Beverage Alcohol Distributors — Research Shows POS Marketing May Be Your Number Two Business Expense

OnTrak’s History with POS Marketing

Over OnTrak’s 10 years of being in business we have talked to thousand of Beverage Alcohol Distributors across the country.

We now count over 100 beer, wine and spirits distributors as customers. These distibutors use out Point-of-Sale (POS) marketing software to track, measure and manage their investments in printed signs and menus, permanent displays, and beverage samples and tastings events.

POS Marketing May Be Your Number Two Expense Behind Payroll

In the nearly 8 years that we have been publishing this blog, we have often stated that POS marketing is a beverage alcohol distributor’s #2 business expense behind payroll.

This statement has been validated by our customers, who use our software and benefit from our integrated reporting and analytics tools that confirm this #2 position. Without such software anyone would have difficulty accurately quantifying these numbers.

Even without our software, you may have already determined that your transportation expenses, including fuel, nudge out POS marketing for the number two spot. Most of our customer found that to be true back when fuel costs hit historic highs.

Then again, you may have determined that recent declines in fuel costs coupled with vehicle’s improved fuel-efficiency are once again showing POS expenses have now risen above transportation.

In either case, your investment in POS marketing is a significant expense item, and as such, should merit at least as much attention as “transportation” expenses.

Differing Opinions About POS Marketing Expenses

Our experience is that some beverage alcohol distributors dismiss the notion of the need to track, measure, and manage their POS spending. Sometimes we’ll hear: “. . .after all, it’s just paper and ink; how could paper and ink be my number two expense?”

Let’s drill-down into what such a quote suggests. What may seem to be “just paper and ink,” may indicate an opportunity for expense item reclassification, according to a mid-western nine-million case beer distributor’s CFO:

“Beverage alcohol distributors analyze and agonize over their sales and marketing budgets. They wonder if their budgets are on par with competitors. They regularly question if they’re spending too much or too little?

Yet, even today, in an environment where suppliers are squeezing distributors, a practice often euphemistically called “sourcing cash”; and customers are demanding increased services which increase costs; some distributors are not properly accounting for or accurately measuring their POS spending.”

Several of our customers have been generous with their time to explain why POS is one of their key performance indicators (KPIs), even while other distributors gloss over the true costs of their retail marketing programs, dismissing them as “just signs”, meaning paper and ink costs.

Drilling Down into POS Marketing Expenses

If you have a “sense” that POS marketing is more than a bloated paper and ink cost line item on your financial statements, but haven’t really drilled down into the total costs that make up your POS campaigns, you may be surprised, perhaps shocked at the following:

Marketing budgets, for businesses overall, comprise over 11% of total company budgets.

Beverage alcohol distributors, based in no small measure of how they categorize their expenses, may spend over 24% of their total budget on “marketing”. 

Of course, based on how you allocate the reporting of your expenses you are likely to find your marketing budget is significantly lower, or at least somewhat lower, and possibly higher.

Let that sink in a moment.

If, as a beverage alcohol distributor, you are spending somewhere between 11% to 24% of your total budget on “marketing expenses”, POS marketing represents the lion’s share of that number.

If you’re a distributor that doesn’t consider POS initiatives worth tracking, measuring, and managing, it is likely you need to reclassify the expense items that you allocate to your POS marketing programs and promotions.

What’s In Your Marketing Budget?

OnTrak’s customers who use our software to help them report on and manage their POS marketing programs, instead of simply using our products for automating the ordering and production of POS materials, tell us this:

Their allocations within the marketing budget include expenses for marketing employees as well as part of their sales staff’s compensation.

On the other hand, if your marketing employees’ expenses are categorized as general and administrative expenses, sales, or placed into other areas, you will have a distorted picture of the importance of what some distributors lump into the category: Sign Shop.

As many of our customers tell us:

“Beverage alcohol distributors who want an accurate and complete picture of their POS expenses will include all direct expenses for marketing, not just paper, ink, and supplies.”

If you’re still having trouble getting your arms around our customer’s claim that “POS is our number two expense, right behind payroll,” it may be because your CFO or controller may be characterizing marketing expenses too broadly and incorrectly integrating them into your operations or sales budgets.

Sometimes the devil really is in the details.

Do You Consider POS Marketing a Revenue Driver?

It is also worth considering that POS marketing is a leading driver of revenue growth and is critical in maintaining a competitive advantage for the majority of beverage alcohol distributors. This is true even if the distributor has not accounted and budgeted for it.

This suggests that although the statistics do vary from distributor to distributor, those that fully understand and allocate their POS marketing expenses at a higher rate vs. those who do not use our POS tracking software, may be missing a bigger opportunity.

If you’re a distributor who allocates lower POS budgets you may not be able to accurately correlate POS costs with sales and corroborate POS as a driver of and responsible for revenue growth.

Contrast the group of distributors who accurately account for their POS marketing expenses with the group of distributors who often consider POS a “black hole”.

Each group will construct and deploy dramatically different growth strategies. Those in the former group are positioned to increase their investment in POS marketing because the have coorelated that investment with an associated increase in sales.

Finally, it should be noted that without a POS tracking system it will be difficult and time-consuming to analyze the impact of your POS initiatives. Likewise, it will be equally difficult to determine both your true costs and the return on your investment in POS.

In addition it may be worthwhile to consider the reclassification and management of your POS marketing and sales. This could be both a strategic as well as a tactical decision that will directly impact your growth for years to come.

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For more information on how OnTrak’s POS Tracking Software helps distributors track, measure and manage their POS Marketing campaigns click on either of the following two links for find out what we know about:

Beer Distributors

Wine & Spirits Distributors

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To request a live, 30-minute demonstration of our POS Tracking Software, please call our product experts on 513-936-4041, or click the button and select the one or more products from the following list:

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SignTrak - Custom Printed Signs

MenuTrak - Custom Beverage Menus and Signs

PermaTrak - Permanent Signs and Displays

SampleTrak - Beverage Samples and Tastings

*Integrated reporting and analysis tools are included in each of our POS Marketing software solutions

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