Corporate Spending Analysis for a major OTC Global Drug Company.

Background/Problem:

A leading OTC/Pharma company was rethinking how they spend their money with their retail trade partners. They were not sure how competitive they were verses their competitors and if they were at a disadvantage in their marketplace. The company was open to changing their spending practices if:

There was documented evidence that any change would not violate the Robinson-Patman act, and that their competitors were engaging in activities that they put them at a disadvantage
It would improve their relationships with their key retail partners

We were asked to examine all costs of doing business with their retail partners including; logistics, consumer, couponing, packaging, and the costs associated with deploying the sales force and Sales and Marketing teams against each customer. In the end this customer wanted a new methodology for their customer P&L’s and new measurement criteria which could be used to more accurately measure the financial state with each customer.

Our Solution:

We decided to gather more information within the consumer goods marketplace. We interviewed 23 companies. Objectives for this CG industry study were as follows:

Understand the prevalence of retailers currently requesting or contemplating requesting efficiency allowances
Understand how manufacturers are reacting to these requests in terms of preparation, and policy development
Understand P&L usage for both retailers and manufacturers including their sharing throughout the CG industry
Understand if retailers would strive for better efficiency practices if they were provided additional incentives to do so
Understand how manufacturers currently allocate their funding to their retail customers
Understand the current flexibility manufacturers have with their trade funds spending and what they would do differently if they had greater flexibility to reallocate investments in the areas of promotion and retail support
Understand if/how manufacturers have been successful in working with select/key customers to improve cost to serve activities in which the savings were deployed to consumption driving activities
Understand the most prevalent key measures used by manufacturers to measure the "cost to serve" activities of each retail customer

The study was performed in 5 weeks time. The study separated fact from fiction and gave a clear picture of what was happening within this marketplace. All participant information was protected. The client was provided an overview of the study showing no individual customer information only "market averages" for the questions asked.

Results:

After reading our marketplace documentation and accompanying recommendations, the company decided to completely revamp their spending practices.
They became both more structured in their approach and more flexible in many areas allowing them to better meet their customer’s funding and promotional needs at critical time periods.
Having the flexibility to react quickly to opportunities allowed this client to more effectively drive their business.
Having more stringent measurement criteria to plan & measure each opportunity took the "guessing" out of their planning, therefore sales forecasting accuracy increased by more than 40%
The following year the company increased their sales by +8% which was more than double the previous year.

Timing:

The engagement took only 8 weeks from inception to the final recommendation. Recommendations were implemented within 4 weeks of the report being presented to senior management.