Supplier Billback Recovery - Are You Leaving Money on the Table?

If So, We May Have a Problem

The Problem

A large beer, wine and spirits distributor, and an OnTrak Software customer, recently told us about an experience they had with one of their alcohol beverage suppliers.  Previously the distributor had claimed $1,200 per month in marketing co-op dollars for the at-retail marketing materials (signs and other POS materials) they produced to promote the supplier’s brand.

After our customer had implemented our marketing measurement and management software, they discovered that the true charge-back costs exceeded $4,000 per month. When the distributor submitted the higher co-op amount, with the required documentation, the supplier questioned the new number, and suggested that they would only pay what they had always paid - $1,200. The distributor responded by asking the supplier if they wanted them to reduce their point-of-sale marketing spend by 70% - From $4,000 to $1,200.

The Solution

Since the distributor had the facts, and the supplier knew that advertising at the point-of-sale works, a compromise was reached.  

The supplier agreed to pay the $4,000, but immediately implemented a reduction of their shipments of “free signs” to the distributor (eliminating those costs), and agreed to shift those costs to the distributor’s marketing co-op allowance instead.

The distributor agreed to continue to produce custom, local signage, to correlate POS spending to sales, case-equivalents and other factors, and to measure and manage POS materials placement and costs based on their customer's contribution to sales.

Together, the distributor and the supplier were able to solve both a financial and marketing problem by having a system that could keep track of what was being spent, where it was spent, and its sales effectiveness. This has created a win-win for both the supplier and the distributor.

Positive Unexpected Benefits

Before this software solution was put in place, sales representatives would order signs, menus and other at-retail marketing materials just because their customers wanted “more marketing”.

Ordering elaborate and expensive signage for any given customer, regardless of that customer’s contribution to total sales or margin, remains a carryover from the Old Economic Environment, when sales were good and margins were even higher.

Today, distributors must confront the realities of a New Economic Environment. Marketing at-Retail costs have become a beverage distributor’s third largest expense, after payroll and transportation.  And POS costs are one of the few remaining cost centers that are unmanaged from a return-on-investment or efficiency perspective.

Having the ability to control this “giveaway mentality” means that the distributor’s sales reps and managers can now determine which customer gets the highest impact (and more costly) materials vs. those that receive the cost effective alternatives. The sales department now knows the impact of the POS marketing investment, and the return on that investment, giving them the ability to say “no” to requests for marketing materials that cannot be justified.

— Mark Fullerton 

For more information about our products go to: www.ontraksoftware.com/products or call 800.513.9194.