FMCG Gyaan PDF

FMCG Gyaan
A day in the life of an ABM

So this next post is written by Anupriya Singhal, who is currently the Regional Brand
Manager for Lux South Asia with Unilever. She has worked with L'Oreal in the past
(which is where I met her) and Heinz and GCPL across sales and marketing and has
been kind enough to write on the blog - so do read! Its a brief introduction to marketing,
what the function entails etc.
She's written about what FMCG marketing is - do note that in a different market (Luxe
etc), your job will be entirely different - would be more about aesthetics and the
"glamour" so to speak. Comments and queries welcome, she follows the blog :)
---Marketing has to be the most "Glamourised" job in a B-School. Continue to read this if
you thought atleast 3 things about marketing from the list below:
1. Marketing is all about making ads
2. You launch a product every now and then
3. You meet the big stars and it is a very glamorous place to be in
4. Kotler has taught us everything about marketing
5. Marketing starts and ends with 4 Ps
6. Marketing is about applying brains and thinking out of the box
7. Creativity is the key to being a successful marketeer
8. Its about making pretty presentations
9. Numbers are a sales thing - and marketing is more surrreal than that
10. Marketing is a superior function and the focal point of an organisation
So it is now a true "reality bites" moment - marketing is not more than 10% about all of
the above. 90% of your time, energy and efforts will not go into any of the listed things.
So now let me list what you will actually do as a marketeer - and not just when you start
but for a really really long time:
1. You are a co-ordinator more than anything else - your day starts and ends with follow
ups - with the agency, with the supply chain, with the vendors, with the ASMs, with the
regulatory, with the research team and the list is longer than what this blog can take.
2. You are everyones favourite scape goat in the system - jo theek nahi hua woh
marketing ki galti hai -all timelines are your to own and no one else's
3. Numbers have to become your first and only love as a marketeer. A good marketeer
would need to do an impossible task of synthesising all information into hard numbers
and bring innumerable data sources together. And it is not a one off thing - 50% of your
working time goes into this
4. You are a report generation factory. Every month starts with a primary report, then
secondary report, then share update, then household panel update, then stock update
etc. - before you realise it,its 30th and you are dreading the 1st to start the cycle all over
again
5. Most marketeers havent experienced making a TVC more than once in 2 years and a
new launch once or twice in their lives - so the entire 4 Ps concept goes out of the
window because more often than not you cannot influence most part of it
6. Marketing is more about roling your sleeves up and getting your hands dirty than
even sales. Every morning you end up doing things like - which depot has stock and
which does not, have the posters reached the depots, checking packaging artworks
where every comma, every spelling mistake is your fatal mistake, getting estimates
raised, getting advances realeased, getting cheques cleared et al
7. You dont learn anything about marketing in a B-school. You only learn a disposition
towards the function and your own attitude being a fit with it or not. Otherwise marketing
is an absolutely learnt art. It is 99% learnt on the job and it has an almost standardised
learning curve. If you are brilliant then you will cover the learnin curve in 3 months
lesser time and if not - you will learn it in 4 months more. However if you dont have the
attitude fit with the function then you may never learn it at all. But the truth is everyone
starts with a ground 0 on this - a gold medalist or the last one in the class!
But having said all of this, it is an exhilarating job!
Posted by Kaushik at 6:22 AM No comments:
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Trade Marketing Explained

So after a super long hiatus, I am back to updating posts. This one is about trade
marketing, an extremely vital part of marketing that most of us recent grads know
nothing about (Other than random facts such as (98% of purchase decisions are made
at the Point of Purchase).
Swati is a Trade Marketing Manager with United Spirits (where in the absence of ATL,
BTL becomes really important) and inte rned with me at LOreal. You can find her here
----
Trade Marketing is a marketing discipline that targets the customer rather than a
consumer. And your customer could be anyone ranging from your trade partners to
your shopper. Trade Marketing revolves around creating value-propositions for both
these entities to increase offtake. This could range from something as basic as a
counter sales man incentive to something more shopper-focused like a promotional
gift/price-off to display elements at point-of-purchase.
Now you may ask - why would anyone have a marketing function that caters solely to
this customer? The answer is because:
It is a challenge when this consumer does not come forth and ask for your brand.
You may push your primary stocks, pressurize your TSEs and DSMs and ensure
secondaries, but in the absence of any marketing activities to support tertiary
movement, you are gonna be in trouble in the coming months due to piling stocks at
retail.
While brand management triggers the Awareness and Interest part of the AIDA
model, trade marketing activities complete the circle by triggering the Desire and
Action, which finally converts into an offtake.
1.
2.
3.
4.
While above-the line-marketing is tailored for larger audiences, trade marketing has
more focused and clearly defined audiences and all marketing efforts are channelized
towards this group. Most activations aim at interacting with the customer at point-ofpurchase or point-of-consumption. Hence, these activations are designed in line with
the overall brand strategy but customized according to local market dynamics.
Trade marketing has a response mechanism (like in the case of coupons,
telemarketing and promoter-driven activities) which is very crucial and which is absent
in above-the-line marketing (the only exception being social media marketing).
Since all of the trade marketing activities are Below-The-Line (BTL) or Through-TheLine (TTL), it is driven by data and is extremely result-oriented, unlike Above-The-Line
(ATL) which is used in brand building. Hence, the marketing ROI can be easily
calculated in trade marketing, which is the incremental sale that you get as a result of
the marketing investment. And, like me, if you are in a media-dark industry like liquor
where the scope of ATL is very limited in terms of effectiveness of surrogate advertising;
then trade marketing becomes a very crucial marketing function.
Also just like you have the proverbial 4 Ps of marketing that we were taught the
moment we step into a B -School, there are the 2 Ps and 2 Ds of Trade Marketing,
which are closely intertwined with the sales function. They are Display (point-of-sale branding material, display units, disruptive visibility of your
brands in the planogram)
Distribution (activities to help the sales force increase the depth and width of
distribution, activating all relevant channels/consumer touch points)
Promotion (consumer promotion in the form of gifts/gratification that enables
sampling and conversion, event sponsorships and exhibitions)
Price (price-offs and trade schemes/incentives).
All trade marketing activities are designed and e xecuted around these four elements in
alignment with the brand strategy. Hence trade marketing is the function that connects
the dots from the brand strategy that is centrally formulated to the market realities that
sales managers deal with thus it helps create synergies at a regional/local level.
Yet, some consumer goods companies may not have a structured trade marketing
function. So if you are doing sales in one such company and your retailer tells you saab
kitna maal uthaoon, aapka brand move hi nahin ho raha, you could try wearing a trade
marketing thinking cap for a change. Trust me, trade marketing activities bear results
which can be witnessed and measured within a few sale cycles. If you invest in an
activity which will help bump up your tertiaries, youll notice buoyancy in your brand.
Just keep in mind the two most important aspects while doing so
(1) carefully prepare your business case for the activity keeping in mind the local sales
trends, customer preferences, market dynamics
(2) ensure executional excellence else the activity will fall flat and your investment may
not bring in the planned returns.
Posted by Kaushik at 5:49 AM 1 comment:
Labels: Basics, fmcg, marketing, Trade M arketing
Fri d ay , Jul y 6 , 2 012
Understanding Price Calculation & Trade Schemes in

FMCG
Time to absorb some basics on FMCG Pricing and Trade Schemes something that
prominently differentiates FMCG from other sectors and yet something that was
unfortunately left out in our B-School Curriculum.
Before we get into the mathematics part of it, let us re-visit the flow of goods from one
layer to the other in the FMCG framework - This will be explained in detail in the next
blog post
From Company->Dealers/Distributors/Stockists->Whole-Salers/Retailers->Customer
Please read this post before you read any further.
Now before exploring the above mentioned transitions, we need to clarif y Trade
Schemes. Trade Schemes are usually additional support in terms of Sales Promotion
or Trade Promotion or Temporary Price Reduction extended to the trade considering
quite a many factors like Competitors Activities, Seasonality, Companys own agenda
etc. etc.
Trade Schemes are of 2 types: Primary Scheme & Secondary Scheme (Not to be
confused with the Primary Sale & Secondary Sale mentioned above). You can read
more about them here
.
These schemes vary from brand to brand (of a company) and change on a monthly
sometimes fortnightly basis. Just one more thing before we finally explore the pricing
aspect mathematically, there are generally 2 methods by which pricing of products is
done within a company: Mark-Up or Mark-Down and on that basis, the schemes,
margins etc. are arrived at for its trade. The only difference between the 2 is the
reference which they use; Mark-Up would use cost price as the reference and MarkDown would use Selling Price as the reference.
Now let us consider a company XYZ India Pvt. Ltd. Which owns a brand X. We shall
see how we arrive at the various price-changes this brand X undergoes as its ownership
changes from layer to layer.
Assuming MRP of 1 unit of X is Rs 150/-. 1 Case of X comprises of 24 units of X and
hence 1 case of X is valued at Rs 3600/- (at MRP).
(MRP is the Maximum Retail Price at which the product can be sold to the customer)
The company decides to roll-out a primary scheme of 4% and runs a Secondary
Scheme in the form of QPS. The QPS is designed for whole-sale and high volume retail
outlets and is as follows:
12 pcs to 1 case Additional Discount of 8%;
1 case to 2 cases Additional Discount of 9%;
3 Cases and above Additional Discount of 10%
Assuming the Distributor Margin of the company is 6%; Retailer Margin for Product X is
15% and the company follows a Mark-Up Pricing:
We shall first see the pricing dynamics of 1 unit of X so assume a retailer who
purchases just 1 unit of X:
MRP of 1 Unit of X is Rs 165. So we will arrive backwards at all the price-points from
the MRP (Which is known as Reverse Calculation)
Since the retailer gets 15% margin and its mark -up pricing hence putting it in equation,
we would arrive at RLP (Retailer Landing Price)
RLP = MRP- Retailer Margin (RM) Primary Scheme Secondary Scheme
DLP (Distributor Landing Price) = Retailer Landing Price (RLP) - Distributor Margin (DM)
Therefore in this example since the company follows Mark-Up Pricing:
RLP = 165 15% of RLP 4% of RLP 0 (Secondary Scheme would be 0 for
purchase of 1 unit)
RLP + 15% of RLP + 4% of RLP = 165
Hence RLP = 165/(1.19) = 138.65
Similarly, DLP = 138.65 DM
DLP + 6% of DLP = 143.47
DLP = 143.47/(1.06) = 130.8
Similarly when you go to a wholesaler and request him to purchase 4 cases of X, he
would ask kya rate hai: you would say:
165 MRP hai, aapko padega (165/1.29 = 127.9) 128/- mein. (Since he is entitled to
10% Secondary Scheme as per the slab above)
We are not explaining Mark Down pricing (Forward calculation) as most companies
follow Mark Up - if you want us to explain this, let us know.
The only catch here is in the first look, you would say the DLP itself is 130.8 then how
come the RLP in the above case is 128 so does that mean that the retailer is getting at
a lower price than distributor??
The answer is No. The distributor has extended a 10% of Secondary Scheme to the
retailer which has not been factored in his invoice from the company and so he claims
those 10% back from the company and keeps his margin intact. And therefore this is the
distributors investment that he is making for the company and hence The Average
Claims Outstanding is factored while calculating his RoI.
Posted by Kaushik at 4:29 AM 4 comments:

Labels: Basics, fmcg, Rate, Sales
M onday , Ju ne 2 5 , 20 12
Consumer Brands Convergence

To all those who are following this, sorry for the delay - both of us have been horribly
busy at work, but we'll post 2-3 more articles by the end of this week. In the meanwhile,
here's a great convergence map that shows how most consumer brands are owned by
SIX COMPANIES! Quite insightful, this.
Full credit to Convergence Alimentaire - You can click on it to enlarge.
Posted by Kaushik at 8:46 AM 1 comment:

Labels: big6, brands, convergence, fmcg, trivia
Sat urd ay , J une 16 , 2 012
Rate Ka Chakkar
Many times, you will come across this line with your distributor/retailer/sales officer
saying Sir, aap ke maal mein rate ka lafda hai. What this basically means is that your
stock is available at a lower rate in the market this could be another wholesaler,
another distributor or anyone else.
A product that has a rate problem means that it is a top selling item in the market, which
is good news for your brand team, but VERY bad news for you. When you start creating
rate differences, you start playing a price war and there is no end to that - so our advice
to you is stay away from it, even if it means a couple of extra gaalis :)
To explain better, let us look at the following scenarios:
Scenario 1:
You are selling Parle G biscuits. Your distributor is called ABC Traders, and there is a
distributor in an adjoining area not too far away called XYZ Traders however XYZ is
not under your jurisdiction.
I will explain landing rates in another blog post, but to quickly explain:
MRP-Retailer Margin = Retailer Landing Price (RLP)
RLP - Distributor Margin = DLP
DLP VAT = Company Landing Price (CLP)
For further information on rate calculation please read this.
VAT cannot be escaped, hence there is only one way till now where your product can
be sold at a lower rate if the distributor decides to forego some of his margin, which is
a rarity.
So effectively the lowest price you can sell at (legally) is the DLP, and illegally is the
CLP or at a margin that is lowered so that your distributor gets volumes and you meet
your numbers (not recommended, will explain this later); right?
Wrong.
Let me introduce you to this necessary evil called Trade Schemes. From time to time,
every company will have a scheme which looks as such:
144 pcs 6% discount

72 pcs 4% discount
24 pcs 2% discount
Then it is possible that Mr. Agarwal, a wholesaler may buy 144 pcs from ABC Traders
for a 6% discount, and then sell it to the retailers at the same price again, even if they
buy one piece. This is called rate undercutting. What effectively happens is that since
wholesalers work on volume and not value, they dont give a shit if theyre undercutting
you, as long as they are getting the volumes and their regular margin.
I will explain this pictorially like a true MBA:
But then why bother, because irrespective of where the retailers buy from, your
distributor is getting the business right?
Wrong again.
The sales planning team in your company will be undoubtedly smart, but Mr. Agarwal in
the market is smarter. Many a times, you will have schemes running in an adjoining
state and/or you will have schemes running in the metros. And metros will have one big
wholesaler, XYZ traders who will sell at a miniscule margin but with high volumes to
these little wholesalers in your town. So what will effectively happen is that it is your
companys business that is growing, but will not show in your numbers and show in your
metro/adjoining state counterparts numbers. Which would mean that your boss will call
you the same night and abuse the hell out of you and will make you think that your MBA
education was as useful as learning trigonometry in the 9 th grade. Which would mean
that your Stock flow diagram would look like this.
And hence you will be fucked and the ASM in the metro will have a life AND complete
his numbers. So please kindly avoid as far as possible whatever it takes, as long as
theres no undercutting happening. Once it starts, it doesnt stop so beware.
Another way of rate undercutting is this: Your wholesalers will wait for your company to
come out with a huge scheme (usually company year ending or slack period) and will
stock up like there is no tomorrow. And then, he will fuck you over. Because he will
hoard the same stock and sell it at the same discount later to your very own retailers
you cant do anything about it, because company schemes are for a one month period
only, but wholesalers can bill it at a discount anytime they like.
Scenario 2: When the companys own sales personnel undercut in order to achieve
their targets:
However unviable this may seem, this is a practical phenomenon almost everywhere.
Imagine Mr X is the Sales Officer of a company which sells Click Shampoo which is one
of its major selling items in the market. The company has rolled out a slab-scheme in
the market which looks something like this:
Slab 1 : On purchasing 0-25 Cases, a silver coin worth 1500/Slab 2: On purchasing 26-50 Cases, a gold coin worth 4000/Slab 3: On purchasing 51-100 Cases, a gold coin worth 10,000/A smart Sales officer will first break the slabs down to nett rates which basically means:
On Slab-1, there is an additional discount of Rs 60/- per case
On Slab -2, there is an additional discount of Rs 80/- per case
On Slab-3, there is an additional discount of Rs 100/- per case.
Now imagine 1 case of Click Shampoos nett rate (after deducting margins and primary
schemes and excluding this additional QPS) is Rs 1100 per Case
Now Mr. X (being onto his last week of the Sales cycle and realizing that he is way
behind his brand target for Click Shampoo) will slog his ass out in the market and find
out that the rate prevailing in the market is to the tune of 1070-1080 per case.
He will convince a particular wholesaler who has the capacity to buy 20 cases saying,
Aap 30 peti loge to rate laga doonga. Similarly he will go to 2 more wholesalers and
say the same thing for 30 and 40 cases respectively.
By the companys rule book, these whole salers had to be sold at 1020 per case
respectively (fitting into slab-2). Instead, what Mr.X has done is, he has shown 1 bill-cut
from the distributors end (obviously to a fictitious wholesaler) of 100 Cases and given
the rate of 1000/- per case to all the 3 wholesalers.
What this means is, the scheme which was intended to run in the market in a certain
way, has been defeated in its purpose for the target achievement of its own sales guys.
This is a never ending cycle because once you show the way to a wholesaler, you can
never get out of it.Worse if in the future you attain the path of righteousness and deny
twisting schemes and rates, he would buy it from a near-by (read another SOs territory)
and keep selling at a lower rate and you are doomed.
Scenario 3: When the distributor cuts rates in order to garner his volumes:
Generally in many FMCG companies, there are 2 channels of distribution for Urban &
Rural respectively which work as mentioned below:
Urban:
Rural:
Typically the Urban Distributors margin would be 6% which while the Rural Super Stockists margin would be 8% of which 3% is for him to keep and 5% to be passed on
to the Rural Sub-Stockist.
Now imagine there is a Distributor sitting in Jalandhar who earns 6% margin and will
therefore at best give a 2-3% margin to whole-sale (urban) and sell his stock.
However, a Super Stockist in Phagwara, who has no business in Jalandhar as far a
Click Shampoo is concerned, but still supplies his Coal-gate stocks in Jalandhar, will
typically have a couple of Mota-Wholesalers whom he sells Click Shampoo at the rate
he would sell to a sub-stockist i.e. by passing on 5% Margin a nd will very easily show in
his books that he sold it to some god-foresaken sub-stockist in a god-foresaken village
of Punjab.
This would generally happen without the knowledge of the company sales guy (if the
sales guy is responsible for both the territories i.e. Jalandhar & Phagwara) and also if
there are different people (Sales Officers) looking after the mentioned territories then
this will generally be aided by them.
Scenario 4: Cross-Geography Under-Cutting due to difference in VAT rates:
Assume that there is a distributor of Click Shampoo in Ambala in Haryana (VAT Rate 12.5%)
Similarly there is another distributor for the same product in Saharanpur in Uttarakhand
(VAT Rate 10% and just a 40 odd kilometers away from Ambala.
Therefore the Distributor Landing Price in Saharanpur will be lesser owing to the 2.5%
VAT difference as compared to the DLP in Ambala.
Hence every opportunity for the distributor in Saharanpur to go and sell Click Shampoo
in Ambala at a lower rate without foregoing his margin.
This procedure, though is illegal and is done only through setting and jugaad, but is
very common.
Similarly, these are just some of the common ways of under-cutting prevailing in the
market. There are many more, and the wicked mind in the market keeps exploring even
more ways to under-cut. Just the other day, on a table of drinks, I got to know about a
Sales Officer, who during his early days claimed to have undercut in the following way:
(For that you need to know this, 1 Case of Click shampoo = 72 strips (also called ladi)
and 1 strip = 20 sachets)
Sir, mera 1 tagda wholesaler tha. Woh 150-200 peti ek saath uthata tha. Maine
company ki jo tape lagti hai peti mein, waisi tape jugaad ki. Peti ko neeche se khol ke 1
ladi nikal kar, wapis tape laga deta tha.Kaam dhyaan se karna padta tha. Lekin usko aaj
tak pata nahi chala. Is tarah rate bhi 12-15 rs per peti kam ho jata tha
Improbable as it may seem.but who knows.
Have you had any experiences in which your territory has been undercut in a different
way? Please share in the comments!
Posted by Kaushik at 9:36 PM 10 comments:
Labels: fmcg, Jugaad, Rate, Sales
Th ur sd ay , Ju ne 1 4, 201 2
Calculating Dealer ROI

This post is co-authored with my good friend Nishit Ganatra who is currently the ASM of
Punjab, J&K for CavinKare. He interned with me at L'Oreal and graduated from XIM,
Bhubaneshwar. He enjoys troubling the Pakistani army by attempting to cross over the
border from time to time and is giving their economists nightmares as he contemplates
to sell Chik shampoo across the border owing to the kindness of his boss.You can find
him here.
So probably the first thing that your distributor/dealer/stockist is going to tell you when
you go to him for the first time is Sirjee, ROI nahin baith raha hai. What this simply
means is that he is challenging you to calculate his return on investment.
This is sort of a monthly exercise he knows that he is getting an ROI, else he would
not be in the business. What he simply needs is some ego massage so that he gets an
ILLUSION that he is in control of something when he is not your rates are fixed, your
schemes are fixed, and so are your claims. While ROI is something that they teach us in
first day of B-School, calculating dealer ROI might be a different ball game altogether as
he is a weasel who is going to try different permutations and combinations to get the
better of you. Do this properly with him, and he (and you BDE/TSO who is twice your
age but earns half as much) will respect you forever.
The equation is simple Return/Investment, Return = (Earnings Expenses).
The trick lies in realizing what earnings, expenses and investment involve & it is here
where the dealer uses his tricks.
Lets put down the formulae first:
a.
RoI or Return on Investment = Returns/ Net Investment
b.
Returns = Earnings Expenses
c.
d.
1.
Earnings = Gross Margin that the dealer enjoys (Usually 6% - 8% in FMCG

companies)
Expenses = Direct Expenses + Indirect Expenses
Here is where the first trick lies, Calculating Expenses:
This arises from the fact that the dealer in question is not dealing with just 1 company,
he instead has 4-5 or even more number of companies that he is dealing with. Hence
there are some resources that he is exclusively using for a particular company for eg.
Sales Man and similarly many resources that he is sharing among the companies eg.
His godown space, accountant, supply units etc.
Please note there is no thumb rule to it as there might be (and more often than not, will
be) cases where even salesmen are being shared among 2 or more companies, and
there will be one guy who would be the accountant-cum-manager-cum-supply wala etc.
This is where the concept of direct and indirect expenses comes in.
Hence his expenses are split in to 2 parts i.e. Direct & Indirect Expenses
Direct Expenses are those that the dealer incurs exclusively for the company
concerned.
And Indirect Expenses are those that the dealer incurs in totality for the companies for
whom the resource/s is/are being shared.
The only rule in calculating expenses is that you need to take into account the part of
expenses that he is incurring for your company alo ne. We will see how we do it below.
2.
Similarly the second trick lies in properly calculating the denominator, i.e Net
Investment.
A dealers investment comprises of 3 parts : Average Stock that lies in his godown,
Average Market Credit that he extends & Average Claims Outstanding,
Hence,
Investment = Avg Closing Stock + Avg Market Credit + Avg. Claims Outstanding
Here the usual suspect where one may go wrong in calculating Investment is the first
variable i.e. Average Closing Stock of the dealer.
A layman would take the month-end closing stock as the average closing stock for the
dealer, or worse if you do the mistake of asking the dealer what his closing stock is, the
beast would tell you a figure which will be his all time high closing stock in a month.
The typical trend in FMCG is that majority of Pushing, also known colloquially as
thokna (Primary) and Pulling (Secondary) happens in the last week and therefore the
last week is not a true indicator of the entire months activity then why consider last
weeks closing stock as his months closing stock. (To clarify, primary is what your
company bills to the dealer and secondary is what your dealer bills to the retailer)
Confused?, we will deal with it with simplicity. Consider this as the trend of Primary &
Secondary for a dealer in a 4-week cycle of a month
WEEK
OPENING
PRIMARY
SECONDARY CLOSING
STOCK
STOCK
1
5, 00,000
50,000
1,00,000
4,50,000
2
4,50,000
1,00,000
2,00,000
3,50,000
3
3,50,000
2,50,000
2,50,000
3,50,000
4
3,50,000
5,50,000
4,00,000
5,00,000
The above table is how a dealers inventory in a typical FMCG set-up would behave
like, i.e. majority of activity happening in the last week and hence one would be wrong in
taking 5,00,000 (Week-4 Closing Stock) as the average closing stock for that dealer in
that month.
The better way to do it is to take an average of all 4 weeks closing stocks. In this case it
would come out to be as : ( 4,50,000 + 3,50,000 + 3,50,000 + 5,00,000) / 4 which
equals to 4,12,500 which is lesser than the previous result and hence his investment
goes down and RoI goes up.
Enough of this gyaan now, let us get straight down to calculating a sample ROI
Premise:
Mr. Atul Mittal is the proud owner of his distribution firm M/S Bhagat Ram Jwala Prasad.
His firm deals with distributing 4 companies in total of which ABC Pvt. Ltd. Is one for
which we need to calculate the RoI. The firm has 1 dedicated (exclusive) salesmen
working for ABC Pvt. LTd. with a monthly salary of INR 6,000/- per month per salesman.
Apart from this, the firm also has an accountant-cum-manager with a monthly salary of
INR 5,000/- per month, pays a monthly rent for the godown which comes to INR 5,000/per month, incurs electricity & miscellaneous costs (supply units, chai-paani etc.) to the
tune of INR 5,000/- per month. Other expenses such as his sons education and his
daughters marriage which your dealer would want to include are not to be included.
All figures are assumptions
Monthly Business (Turnover) inclusive of all 4 companies: 20,00,000/-;
Monthly Business (Turnover) of ABC Pvt. Ltd. : 8,00,000/ABC Pvt. Ltd.s Company Margin: 8%
Average Market Credit for ABC Pvt Ltd. Is 10,000/- INR
Average Closing Stock for ABC Pvt. Ltd is worth 2,50,000/- INR
Average Claims Outstanding in ABC Pvt. Ltd. Is worth 10,000/- INR.
Hence going by the formula:
RoI or Return on Investment = Returns/ Net Investment
Returns = Earnings Expenses
Earnings = Gross Margin that the dealer enjoys (Usually 6% - 8% in FMCG companies)
Expenses = Direct Expenses + Indirect Expenses
Lets calculate each element one by one:
Earnings = Gross Margin = 8% of monthly turnover of ABC Pvt. Ltd. which is = 64,000/Expenses = Direct Expenses + Indirect Expenses
Direct Expenses = Salary of Exclusive Salesme n = 1*6000 = 6000 per month
Indirect Expenses for ABC Pvt. Ltd.=( Contribution of ABC Pvt. Ltds Turnover to Total
Turnover) * Total Indirect Expenses
Total Indirect Expenses = Godown Rent + Managers Salary + Miscellaneous Expenses
= 5,000 + 5,000 + 5,000 = 15,000/Contribution of ABC Pvt. Ltds Turnover to Total Turnover = 8,00,000/20,00,000=40%
Hence, Indirect Expenses for ABC Pvt. Ltd. = 40% of 15,000/- = 6,000/-
Therefore Total Expenses = 6,000 + 6,000 = 12,000

Hence Returns = Earnings Expenses = 64,000 12,000 = 52,000
Net Investment = Avg. Closing Stock + Avg. Market Credit + Avg. Claims Outstanding =
2,50,000 + 10,000 + 10,000 = 2,70,000
Therefore RoI = Returns/Net Investment = 52,000/2,70,000 = .1925 or 19.25%

Labels: Basics, fmcg, ROI, Sales
Th ur sd ay , M ay 17 , 201 2
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
companys 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
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
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 companys 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 companys 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.
(Added by Sarabjeet Matharu) Display: Usually means a FSU or a shelf that the retailer keeps
for the company's products exclusively
Sun day , De cem ber 30 , 2 012
Working With Numbers - Part 4

Working with Numbers Part 4
So till now we have covered 3 major sources of information internal numbers, Nielsen &
HHP. We have also covered how to tie in the internal numbers to Nielsen and how to use both
of them in tandem to arrive at a richer, deeper and more insightful analysis.
This post shall cover how to marry all 3 sources together and to work towards aligning
marketing strategies and actions to grow everywhere.
As with everything else in life this post shall work on the following assumptions:
Market Share is a marketers pride ultimately you are doing everything to make
consumers buy more of you in comparison to other brands
Irrespective of what market share you have, the company wants turnover from you
that is where the moolah comes from and this is what funds your marketing activities
HHP is a true diagnostic of what actually happens and if you fix that you may be
able to fix everything
Now lets lay down some housekeeping rules:
Forget value for sometime value is a derived figure what sells is 1 unit of your
product the consumer buys 1 unit of your product and not Rs 100 worth of you
Figure out what is the volume metric which works for your category and from
now we will only talk in that it could be kgs/tons/units/liters etc etc etc throughout this
post I am going to use kgs (I sell sabun after all)
Read the previous 3 posts for basics of the 3 sources that we are going to now
intertwine and twist around and mess your mind with (evil laughter is in order here :d)
So now lets start making the framework we will look at for this exercise you can of course
make many many of these and turn it all around if you want
Start from 1 common point usually HHP is a great way to start as it is a most complex and
inflexible database.
Divide geographies in your internal data source and Nielsen according to how they appear in
HHP. E.g. Punjab & Haryana will need to be clubbed. So would MP + Chhattisgarh and so on
and so forth
Divide all volumes in the HHP volume metric whatever it may be dividing HHP volumes
into other metric will make it very difficult when reading into measures like Avg.
Consumption etc.
E.g. if you measure your volumes in tons internally and in kgs in Nielsen while HHP measures
it in grams then please convert everything to grams
Again, please remember secondaries are your only reality. Hence, you need to start with
finding out your pick up in HHP and take it as a common factor for conversion
For eg if your internal sales says in Delhi you sell 100 kgs and HHP says in Delhi 120 kg is
consumed then you need to take this factor and build back into secondaries
Framework: Being the Bollywood freak that I am I call it the love triangle. Ismein sab hai,
romance, masala, tears, action and of course loadsa drama. So heres how the story unfolds
So the construct of the framework is as below:
Note: T he category contribution is Nielsen contribution. You can take any
We will use the data in this table for the rest of the post. A good exercise would be to
probably populate this table and then read further. But then thats a lot of work so take your
pick :D
So the basic premise here in this analysis is that there are states/geographies in this country
which are pre disposed to a consumption pattern for a particular category and hence they
need to be seen as such. For e.g. TN is one of the largest consumer of Glucose Drinks while
MP is the largest market for Hair Colours. So its important to sort the markets according to
their contribution to the category.
The next thing to note is the CAGR for the past 3 years of the category. It is important to take
a slightly longer time period as it helps negate the impact of recency effect of growths, new
entrant into the category etc. Similarly, for the rest of the parameters its important to look
at CAGR and immediate period growth. Looking at both a CAGR as well as immediate growths
gives one a perspective of the trend of growth.
Now lets analyze each element of this grid and see what can be done with them. This
analysis neednt only be done for geographies they can also be done for SKUs/Pack
Sizes/Variants/formats/sub brands or any other cut of your brand or category that makes
sense.
Contributions: As a marketer one can have two approaches ride on category dynamics and
the other is to develop the category or geographies. However, these approaches also need to
be looked through the lifecycle lens. For instance for highly penetrated categories it is
important to take the category trends and contributions as a given and to align your bra nd to
these dynamics. For not so penetrated categories or rather niche brands it is probably alright
to confine oneself to the category construct. Now if one were to take either Nielsen or HHP
cat contributions as a given then it is very important to look at how your brand stacks up
against it. For e.g. if your internal contribution of a 10% category contribution state is only 5%
then you know you are under pitched and need to take a look at these markets especially if
these are also high growth markets. Here growths dont necessarily have to be in % terms it is
also absolute growth. A big market will very rarely grow at 40-50% but a 10% growth in a big
market will in all probability drive the category growth rather than a small market growing at
50%
Growths: Now that we have all 3 databases lets deconstruct the growth of our brand. So step
1 is to pen down growth in each geography by all three sources (only volume growth). For
HHP you will need to break down the growth in volume by HH growth and growth in avg.
consumption. States where all three growths are in the same direction its fine. And I mean
direction which means that it will never be exactly the same as long as the movement is in
the same direction and in a +/-5% here and there it is in the same direction. In these states
one should just continue to do what is being done. In states where all 3 are not in the same
direction one would need to dig deeper and arrive at the WHYs. And here I think I am not
going to detail this out as you must explore this on your own and am happy to answer
questions
Trends: One must use this analysis to find out trends for the category as well as your brand.
For e.g. If the CAGR is high but the immediate growth are low then you know the category
growth is slowing down and at some point so with the brand. Usually category trend leads the
brand trend by a gap of a quarter or something its a very rule of thumb but one can
establish it for a particular category and brand. Similarly, if one were to assume a simple
linear relationship of:
Household Consumption growth will drive Nielsen Growth will in turn drive Secondary growth
Then its important to look for anomalies in the three sources of information. For e.g. while
your secondary and Nielsen are showing healthy growth but the HHs or the HHs volumes are
showing a slowing down it is a red alert situation. You would want to correct that trend
because at sometime that trend will catch up with offtakes and in turn with our internal
brand growths.
Problem Childs: This of course is (in my opinion) the ideal way to find out the problem child
geography and then take targeted marketing actions. Once you plot
geographies/SKUs/Variants or any other cut of your brand and category which makes sense
and identify which of those is creating the issue for your brand or pulling down your growths,
then you can target your marketing efforts only on those.
Forecasting: This framework is also a great way for forecasts. Once you have these numbers
then you know what are the growth levers for the coming year and hence what should get
focus and hence build in higher growths and ambitions. This has important implications in
terms of what kind of monies will be needed to get the desired growths. E.g. depending on
what are the purchase drivers for each geography, SKU, Variant the investments will need to
be in the right mediums, channels etc. This also has strong implications on the sales and stock
planning for the year forward. For e.g. you may need to push the sales team on which
geographies to grow their distribution in and help them with accurate tools for the same. E.g.
if it is a strong rural SKU then you may want to do activities like Mass Dealer Contact
Programmes and on the other hand if it is a highly Modern Trade led SKU then you could plan
on very strong consumer activation etc.
Important Safety Instructions this framework can only be used in tandem with the part 2 & 3
of these posts. Only once you have arrived at the correct diagnostics of what is going right or
wrong in your analysis targets can you use this framework. In itself this is just a snapshot and
1 stop shop for all information and almost like a ready reckoner for your brand. If each
element is not analysed individually then this exercise will be futile.
Posted by Kaushik at 6:03 AM No comments:
Labels: brand management, fmcg, marketing
M onday , D ece mb er 3 , 2 012
Working with Numbers - Part 3

