What is the best framework for selecting the key Commercial Terms and allocating budget in line with our Strategy?
Commercial incentives can account for a high fraction of a manufacturer revenues and even so, they go almost unnoticed in budgets reviews. This is a clear sign that something is wrong: managers don’t want to talk about what they think they can’t fix. Why is it so and what can be done?
The objective of this chapter is to make each dollar invested working harder and this can be achieved only by defining an efficient Commercial Policy in which each Term is calibrated around specific needs and goals. The solution gravitates around capital allocation decisions, and trade-offs. It is not an easy task: what is the ideal balance between Pull and Push activities, or between discounts and rebates? Should we invest more, say, in improving the customer service or the payment terms? The next pages provide a practical set of frameworks that can help find the answer to the main questions.
The reader will first get acquainted with the main terminology and then learn to make budget decisions, structure the Pull and Push mix, allocate target levels that work, improve the Credit Policy, set the list price, improve forecasting and stock management.