Minimum Margin

In order to get a consumer good placed well on the shelves of a retailer, manufacturers often agree on a specific minimal retailer margin this product will be sold for. This ensures the customer that he will make profit with his shelf, even if the product is advertised with aggressive rebates. Such agreements add complexity to the daily work of a Key Account Manager (KAM) that needs to be aware of them and ensure that his promotions will not cut the prices too much. The same principle applies when a manufacturer wants to sell its own products on a certain minimum margin.

Salesforce TPM can simplify this business case massively. Depending on the manufacturers preference, there are several possible solution approaches to either prevent too narrow margins or work around them.

The most straightforward solution is to strictly prevent KAMs from planning promotions undercutting the guaranteed margin. For this, the flexible Salesforce TPM calculation engine can determine the retailer margin considering the planned rebates either for each individual product or even on higher levels of the product hierarchy. Comparing this planned retailer margin with an integrated or manually entered minimum margin provides an indicator whether the promotion can proceed or needs to be reworked. This could mean an automatic hard stop in the user flow or be part of the approval workflow, allowing options to get special approval. A business reason for a special approval could be when the KAM aligns the promotion with the customer and, for example, compensates him with bringing additional business to his stores or adding other tactics that are beneficial to the customer.

In case a manufacturer does not want to prevent promotions undercutting the minimal agreed retailer margin, but instead wants to run the promotion and then compensate the customer for the revenue missed out on, Salesforce TPM can adjust to that process. A KAM can add a separate tactic to aggressive promotions that will automatically calculate how much money the customer is missing out on compared to the agreed minimal margin and reserve money for an off invoice payment to make up for it.?

(A tactic calculating the margin per SKU sold and calculating the difference to a freely chosen target margin.)

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