Wholesale will make my Distribution Setup and Investment worthwhile? Remember the Distributor is also a Businessman in the end and his major reason for taking up a Company's Distribution is focused on financial return.
The Preferred Retail/Wholesale Ratio in most distributions for FMCG's is 70:30 in favor of Retail.
Next obvious question would be why 70:30 ? Why say.... not 50:50?? The answer to many will be clear but just for further clarity whenever the Distributor offers large volumes of stock to the Wholesalers they in most cases have to offer certain discounts (cuts) on the Trade Price recommended to them by Company as Selling Price. Next follow up might be why is this so? Answer is simple once again whenever you go to the market for example fruit shop whenever you request for a bigger purchase from the Shop Keeper does he not normally extend a discount? A common phrase we get to hear the Itwar Bazaar in Pakistan would be to our mothers/sisters or wives would be " Baji wesey to PKR 1400 buntay hai magur ap ko kum bhao lagata ho... PKR 1250 mein ley ley yeh fruit"
Next obvious question would be why 70:30 ? Why say.... not 50:50?? The answer to many will be clear but just for further clarity whenever the Distributor offers large volumes of stock to the Wholesalers they in most cases have to offer certain discounts (cuts) on the Trade Price recommended to them by Company as Selling Price. Next follow up might be why is this so? Answer is simple once again whenever you go to the market for example fruit shop whenever you request for a bigger purchase from the Shop Keeper does he not normally extend a discount? A common phrase we get to hear the Itwar Bazaar in Pakistan would be to our mothers/sisters or wives would be " Baji wesey to PKR 1400 buntay hai magur ap ko kum bhao lagata ho... PKR 1250 mein ley ley yeh fruit"
This is a necessary evil in Sales unfortunately. Retail Sales brings in the Returns in form of $$$ while Wholesale Players much needed boost in volume Growth/ Target Achievement for the distributor because of bigger financial muscle of the Wholesalers compared to Retailers.
Category division is different in case of different companies. Some identify categories by the Product that they sell e.g. Juices, Noodles etc While in other companies this categorization is based upon other factors i.e. Premium, Aspirational Premium, Value for Money etc.
There is no fixed role that a Premium Product will definitely have more percentage margin or vice versa. But normally for prospective distributors its not a choice as far as Basic Primary targets are concerned but in certain situations one particular category has more return compared to the other. So in such situations the Distributor tries to manage through his Managers to gain on the profitable category by completing his monthly target well in time so that he can capitalize and complete further invoicing of the profitable venture ensuring side by side completion of invoicing of less profitable ventures to keep company representatives satisfied as well.
So in short you gain in terms of Value of Sales in Retail while you Gain in terms of Quick Volume Sale in Wholesale. Remember both Retailers and Wholesalers are your customers and both are important!!!
Therefore when you manage good Retail/Wholesale Ratio you are bound to have a profitable venture in your hands. With the profits coming in Primary Targets (INVOICING) becomes that much easier and the Sales Managers will even be surprised to notice that the Orders will keep flying in when the Channels of Sale is profitable for the Distributor. Even so this much that Distributors on occasions when Credit Facility is available will still prefer to Invoice stock from Company on Full Cash Payment. That is what a healthy pay check and consequent positive motivation at the month end does to a distributor!
Therefore when you manage good Retail/Wholesale Ratio you are bound to have a profitable venture in your hands. With the profits coming in Primary Targets (INVOICING) becomes that much easier and the Sales Managers will even be surprised to notice that the Orders will keep flying in when the Channels of Sale is profitable for the Distributor. Even so this much that Distributors on occasions when Credit Facility is available will still prefer to Invoice stock from Company on Full Cash Payment. That is what a healthy pay check and consequent positive motivation at the month end does to a distributor!
Now we as people on the TM&D Curve have come to the crossing where we realize that Invoicing is definitely important but Retailing is the basis on which smooth and steady Invoicing will eventually take place.
So What is Retailing ( Secondary Sales) ? Retailing in a nut shell is shipping the stock in the distributors Warehouse to the end customer i.e. Retailer and Wholesaler so that the end CONSUMER (person who will actually utilize the product for it's intended use) can find it available at the market end and trial of the product can eventually begin. This process from Start (e.g. Farm) to End (Consumption) is given different terms in different industries e.g. Seed to Smoke in Case of Tobacco.
How do distributors Manage Monthly Retailing Targets?
( To be continued in the next feature of this Blog)
( To be continued in the next feature of this Blog)
