Posted by
Tom Tipps
Through our decades of experience in managing
trade promotion transactions for
foodservice manufacturers,
Answers Systems is able to validate many of these statistics with real-world examples.
Technomic says, "On average 28% of trade claims are overstated."
For Answers Systems' clients the numbers range from a high of 50% for new clients to a low of 22% of seasoned clients. The critical statistic is that the dollar value of invalid claims totals 15% of the total dollars claimed.
Technomic says, "15% of total manufacturer sales can be related to trade spend," and "manufacturers' soft costs are about 3.2% of total sales." Answers Systems knows that our manufacturer clients spend right at 12% of total sales on trade spend. So, if the Technomic soft-cost number is accurate, that would total about 15%.
Technomic says, "Manufacturer's total annual trade-spend costs run 2-3 times the cost of the sales organization." We assume this includes broker commissions. While we are not sure about this number, most of our clients' sales costs seems to hover around 5% of total sales.
Other notable statistics from our TPM solution: about 60% of all shipments into distribution carry with them some type of price discount, which is either billed-back from operators or distributors . . . or offered off-invoice. These discounts range from 10-25% depending on the nature of the business and the price of the case.
If one wanted to take these stats and plug them into a predictive formula, it might look something like this:
Total foodservice sales $ X ____% of volume discounted X ____% trade discount = Total Trade $ Claimed X ____% Invalid Claims = $ Revenue Slippage
Example: for fictitious company NewCo, here are the figures . . . .
The other key statistic is return on investment (ROI). We run this calculation for all manufacturer clients on a monthly basis
*based on very timely and accurate information, we support the collection of invalid deductions . . . with a very high success rate!
Results? ROI for small clients runs around 200%; for large clients around 1000%.
Answers Systems' value proposition deals with very fast and accurate sales & marketing information and the ability to stop the slippage . . . raw dollars to the bottom line.
Technorati tags:
trade spend,
trade promotion management,
foodservice