Important Disclaimer: All the definitions given below are collection of knowledge from sites mentioned in the sources at the end of this Page. These are not personal views of any one individual or group of individuals.
Name of any company or product used are for example purpose and not for any harm to the brand equity. Please drop a mail on connect@marketingweekly.in or ping on 8804900400 for any objection/removal of name. We have used name in good-faith.
Part 1:
Basic Terms of Revenue
1. Primary Sales: Any sales company (manufacturer: E.g HUL, Vodafone, etc) earn from business partners (Distributors, channel partners, Modern Trade channel) is called Primary sales. These channel partners are selected by companies to increase their distribution and reduce financial risk.
E.g. If a distributor (an entity which distribute the goods to dealers, wholesalers, etc.) in Ahmedabad buys 1 Lac of goods from the company directly it is called primary sales of the company. Depending on terms with the company, distributor either pay in advanced or get some credit days before making payment to the company.
2. Secondary Sales: Any distributor after getting goods from the company, sells them to dealers (Retail shops) and wholesalers (Bulk buyers which again redistribute it to smaller shops) is called Secondary Sales.
3. Tertiary Sales (Offtakes): When an end-user (customers, professionals) buy the goods from a Retailer, it is called Tertiary Sales. Companies spend their marketing budget on improving brand equity so that products will have a faster offtake. Marketing activities such as Paytm cashbacks, scratch & win, discounts, and gift schemes are employed to woo the end-users and instill consumer loyalty.
Part 2:
Margin Structure
Before moving to the next terms, let’s quickly understand the margin (pricing) structure in these 3 sales
4. Distributor Price: It is the price at which company bill a product to distributor. E.g 3 Rs. for a 5 Star Chocolate (Prices are suggestive, not actual) from company to the Distributor.
5. Retailer Price: It is the price at which distributors bill a product to retailers. E.g. 4 Rs. for a 5 Star Chocolate.
6. End-user/Customer Price: It is the price at which retailers bill a product to the customers. E.g 5 Rs. for a 5 Star. Retailers should not sell it at more than the MRP of the product, but he can sell at a lower rate to increase footfall in his shop.
Part 3:
Basic terms of Schemes (Trade and End-user schemes)
7. Primary Schemes: Companies provide the fixed margin for products to distributors (e.g. 5%) so that they can earn. Primary schemes are aimed to increase primary sales of certain products by giving an extra margin based on the quantity of purchase (1% if buying >10 Lacs) or on the timing of purchase (1% if buying before the 5th of a month).
8. Secondary Scheme: As distribution achieved a lot of modernization, most big companies control the price at which distributors sell the product to dealers using billing software and mobile apps. It is a scheme distributor give to retailers. It can be in terms of extra discount or gift. (check below 3 sub-types of the secondary schemes).
9. Quantity Scheme: It is a type of secondary scheme which is divided into various windows of discounts.
E.g.
50 Piece – 1%
200 Piece – 2%
500 Piece – 3%
10. Value Scheme: It is like a Quantity scheme but is pegged to a certain value.
E.g.
Rs. 5000 – 1%
Rs. 20000 – 2%
Rs. 100000 – 3%
11. Extra product scheme: It is a secondary where retailers get one or more extra products on buying a particular quantity.
E.g.
Buy 11 Piece – Get 1 Piece Free
Buy 9 Piece – Get 1 Piece Free
12. Tertiary Scheme (End-user scheme): With the advent of the smartphone, companies provide cashbacks, gifts, discounts, and loyalty points to users. It aims to increase counter offtake.
Part 4:
Miscellaneous
13. Beat: It is a route that the distributor follows to deliver the orders. It is made to optimize its logistic cost. Let us understand it by a simple diagram. He may allot days to provide
Delivery to each beat like Monday for Beat 1, Tuesday for Beat 2, etc.
14. ROI: Return on Investment is simply the money (in % term) distributor earns by selling your product. (More detailed article on this here)
15. Rate issues: It is one of the most annoying words you will hear when you start working as a sales manager. It is a price war between distributors to increase their market share.
Let us understand by a simple example of Cadbury Silk.
There are two distributors A and B, A serves areas 1,2,3,4 and B serves areas 5,6,7,8. Not, if both these distributors keep serving their own market, then there will be no undercutting but what if A start dumping Cadbury Silk for 4% extra discount in area 5 which is a border area for A & B, it will impact the revenue of the distributor B.
Above rate issue is external undercutting, also known as Undercutting by Infiltration.
16. Infiltration: Every distributor has given a specific area to service. When any distributor tries to sell a product outside its assigned area, it is called infiltration.
17. DPL: Dealers Per Lac is a concept which measures how many retail outlets the area has per 1 lac population. E.g. if your area has a population of 5 Lacs and your outlet number is 500 then your DPL = 500/5 = 100 DPL. Companies always strive to improve DPL for better distribution & product availability.
18. RSI: Range Selling Index is the measure of how many different products you are selling in the retail outlet. Let us take a hypothetical example, imagine you are a salesperson of Nestle and you have 3 outlets in your area. You are selling Maggi Noodle, Munch, and Kitkat in outlet 1, Maggi Noodle, Ketchup, and Nescafe in outlet 2, and only Maggie Noodle in outlet 3. Result in the Table below:
Apart from these terms, every company has its specialized jargon.
Happy Selling!
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Above article is extracted from below website sources. Appropriate language change has been done for better explanation:
