Thursday, May 17, 2012

Glossary of basic sales terms


I should have probably written this first, but better late than never. I have received a lot of feedback, and most people have said that a glossary of sales terms should be included – so here it is! The response to the blog has been overwhelming, please continue sharing and giving in your inputs – Thanks for your encouragement!

Primary Sales:  These are sales from the company to the distributor

Secondary Sales: These are sales from the distributor to the retailer. Usually, targets are always based on secondary sales

Offtakes: These are sales from the retailer to the customer. While offtakes are not tracked by the company, trends of offtakes are tracked by Nielsen, which is a market research agency. Nielsen provides cumulative data of offtakes to brand managers in terms of market share. The accuracy of this is debatable as Nielsen takes only a subset of the number of traditional trade stores (which is then extrapolated) and does not track some modern trade chains – however due to lack of options, companies use this share data to figure out if their brand is doing well or not. For high value goods such as make up and durables, companies track their own counter wise offtakes.

Trade Schemes: These are schemes that are given out in the market to boost sales from time to time. Trade Schemes are designed for the trade i.e. Retailers/Whole-Salers and the distributor is supposed to comply with them and extend it to the trade and the company’s sales force are expected to utilize it in the right spirit and ensure market hygiene.
These can be in terms of discounts on the bill (hence translating to higher margins) or in terms of goods that may be enticing for the retailer/distributor. An example of this would be a free air conditioner on purchase of a particular value of goods, or a free holiday package on achieving the target that is given.
Trade schemes are of two types:

Quantity Purchase Schemes (QPS): These typically look like this:
144 pieces – 8% discount
72 pieces – 6% discount
48 pieces – 4% discount
24 pieces – 2% discount
Basically these are discounts offered on purchasing a particular quantity of products

Value Purchase Schemes (VPS): These would look like this:
Purchase of 10,000 – 8% discount
Purchase of 8,000 – 6% discount
Purchase of 6,000– 4% discount
Purchase of 4,000 – 2% discount
These are discounts offered on purchasing products of a predefined value

Trade schemes are further divided into two types depending on who they are offered to:

Primary Schemes: These are those that are deducted while the invoicing is done to the distributor from the company’s end. This may be done to give the distributor an additional margin.

Secondary Schemes: These are those which the distributor is supposed to first extend to the market and then claims it back from the company.

Trade schemes may cause problems with the rate – to understand how, read this. Trade might also try to manipulate you with calculations – read this so that you are not fooled J

Rate: This is a concept explained here.

ROI: This is explained here

Beat: This is the route that a salesman follows on a particular day. For example, his beat on Monday will be Area X, and his beat on Tuesday will be area Y.  This is usually optimized to ensure optimum coverage of all the stores in a sales territory such that the salesman visits each store once in a fixed interval. To elaborate, a company’s norm might be that a store has to be visited once a week. In that case, the beat is decided such that the entire sales territory is covered in a week – this way every store gets one visit a week.

This is just a start – please please PLEASE comment so that I can keep adding terms to this glossary.

From the comments:

FOC: Free of Cost

Display: Shelf that a company pays for. Can also be a floor standing unit (FSU) in Modern Trade

Strike Rate: % of all successful sales calls



28 comments:

  1. Display: Usually means a FSU or a shelf that the retailer keeps for the company's products exclusively

    ReplyDelete
    Replies
    1. GSV means gross sale value which is after deduct margian.
      NSV net sales value which is deduct schemes,cd,any BTPR & slabbed tpr etc.in GSV.

      For example MRP 100 & Margian 10%, scheme 5%, cd 1%
      Then
      GSV is 90.9
      NSV Is 85.5

      Delete
  2. Why targets are based on secondary sales? Please elaborate

    ReplyDelete
  3. Hmm how targets based on secondary sales..how can i be responsible for distributors making it to the retailers.

    ReplyDelete
  4. 1. Credit: it could be in value( for primary sales) or period (for secondary sales)
    2. Chakker "Billing" ka: Billed to one retailer, supplied to many
    3. Forward sales: Billed but not delivered.

    ReplyDelete
  5. DLP: dealer landed price(Price at which dealer gets he product from distributor.

    MOP: market operating price(Price at which retailer sells in the market..Note: MOP-DLP-Scheme value on a product is the margin of retailer.

    MRP- I hope u know.

    ReplyDelete
  6. FOC: free of cost...This is a jargon used during schemes given by company...When a company gives say 1 box of chocolates when a retailer purchase 10 boxes, then 1 box FOC is given.

    2. Credit note: Company agrees to pay the retailer a sum of money, say a after a quarter, if he purchases say x amount of boxes. This is in a form of a paper in which company says that we owe u ...x Rs on say abc date

    ReplyDelete
  7. "Trade schemes may cause problems with the rate – to understand how, read this. Trade might also try to manipulate you with calculations – read this so that you are not fooled J"
    The link seems to be broken.

    ReplyDelete
  8. Strike Rate: % of successful sales calls.
    Brand Call Productivity: % of brand X In all successful sales calls.

    ReplyDelete
  9. thanks you so much for this brief idea.but can you please elaborate a MRP base calculation.from customer purchase to distributor's purchase from a company.

    ReplyDelete
  10. Tell me how do i know , how many shops is there in a particular area????

    ReplyDelete
    Replies
    1. First step buy a good pair of shoes and comfortable clothes, then visit your market as there are no shortcuts for obtaining your Retail Universe (RU).

      Delete
  11. Thanks for sharing this Informative content. Well explained. Got to learn new things from your Blog on SAP SD

    ReplyDelete
  12. How does Key Accounts or Modern Trade functions

    ReplyDelete
  13. Can any one explain the concept of mark up pricing and mark down pricing? Please explain with calculations.

    ReplyDelete
  14. What is the full form of JC?

    ReplyDelete
  15. i really love ur blogging. I came for one info but now i got addicted.thanks.:)

    ReplyDelete