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