FMCG Basic sales terms

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 

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.

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

Credit: it could be in value( for primary sales) or period (for secondary sales)

Chakker “Billing” ka: Billed to one retailer, supplied to many

Forward sales: Billed but not delivered.

Churn Rate: A metric that measures how many customers you retain and at what value. To calculate churn rate, take the number of customers you lost during a certain time frame, and divide that by the total number of customers you had at the very beginning of that time frame. (Don’t include any new sales from that time frame.)

For example, if a company had 500 customers at the beginning of October and only 450 customers at the end of October (discounting any customers that were closed in October), their customer churn rate would be: (500-450)/500 = 50/500 = 10%.

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.

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.

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

“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”

Strike Rate: % of successful sales calls.

Brand Call Productivity: % of brand X In all successful sales calls.

Cash Discount: Trade schemes are in form of some discount if they clear the bill on time. Its called CD – Cash Discount – normally companies give 1% CD. but its very important to understand that its more of a consumer pull category and trade push dosent work here.