For companies and distributors implementing deep distribution, expense is a very sensitive topic. If the marketplace is a battlefield, then personnel are the guns, and expenses are like the bullets in the guns. On the battlefield, you could just swing the gun by the barrel, but not only would you be fighting against well-equipped enemies, even if the opponent had only swords and spears, you can imagine how many people would die. Since you want to provoke others and wade into the muddy waters of deep distribution, without scientific and rigorous expense support, it won't work. So, do the people carrying guns and fighting actually know how many bullets they have? In other words, do today's distributors and manufacturers' city managers know how much expense they have available? If you ask them this question, nine out of ten will answer affirmatively: "Yes, of course I know. Every batch of goods from the manufacturer has a policy, with expense points. The more goods you order, the more expense you get. How could I not know? Is there any problem?" Unfortunately, that's exactly the case!
For example: The manufacturer sends the distributor a batch of products: 1,000 pieces at 10 yuan each, total value 10,000 yuan. The manufacturer informs that this batch carries a 25% expense point, with 250 pieces as free goods. So how do you sell them? Buy 4 get 1 free? Of course, that's possible! But a city manager of a company whose business is primarily deep distribution, who just follows whatever policy the manufacturer gives, won't last long. If you are asked to sell without free goods and use the expense to run a promotion, how much money can you take out of each piece? Would you do the following arithmetic?
10 yuan * 0.25 = 2.5 yuan? You can take out 2.5 yuan per piece. With 1,000 pieces arriving, this batch has 2,500 yuan in expense available.
If you accidentally did the above calculation, then I'm sorry to tell you again: you lost 500 yuan! This batch lost 500 yuan.
Where did it go? So, is there any mistake in selling with buy 4 get 1 free?
Let's recalculate with buy 4 get 1 free: 10 yuan * 4 ÷ 5 = 8 yuan. So the actual cost per piece is 8 yuan, meaning you only have 2 yuan per piece to use. Where did the 0.5 yuan go? Which calculation is correct?
Actually, to figure out which calculation is correct, you just need to clarify the quantity of free goods shipped by the manufacturer. For example, the manufacturer says there is a 25% expense point, shipping 1,000 pieces with 250 free goods. The free goods account for 25% of the goods, which is correct, but they only account for 20% of the total. So selling with buy 4 get 1 free is correct. If calculated at 10 yuan per piece, the actual cost is 8 yuan. As for why there is a difference between 25% and buy 4 get 1 free, after looking at the figure below, comrades should understand where it went.
The 25% mentioned by the manufacturer is as shown in the figure:
From the figure, it can be seen that the 25% expense mentioned by the manufacturer should actually be understood as buy 4 get 1 free. In actual marketing, buy 4 get 1 free only accounts for 20% of the total goods, a full 5% difference. The real 25% expense should be buy 3 get 1 free, as shown below:
It can be seen that the actual 25% should be that the free goods and the goods together form a whole. The free goods account for one quarter of this whole.
Therefore, as a distributor or city manager, you must master the calculation method of the manufacturer's expense points, and never take it for granted.
Businesspeople who often deal with supermarkets should clearly understand the pros and cons of the two expense calculation methods: markup and discount. The same expense points can easily make a big difference in the profit obtained. In fact, the practice is similar to the manufacturer's, but relatively speaking, the manufacturer's is more hidden. So, after understanding the expense calculation method and knowing how much expense is available, can you rest easy? NO! Does knowing how much mean you actually have that much?
Let's first list the ways manufacturers provide expenses. Besides separately reimbursed supermarket or personnel expenses, manufacturers generally give product expenses to distributors in two forms: one is with the goods, and the other is retroactive.
Speaking of retroactive, I recall a very interesting word game.
A man planted ten jin of scallions and took them to the market to sell, priced at 1 yuan per jin. At that time, a man came and said, "I'll take all your scallions, but I have different uses for the white parts and the green parts, so they need to be packaged and calculated separately. Your price is 1 yuan per jin, so let's calculate at 0.7 yuan per jin for the white parts and 0.3 yuan per jin for the green parts. Together, it's still 1 yuan per jin." The scallion seller thought it was reasonable and started weighing. The white parts weighed 8 jin, 8 jin * 0.7 yuan = 5.6 yuan; the green parts weighed 2 jin, 2 jin * 0.3 yuan = 0.6 yuan. 5.6 yuan + 0.6 yuan = 6.2 yuan. After selling, the scallion seller was puzzled: he originally wanted to sell for 10 yuan. How did he lose 3.8 yuan?
