MYPRODUCT36 The War of Promo Offers

1.Situation

As I detailed in MYPRODUCT26 anti-parasitic products mark between April and June the strongest sales peak, who miss this period have great chances to miss their annual targets. That is why in March-June are concentrated the majority part of the commercial and marketing activities for this product segment.

As Commercial Director in Veteco, the commercial policy I implemented until 2014 was similar to competitors, the main pillar being monthly promotional offers based on discounts, free products, discounts:

-2000 ron + 20% free of charge products

-10 + 1  / 100 + 20 free of charge per product or range

-10 000 ron purchases with financial discount 25%

Note: Numbers are random, used for exemplifying purposes.

As per all above mentions, in March-April-May, customers (veterinary practices and pharmacies, pet shops) were simply bombarded with anti-parasitic promotional offers from all competitors.

As each player was trying to stock as many goods as possible at clients, during this period our sales team had to face a commercial assault of competition offers, one more attractive that the other, with 30% discount, 40% discount or even 50% discount, payment terms 90-120 days or even later in the autumn.

2.Task

As commercial manager, how do you react when your sales agents come from the field and tell you that there are competitive offers in the market that far exceed the commercial conditions your company is able to provide on the market?

2.Action

Until 2013, the power of the Frontline Combo / Frontline brand played an essential role in this commercial war, investing in season-high in TV campaigns represented a key negotiation leverage for the commercial team in dealing with our customers.

The strength of the brand allowed us to avoid the direct and hard comparison at the level of commercial offers and to bring at the negotiation table the fact those TV campaigns generated demand from pet owners, essential aspect the other competitors – with the exception of Bayer – Advantix – were not capable to offer to clients.

For many years, this negotiation tool worked with very well results.

However, starting from 2013 I noticed that the relevance of Frontline Combo TV campaign in our client decision (practices, pharmacies, pet shops) started an erosion process, overlapping with the fact that the anti-parasitic market became very crowded as almost all players launched new products.

As Commercial Manager I was obliged to take these facts into account and consequently to adapt the company’s commercial policy to deal with a much wider and aggressive competition, including the commercial offers and discounts “thrown” on the market.

In this context in 2014 I switched from commercial policy based on monthly offers to annual contracts based on quarterly / yearly targets.

With each sales agent I analysed each customer’s purchasing history in terms of value, anti-parasitic units and vaccine units from previous years and we defined the acquisition targets for 2014 per customer in these three areas.

I then prepared a simple trade agreement where on one page I synthesized the history of the acquisitions and I defined the commercial offer based on targets that combined a discount on the invoice valid for all year purchases + bonus for achieving quarterly objective + bonus for achieving the annual target.

This approach was put into practice taking into account some essential aspects that were critical to the commercial program success:

-in February, when the market was asleep, the agents approached all targeted clients for this commercial program and by March they signed annual all the agreements with these customers

-clients who did not want to enter in this program accessed promotional offers with minimal conditions, incomparably below the level of the terms from the trade agreements

– objective calibration was essential, reason why the agents discussed with each client and annual / quarterly targets were agreed / assumed together

-sales agents had total freedom in front of clients to negotiate and correlate the agreements at the level of the objectives and the maximum level of the commercial conditions  to be granted to clients, reason why both agent and client were responsible for the agreement

-commercial agreements included the entire pet product portfolio, which was extremely attractive to clients and agents because it offered them the opportunity to personalize their purchases

-payment according to terms agreed in the agreement was an essential condition for maintaining the commercial terms of the agreement, delays in payment cancelling these preferential conditions

-in order to access attractive commercial conditions, customers were not persuaded to overstocking but to increase the number and frequency of orders, which also attracted the decrease of non-payment incidents

-customers’ sales figures were monitored by me at weekly intervals, so agents and clients knew at any time how they are positioned themselves against the quarterly / yearly targets and what sales / acquisitions they had to make in order to accomplish their objectives

-obviously the new commercial policy was correlated with the target-bonus system for sales team.

4.Results

I defined the new commercial policy at a size and in a way of implementation that simple “moved” the market and our business structure.

So annually the commercial team signed with customers commercial agreements with 3 digits number, the business generated directly by the team in relation to these customers representing about half of Veteco’s total pet business.

Annually customers included in this commercial program generated total sales significantly higher than the acquisitions made in previous years. For example in 2014 sales were 33% higher than in 2013.

From 2014 the commercial agreements have become the central pillar of Veteco’s commercial policy for pet products, customers being those who were asking / waiting to discuss at the beginning of the year with our sales representative the new commercial terms and annually objectives.

5.Key Leanings

Commercial policy, marketing policy, pricing policy, discount policy must always be tailored to the market and competitive environment.

These macro policies are strategic to the future development of the company and their definition as size and way of implementation must be very carefully prepared in order to generate the expected impact.

Moving to a new commercial policy is always a major inflection point in business, determining the company’s medium-term trajectory.

 

Notification: MYPRODUCT reflects my real professional experience and expertise as well as my subjectivity. I do have a profound respect for all the companies I collaborated to and for all the people I worked with. It is not my intention to approach any sensitive, confidential or offending information related to companies, projects or people. If you the reader deduct or recognise companies, projects or people in my examples, I kindly ask you to respect MYPRODUCT and my professional and ethic approach and to not share any detail, information, situation, name, company.