Tuesday 5 February 2013

Trade-spend Responsibility – a move to the Finance Department?

Having grown from a sales-department ‘slush-fund’ of  5%  of turnover to over 20% of  a typical supplier’s sales, trade-spend is now greater than cost-of-goods in many cases.

The global financial crisis having caused consumers and businesses to ‘deleverage’ by paying down debt, means there is less money available to spend, resulting in flat-line demand for the next five years, in most markets…

This situation was becoming unsustainable leading up to 2007, but the global financial crisis has changed the game fundamentally…  The sums and the stakes involved are now so high that companies have to consider applying all of the disciplines of capital investment and the law of contract to the allocation of trade funds, or risk devaluation of the share price by investors, or worse….

In other words, trade-spend, this key selling tool, has become too important to be left to the sales department…

However, it should be kept in mind that NAMs are closer to the customer and as a result are better placed than most to take a commercial view of the ‘cause and effect’ of promotional expenditure.
Above all, the NAM should by definition be a good integrator of company and customer interests in ensuring that trade promotions meet joint objectives.

The key is to be able to converse with individuals in their own language, framing all requests in terms of meeting their needs via the NAM’s initiatives, with the corporate goal-in-common expressed in financial terms, the common language, and Return On Capital Employed the key driver. .

By incorporating the principles of Capital Investment to trade spend management, including the financial impact on both parties P&L, NAMs will echo the finance department approach to making financial investment decisions and will thus make trade-spend feel more comfortable in Sales’ hands…

More on ‘How’ for NamNews subscribers in the February edition.
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