Of course, this is just a word game. In real life, if the scallion seller feels it's not worth it, he can refuse to sell. But how many distributors can guard against the manufacturer's word games at the beginning of cooperation, to avoid being in a dilemma? Watching their hard-earned profits slip away.
Because the fact is that the retroactive compensation promised by the manufacturer is very likely to be distorted by the time it reaches the distributor. For example, for 1,000 pieces of product, the factory expense is buy 10 get 1 free. With the goods, it should be 100 pieces of free goods, right? If it's retroactive, it should also be 100 pieces, right? But in actual operation, the number of free goods becomes 90.90909 pieces.
Why? The manufacturer's answer is absolutely impeccable. For these 1,000 pieces sold with buy 10 get 1 free, the actual sold goods are 909.090909 pieces, and the free goods are 90.90909 pieces. That is, you actually gave away 90.90909 pieces. So they compensate you for what you gave away, and the case is closed. They won't consider how you will sell those 90.90909 pieces of free goods. This situation generally occurs in relatively strong brand companies. I believe you cannot avoid this calculation method. The goods have been compensated, and the case is closed. What can you do? It seems a bit rogue, but as long as you rely on the manufacturer to make a living, you have to endure. Of course, the manufacturer doesn't calculate expenses this way every time, because after all, it's cooperation. The cooperation between distributors and manufacturers also emphasizes matching status, and cooperation is based on fairness. As far as I know, no manufacturer has formalized such an overbearing expense method into an agreement; it's completely voluntary.
In actual market activities, I believe many distributors are aware of the profit loss caused by such retroactive compensation. After suffering losses, they will ask the manufacturer to compensate the free goods proportionally in future shipments. But in actual daily operations, due to the manufacturer's small calculations, the distributor's hidden costs increase, and profit loss is hard to prevent.
For example: The manufacturer ships 1,000 pieces with 100 free goods, and the manufacturer notifies that the expense will be retroactive, but promises to compensate 100 pieces of free goods. So, is there no difference between this and 100 pieces with the goods? I can confidently say that most people will say there is no difference. Whether it's a month earlier or later, 100 pieces of free goods arrive, right?
First, let's talk about why retroactive compensation occurs. The manufacturer's main purpose is to use expenses to suppress the distributor's cooperative status, making the manufacturer dominant in the cooperation. Perhaps unintentionally, but they indeed cause some unnecessary losses for the distributor during the cooperation.
For example: 1,000 pieces of product actually arrive, with 100 free goods arriving at the beginning of next month.
This month, 1,000 pieces are sold with buy 10 get 1 free, so the actual sold goods are 909.090909 pieces, and the free goods are 90.90909 pieces.
At the beginning of next month, the 100 free goods are sold with buy 10 get 1 free, so the actual sold goods are 90.90909 pieces, and the free goods are 9.090909 pieces.
Add the actual sold goods of the product to the actual sold goods of the retroactive free goods: 909.0909 + 90.90909 = 1000 pieces.
OK, not a bit off!
Is that really the case? I ask, how many pieces of goods is 0.00009 or 0.0009? Or what fraction of a piece is it? In market marketing activities with the distributor as the main body, more often than not, digits after the unit are omitted and not recorded. These fractions are mostly written off as losses. These losses, which were originally profit, may be very small. The manufacturer won't care, and even the distributor themselves may not care. This all leads to the inevitable occurrence of hidden losses.
In summary, some friends will say, according to this calculation, only when the free goods arrive with the goods, and then however the free goods come, I'll sell them accordingly, that should be correct, right? It should be said that the calculation method is correct, but the market operation method has problems. In fact, this article cannot make everyone cautious and stop. The market still needs to be done, and it needs to be done with new tricks. The key is to pay attention to the details of expense usage, reduce unnecessary losses, and don't put assumed expenses into the market.
In marketing, there are no small matters. The details may indicate our success or failure tomorrow. A message to distributor friends: As businessmen, save a cent, earn a cent!
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