So my apologies for being so inactive, Anupriya had sent me this post a few weeks back, and
owing to work pressures and other such things in my life, I was unable to update the blog although planning a revamp and lots more interesting stuff next quarter, so keep visiting the
blog!
As always, thanks Anupriya - star you are! Very kind of you to take time out and write :)
Also, just crossed 10,000 hits! Thanks for your support people!
Working with Numbers Part 3
In the 2 previous parts we have covered the basic sources of data that we have access to or
use as marketers and a deep dive into 2 very important ones internal numbers and ACN.
In this part we will try and understand Household Panel (hereafter referred to as panel) and
then try and put the 3 sources together i.e. internal numbers, ACN and HHP
Panel is your one stop shop to understand what your consumers are doing. What is their
purchase behavior? Understanding of Panel makes you understand the consumer need.
Panel can be put to many uses and analysis. I personally use panel to make operational
decisions on the brand. As you understand the panel better or speak to more people who have
been in the field for some time they will give you different uses of Panel. I however, strongly
recommend panel to be used to making strong operational decisions for the brand. For e.g. in
which state should you run a consumer promotion or which SKU to support with trade scheme
or what is the ideal SKU size for your brand. If you want to do on ground activation against a
competitor which one should it be?
Panel has answered all these questions for me.
CAUTION: a very important thing to remember throughout this post is that Panel measures
everything at a household level and not individual level. Hence, panel gives you purchase
behavior and not consumer behavior. Please do not use panel for consumer behavior
It will give you WHATs its the job of the smart Marketer to understand the WHYs
Panel has given diaries to 74000 households in the country who are representative of the
entire population and then extrapolate the data to the entire population. The households
which have the diaries are supposed to note every purchase in that and then panel
representatives also do pantry checks/dustbin checks.
Key Metrics to dig into:
1. Penetration this measures the number of households (HH) your brand is bought by.
Penetration = Brand HHs/Total Category HHs. Penetration numbers are important at 2 levels:
a. Category Penetration this means for the entire category what is the penetration amongst
all HHs. This determines the lifecycle of the category and hence is a very important measure.
Cat Pen = Category HHs/Total Universe. Very high category penetration means that the
competitive heat will be very high and loyalty lower. E.g. soaps have almost 100%
penetration which means that you can grow only at the cost of other brands. On the other
b.
2.
a.
b.
3.
4.
a.
b.
c.
hand if category pen is low you actually stand to gain by just category growth e.g. hair colour
have penetration of less than 30% hence category growth is the single biggest brand objective
Brand Penetration as explained earlier it measures the HHs that your brand is bought into
within a category. As a marketer you have to set a penetration objective for yourself. For e.g.
LOreal Excellence and Garnier Color Naturals will not have the same objective. However,
once the objective is set then one must craft the marketing activities to achieve that and
then to maintain it. Drop in penetration often means it is a cause of grave worry. Also,
penetration drop cannot be measured on a month on month basis It must be measured over
a quarter.
Consumption - This measures the actual volume of your brand/category consumed in a HH.
Now this can be measured at 2 levels:
Total Consumption which is total volume of your brand in all the HHs you are bought by
Avg. Consumption this measures your brand consumption in 1 HH. This is usually the
measure that is referred to when one says consumption has fallen. It is an extremely
important measure as it gives you your brands consumption pattern in a HH. This is also the
measure you look when looking for seasonality, impact of consumer promotion, impact of
communication etc. For e.g. if you ran an ad which said for best results use twice a day it
should ideally move your Avg. consumption up.
Share of Requirement (SOR) this is the share of your brand within a household. SOR =
brand volumes in brand HHs/category volumes in brand HHs. This basically is a measure of
multiple brands being present in a particular HH and how strong is your brand within that HH.
Again do remember this is at a HH level and hence multiple brands are present. Simplest
example being shampoo, with avg HH size in India being 5-6 people more than 1 brand is but
obvious. However, the measure to watch out for is the trend of SOR if you have a SOR of say
60% and every quarter see it going down it means there is a problem and more people in the
HH prefer some other brand or they are using the other brand for more occasions. And when
you were an occasional use brand and see your SOR going up it means that the consumers are
sticking to your brand more than their usual brand. This may happen for a lot of reasons
increase in availability of your brand, you having corrected your pricing, affluence of the HHs
going up etc
Entry Erosion Analysis this analysis tells you for a particular period what is the source of
HH growth of your brand. It gives you the following measures:
New Triers for a particular period what % of your users were new triers i.e. who tried your
brand for the first time in that period. Now this is an extremely important thing to know
because this is a measure of trial ability of your brand. This measure also gives you the new
triers constitute what % of your total consumption ie when these new triers come in do they
consume more of your brand than existing HHs or avg consumption or are they only trying
your brand. The key here is to choose the correct period for which we want this number.
Ideally anything less than 6 months is futile but again it depends on the nature of your
category and business
Retainer Users these are the HHs who were using your brand in the last period as well.
This measures the loyalty of your brand how many HHs continue to buy you over a period of
time. The important thing to note in this is the consumption trend. Whether these HHs are
consuming more of your brand or have they reduced the consumption for your brand and
added some other brand to their repertoire
Lapsers these are the HHs who purchased you in the last period but have chosen to not buy
you in this period. Now this is a very critical measure for obvious reasons. If the lapsage for
your brand is very high then it is a cause of concern. Also, lapsage is a relative term and again
extremely dependent on the time period. Let me explain this with some examples.
i. Say you are a baby food brand who has baby food only for infants from the age of 6-9
months. Then for sheer demographic reasons every year or every 3 months HHs will lapse out
of your brand to some other brand which is relevant for their babies in the age of 9-12
months.
5.
a.
b.
c.
d.
ii. If you are a summer brand, lets take Glucon-D where >60% sales comes in Mar-June.
Now if we choose time period of Q2 vs Q3 then obviously the lapsage in Q3 will be extremely
high as the brand or category is no longer relevant
Hence it is important to analyse this number within the framework of your category. And for
this also it is important to know who is lapsing out of your brand. Were they heavy users of
your brand or were they HHs who were marginal consumers who bought you occasionally
Gain/Loss this gives you the source of your volume growths or volumes losses. This tells
you where are your volumes coming from or going to. Now you can gain/lose volumes in 4
basic manners:
New Category users/lapsers these are HHs who entered the category through your brand
or were your brand users and then decided to exit the category completely. The classic
example in this case is baby products. After sometime these HHs will exit the category or
enter the category when the category is relevant and will be usually heavy users in that time
period. And when they exit the category or enter the category they impact the brand a lot
Increase/Decrease in Consumption HHs who started consuming more or less of your brand
in absolute volumes. Now this may not be an absolute decline at times. For e.g. if you are a
shampoo brand and instead of 7.5 ml in a sachet you start filling up 6 ml. Now consumers will
not buy 2 sachets because you have reduced fill rate. What will happen is that the absolute
consumption in your HHs will come down by that amount because they will still use 1 sachet
of your shampoo. On the contrary if say you give 10% extra volume on small SKUs that small
volume may not make the HHs buy lesser number of packs and hence absolute consumption
will go up for your brand
Addition/Deletion to Repertoire this when a HH starts buying your brand over and above
the brands they already purchase. This could be because of a special consumer need that your
brand fulfills which their other brands do not so they use your brand in addition to their
existing brands. For e.g. say you are a fabric softener, then HHs will buy you over and above
their existing detergents and not replace their existing detergents with you. Taking the same
category example, in winters a lot of HHs will add liquid detergents like Ezee to their
repertoire of detergents and then remove It from their repertoire as soon as winter is over
Gain/loss from competition this is when consumers substitute your brand with competition
or vice versa. This is a scary reality check and something to completely watch out for. This is
where you can pin point who your real competition is and who you need to attack in the
market and whether as marketers we like it or not this is a reality check and we need to
embrace it as a fact and work with it. E.g. you launch a premium fairness cream with a new
texture, with world class technology and price it at 200% premium to the market. And when
you advertise it you assume that consumers who use premium skin care will move to your
brand. However, this measure may show you that you actually recruit your consumers from
the bottom of the pyramid. This could be a good or a bad thing depending on what you make
of it. If this is true it means that your media deployment will need to be for these HHs and
not for the premium skin care or it could mean that even with limited money, great
profitability and limited visibility in media you can actually get consumers. However, the
reverse would be devastating. Imagine your HHs actually lapsing to the bottom of the pyramid
brand. It would mean all your assumptions about your technology or strength of
communication have gown down the drain consumers prefer their old brand over yours.
Panel of course has lots of other measures that you can dig into. But these according to me
are the most important.
And unlike Nielsen where you can only take geographical cuts, here you can actually drill
down into demographics of HHs and you can actually arrive at which SEC, which type of city,
how many people in a HH, HHs with children etc are your brand users. With Panel you can get
into as much granularity as you want.
Now, I will explain why I said I use panel for operational/tactical brand decisions. I am going
to give you some examples and then when you explore the panel further you will realize that
there are more and more of such decisions that you can take:
1.
2.
3.
4.
5.
Consumer Promo this gives you the empirical evidence of what your and your competitions
consumer promo did for your brand. Did it get new HHs, did it make your exiting HHs consume
more of you, did it increase your SOR in the HHs, did you gain volumes from completion and
same answers for your competitions Consumer promos. And there you go you know which
consumer promo actually gives you results or even which will screw your competition the
most and you go for it
Cross Promotion if you want to do a cross promo for your brand, you can actually know
which other product to give. For e.g. Panel will throw up what is the intersection of HHs b/w
you and intended promotion brand and whether you will each new HHs at all or will you only
reach the same HHs etc.
SKU choice if avg consumption for All India for your brand is 100 gms while in a particular
state or a particular SEC which is a big contributor your avg consumption is 500 gms then
there is merit in the launch of a 500 gms SKU thereby saving packaging cost for yourself and
also locking in the consumer for a longer time as the HH will only think of purchasing
another brand once they have consumed your 500 gms
Media Deployment if you know that while you thought your TG was SEC AB but your actual
HHs are Sec C &D then there is merit in taking your media more mass or adding mediums
which cater to these SECs
Cannibalisation from a LUP whether or not to launch a LUP is often a much debated
decision with the fear of cannibalisaton of a bigger more value & profit generating SKU. And
only panel can tell you for your competition and other categories how much cannibalization
can you expect.
And there are more such decisions which only panel can help you with.
At the beginning of the post I said this post will cover marrying the 3 sources of data that we
have covered so far together. However, I think this one has become longer than I thought it
will. And marriage is a complicated process anyhow!!! So we shall keep it pending for the
next part in the series.
And unlike what Kaushik said I think this may just go into 5-6 parts. So please be patient.
Th ur sd ay , No ve mb er 1 5, 20 12

