What is Your Next Promotion in Wholesale Distribution
When you work in B2B, business people, craftsmen, are more familiar with yearly contracts, not promotions. Nevertheless, the habit of promotion is emerging now strongly in wholesale distribution in recent years and is no longer inside a confidential scope.
The reasons for a promotion in wholesale B2B have different causes, but the first ones are related to a stock issue:
- Decrease a too large stock
- Target stock to zero before the release of the product with a new SKU
- Erase stock with a short shelf life to avoid scrapping it
It may be also recently related to a marketing strategy:
- Launch of a new product entering the market
- Agreement with a supplier to attack a market with their own category of product
Precise Promotion in Wholesale
In B2C the promotion is for everyone. It is largely an open sale inside a store, you cannot choose your consumer and avoid selling a promotion to the ones who would have bought it anyway, which is not very business efficient.
The efficiency of precise promotion to only the ones you want is possible in wholesale distribution, as you have a unique relationship with each customer. Indeed you aim to not sell a product you would have sold anyway at a lower price. In wholesale, you can target that the promotion is impacting the selected customers that you would have not touched or made a deal with if the promotion didn’t exist.
Nevertheless, if the strategy to define the right target of customers needs preparation where predictive analytics could be helpful, the second part, the execution of the promotion is even more important of a subject.
Plan and Execute
For the first part, defining the right target, wholesale distributors can rely on their huge database of past transactions to know who the customers are that they should sell an otherwise not purchased product to. The database of a historical transaction can be scanned and modelized to segment the appropriate customers with the best chance of making the promotion a success.
Once this is done, the execution has different challenges:
- The sales rep needs to know which customer he can offer the promotion to
- Which quota he/she got and which quota to each of his/her selected customers
- Among all his/her filtered customers, who are the ones the most inclined to accept the promotion
- For sales administration, the executed promotion should automatically provide a new pricing schema date to date (ending at the end of the promotion), with no chance of dispute, otherwise, the cost of inefficiency would overcome the promotion gain effect. The same applies in case quotas are defined when the promotion is limited in terms of stock. You need here to define who can get how much per period. Then proper execution shall control for each sale if we are still inside the quota for a given time slot. This is key to avoid disillusion on the customer side that would also destroy somehow the promotion gain effect in terms of loss of quality image.
For this tough execution, you need a solid ERP platform able to execute properly the key success factors of your promotion – price and quota.
Promotion also on the Purchase Side
The wholesale distributor can also benefit from a supplier offer that he might or not re-distribute to its own customers. Generally, in that case, the promotion is linked to a volume to take a “lot” for a price off. The question is then the trade-off between the better price of purchase and a temporary overstock.
At a certain level of overstock, wholesalers might also consider the risk of obsolescence as a part might be scrapped eventually. Hence the promotion on the purchasing side should include both the logistics and the selling managers before pushing the button not only a category manager choice. The decision could be also helped with predictive analysis showing the degree of acceptance by the customers.
Intelligence and Execution as a Couple
In a nutshell, the decision of promotion in B2B industries needs intelligence to choose the right promotion and capacity of flawless execution, typically what is able the new generation of intelligent ERP.
Of course, that will not be the only means to reach successful promotion, as you also need coordination and communication between different teams. But again, the fact to distribute the same sustainable info to all is the basic foundation of an ERP.