Part 2 of Anupriya's 3 part series! As always, thanks a lot :)
For Part 1 click here.
--My first post covered the various sources of data that we have access to or use as
marketers. Now I will dig deeper into 2 sources - Internal Numbers & Nielsen and most
importantly how to tie them together.
As discussed earlier on also, internal numbers are the only reality of our lives. We need
to live with them and all marketing activities at the end of the day need to culminate into
better sales growth.
For simplicity sake for this entire piece we will assume Primary Sales =
Secondary Sales
Some Key Points to remember while looking at internal numbers:
Actual numbers are important but most important metric to look at is growths.
What is most important is to chase a growth objective and chase it hard
While looking at growths always delink the volume growth and value growth for
e.g. if you took a price increase by 10% and your sales growth is only 11% then it is a
cause of worry. One must always set a volume growth and a value growth objective.
Ultimately consumers buy 1 unit of your bra nd they do not buy Rs 100 worth of your
brand. Hence, always try and sell more units
Always look for the BASE EFFECT any activity in the previous period which
increased/decreased your sales abnormally is a base effect. For e.g. suppose to
liquidate old stocks you run a 1+1 offer on your brand it will surely show as a part of
your base. Or if you increased your price by 20% in a particular month and the category
is price sensitive it will show a tanking of sales. Or something as simple as a stock out
in a particular month which would make your base lower
Map the seasonality effect if you operate in a category which is seasonal then
you must always consider it while analyzing numbers. And seasonality is of various
types. For e.g. there are some brands like Glucon-D who do more than 60% of their
annual turnover in 3 months and then there are brands like Make -up for whom sales
doubles during festivals.
Accurate Geographical Mapping as long as you are looking at All India

numbers this phenomenon does not come up as an issue. But the moment you start
digging deeper and granular it is extremely important to map geographies accurately.
Let me explain this further. Internally numbers come in ASM wise which means the
sales are for ASM territories. Usually they are according to states. However, there are
times when a certain part of an ASM territory may be removed and handed over to
another one. So just a word of caution
Key Metrics to look at in internal numbers are as follows:

1.
2.
3.
4.
Absolute Volumes
Absolute Value
SKU mix i.e. how much of each SKU/Variant sells
Volume & Value growth
Key Drill downs for each of the above should be:
By SKU/Variant e.g. 100 gms, 50 gms, a particular variant like in shampoos or

soaps, shades for hair colour, flavours in food.so on and so forth
By pack type bottles vs sachets, wrappers vs cartons, jars vs cartons etc
By geographies
o Urban & Rural
o By State
o By Metros, Tier 1 Cities & Rest of India

o Top 10/20 contributing Cities (ideally this should be more than 60% of your sales)
AC Nielsen
AC Nielsen is a bitter reality of your life and will always be. So we all as a community
can crib about it, can abuse it and wish that we could do without it but sadly we
cannot!!!! We have to learn to live with it and at best back co -relate it to the internal
numbers.
So what essentially Nielsen does is takes a sample set of outlets these are
representative of the entire universe of outlets and then extrapolates the data collated at
these outlets to an All India number or for a particular state or city.
So in essence the ACN is your one stop shop for competition benchmarking. This is the
closest one can get to market reality.
1.
2.
a.
3.
4.
a.
5.
Key Nielsen Metrics to look at:

Market Share Value (MS Val) this is your sales in any particular market/Category
sale in that market
E.g. if you sell Rs 100 worth of soaps in Maharashtra while in totality Rs 1000 worth of
soaps are sold in Maharashtra then your Market Share is 10%
Market Share Volume (MS Vol) this is your volumes sales in any particular
market/category sales in that market. Now this measure is important because (as
quoted earlier) volume is the consumer reality rest is only a price game. So you would
want to know how good or bad you are on volume shares
Volume share can be calculated at any common volume measure. E.g. Units, Kgs,
tons, gms etc depending on what makes the most sense for your category. For instance
in Hair Colour since the sub categories have different formats hence looking at Unit
share makes sense while in Soaps volume share in tons makes sense as all soaps are
measured in grams
Numeric Distribution (ND) this is a representation of your distribution. This is
number of your outlets/total number of outlets the category is present in. E.g. if you are
present in total 100 outlets and the category outlets are 200 then your numeric
distribution is 50%
Weighted Distribution (WtD) this measures the quality of distribution i.e. in your
distribution what is the category sale. So for e.g. if your weighted distribution is 80% it
means that 80% of the category sales happens in the outlets you are present in which
basically means that you are present in the right kind of outlets
The higher the weighted distribution the better it is and one should always chase this
measure. This is not to say that you shouldnt chase numeric distribution but weighted is
more important. Hypothetically speaking if your numeric distribution was say 80% while
your weighted was only 50% it means that while you are present widely, you are not
present in the outlets where the chance of getting picked up is higher
Share amongst Handlers (SAH) this is a measure of your strength within your
distribution. This is a measure of your market share in the outlets that you are available
in. ideally for strong brands this should be higher than your overall share substantially.
Else, it means that your brand strength is not good and you need to chase marketing
measures than availability. Eg. If your overall market share is 20% then your SAH
should ideally be around 28-30% unless of course your ND is >85% because then your
distribution is almost the category universe
There are a lot of other measures in AC Nielsen which can be looked at and analyzed
and there is usually never an end to analysis. I have however, chosen these 5 metrics
because these are (according to me) most important and also the best to start analyzing
the business with.
These measures when analysed thoroughly will throw up question which can then be
answered using other measures. And I will be more than happy to tell you which ones if
you can revert with specific questions.
Marriage b/w Reality & the Bitter Truth

This is the section where I explain how both the internal numbers and the Nielsen
numbers need to be looked at in conjunction to each other.
Within internal numbers you need to look at only secondary sales because this is what
goes into the retail environment. However, again for simplicity I am going to consider
primary = secondary sales
Note: LOOK FOR TRENDS NOT ABSOLUTES
While marrying the two sources of information please only look for trends and not
absolutes it will only throw up nothing
So things one must correlate:
Growths one must look for a similar growth trend in CAN & internal secondary
numbers. Now a gap of 2/3% is absolutely normal but it should be in the same zone for
eg b/w a 8% internal growth and 10% Nielsen growth then its fine. However, it is always
helpful to draw a 2X2 matrix for markets where the axis cut each other as All India
secondary growth and All India Nielsen growth. Then each market is mapped according
to these 2 growths.
X Axis- Nielsen Growth and Y Axis Secondary Growth The 4 quadrants of this will be:
Right Top Doing Well Continue Efforts these will be markets which are growing
faster than All India both internally and in Nielsen
Right Bottom Strong Brand Push Sales - these are markets where in Nielsen
you are growing faster than All India however your internal growth is not so fast. Here
strong sales plans help
Left Bottom Immediate Action Plan - the brand is not growing well either in Nielsen
nor in internal sales. These geographies need a full understanding of what is happening
Left Top increase Investment these are geographies where your brands has a
strong trade pull however, the consumers are not buying as much of you as they
should. This means these geographies need incremental inputs on media or consumer
activation or consumer promos depending on what is the reason for this situation
One must always know the lag in pick up so is your category the kind where what
gets sold in month x gets sold in month x or does it get sold in x+1 or x+2. It is x+2 then
you should look for the growths for x+2 period and not x
ACN Pick up this is an exercise one must do over atleast 24 months period and
then take an average. This means take out your volume sales (if yo u have too many
SKUs) or value sales if there is only 1 odd SKU for internal secondary and ACN and
then find out the ratio for that. Then average out this ratio. So every time your share
movement is not in the right direction as your internal numbers you s hould first check
this ratio is there a change in pick up. This is especially very important for new brands
or brands which are highly mordent trade dependent.
Geographical contributions one must look at the geographical contributions in the
internal numbers and Nielsen. For eg if your top 20 cities/ 10 markets do not match in
Nielsen and internally it means that the wholesale component is very high internally and
the actual consumer is sitting elsewhere. This also means that your marketing ac tivities
should be focused on the consumer pick up geographies and not your internal sales
geographies. And trust me it is always a very difficult choice
Last Quote: For the 2nd part my last quote is these all put together give you the
answer to WHAT not WHY. So please dont look for WHY. The biggest mistake all of
us end up making is turning this analysis somehow into diagnostics. It is not. This is
only the symptom. Diagnostics we will come to.
Wait for part 3!!!
Posted by Kaushik at 4:51 AM 2 comments:

M onday , O ctobe r 22 , 201 2

So Anupriya has been kind enough to write again, this time a 3 part series!
Its quite intimidating for freshers like me to get into a brand management environment and
manage an entire array of numbers stemming from different sources - which ones do you use
for what? It gets quite overwhelming, so here's the first part of "Working with numbers".
--I am almost a regular on this blog now though the initiators of this blog call me the guest
writer!!!
Well this post is a continuation of my last post A Day in the life of an ABM. As I said for a
marketer more than 50% of his working life goes into numbers and making sense of them
even if at times there is little to make sense of.
And trust me there are a lot of numbers floating around to be able to pick up the right ones is
almost like fighting a new battle every day. To my mind A beautiful mind portrays this very
beautifully how Nash picks up words and numbers when he is out of his mind well numbers
crunching is almost like that.
Am hoping this post will make some of it easier for the young budding marketers.
First things first some cardinal rules of making sense of data. I will explain each of the cardinal
rules during the rest of the post but still take note of them for now:
1.
Always make a framework before you start looking at numbers - to start with borrow
someone else framework and then develop your own
2.
Always start with macro getting into details is a good thing but without the larger picture it is
futile. At the end of the day all work is towards the Big Picture
3.
Always have an objective culling and crunching of numbers without an objective is like
going shopping without a shopping list you will end up finding everything except what you
went shopping for
4.
1.
2.
3.
4.
5.
Make hypothesis and then prove or disprove them

There are basically 5 regular sources of data and 1 mother of all researches which you will keep
going back to all the time:
Internal Sales Primary & Secondary
Nielsen
Household Panel
Brand Track
SOV & GRPs
6.
Usage & Attitude Study

Most of your life will revolve around these data sources. Now lets look at the role of each
source
Internal Sales: this is the ONLY reality of your life. This is what is the DHANDA and
everything else in life may be hunky dory but if this is not then well sorry to put it bluntly but
your brand is screwed. Just as a refresher course:
Primary Sales is what as a company you bill to your distributors. This is what we all call
turnover of our brands. This is the actual realization of your brand for the company.
Secondary Sales is what the distributor sells to trade. In an ideal scenario Secondary=Primary
but then as everything ideological it is only a myth. Secondary sale is the most important
parameter to track as this determines what your consumer will get to buy (stay with this
statement for some time and I will explain how).
Nielsen: This is what gives you your brands performance at the retail (universe of all shops
where you or your category is present) level. This is your single point of reference for all
competition benchmarking, Market Share, Distribution, Offtakes, Brand health at the store level
etc.
Household Panel: This is your Consumer Reality. It answers a lot of questions regarding the
purchase behavior for your brands or category:
Who buys you demographics, town level, city wise, how many kids et al
How much they buy you
How many times they buy you
What else do they buy etc.
Brand Track: This measures your brands health. This is a measure of What your brand stand
for in the consumers mind:
Brand Awareness
Ad Awareness
Share of Endorsements
Trials, Repeats etc
SOV & GRPs: This measures your competitiveness in media how much money is
competition pumping in, how much your consumers see your ad etc
Usage & Attitude Study: Well this is basically your bible for consumer behavior how they use
your product, why they use your product, how often they use your product, where they buy it
from, why do they not use your product etc
Now the next question is how to use all these sources together. Well I am a marketer and am
going to make you wait and read the next post for that.
Marketing, Sales or Innovation?

So I have always been super passionate about FMCG, and if there is one person who
has helped me channel this passion and take it to the next level, full credit would go to
Swapnil Kumar, who took the FMCG Branding course at MICA.
He's an IIM-L alumnus who started his career off with Unilever and now is the Global
Brand Manager for Vaseline - he has spent time across Marketing and Sales and can
be found here. This is a letter that he wrote for the incoming batch of MT's at Unilever a
few years back.
-------
Let me start by writing that this is not a definitive guide to what to choose and also what
you shall get once u have made your mind up given that u have to make your mind up
right away.
There is also a disclaimer attached that these are all points of view of what I have heard
and the writer doesnt necessarily subscribe to the points written hereafter. Even though
I have spent more than 8 years in these streams I am not too sure if I have also
experienced most of the things that I am going to write.
There are 3 kinds of people in this company Those who know what they want, those
who dont and those who dont know and dont care. This guide shall work very well for
subset 2 and not too much for the other 2.
If you feel offended by something in this document, slap the person next to you. It shall
not make you feel better but might get you bashed up thus taking your attention away
from what offended you in the process.
After reading this if u are still left with an iota of confusion in your mind, quit and get
yourself an MBA in finance from a firang university, join an investment bank and earn
truck loads of money, which, by the way, shall come with a 24X7 work routine and well,
trucks are very expensive.
The document doesnt have an appendix as the author knows that appendix is a
vestigial organ and at best can cause pain by bursting giving you appendicitis.
I must also say that these are points of view and not the commandments. The
difference being that POVs are like a persons back side - every one has one while
commandments is the name of Gods back side.
One last bit ... dont drink and drive, you might spill your beer.
Now that the serious bit is over, let the games begin.
It is not by luck but by choice that the field is called S&M. (sales and marketing words
were a force fit). But you can think of a way to look at these as 3 lanes here sales,
marketing activation and marketing innovation. Some companies do define these as
three separate lanes today while most of them bundle them as one marketing team
One of the biggest differences in the 3 streams actually lies in how fast you can become
a platinum card holder on Jet frequent flier program (best airhostesses, even in the drab
new uniforms). Sales shall give u a chance to befriend all the air hostesses and
stewards on one sector or atleast all the dogs that visit the depot everyday as your car
enters the same as u shall take the same flight twice every week for so long that the
crew would even know the decibel levels at which you snore. (E.g. airhostesses on
Chennai Hyderabad flights used to give me 5 bottles of lime water just as I boarded so
that they wouldnt need to talk to me again). Activation on the other hand takes you all
around the country and Innovation takes you abroad very often. Obviously this is
dependent on the fact that you dont become ASM for Tundla and hence travel only in a
radius of 3.2 miles or become a inno guy for a brand that sells only in Gummidipundi.
Let me try and put across the things that define any of the 3 stints.
Sales: The work of an Sales guy revolves around managing the krazzy 4 People,
Customers, Infrastructure and Systems. Managing categories and numbers is incidental
as, when u can manage the first 4, these get done. I wrote People first because that is
where they belong. Every stint as a sales guy gives you a great exposure in managing a
team and in managing through people. The role shall involve a lot of operational work
and the typical marketing creativity shall not be put to a lot of use. What you shall get
to do, on the other hand, is to be creative in the market place. You shall also learn to
maximize the bang from each and every offer that comes at hand. As a result it shall
also give u an insight into how various categories work and interact in the market place.
Basically what it means is that you shall know that every time the numbers are under
pressure, sell Lifebuoy, FAL sachet and Close Up or maybe Tea, Coffee, Kissan and
Salt (are there any other categories in foods business?). It shall also help you learn how
to make choices as the situation is fluid and changes very fast. (Every time a truck of
stock lands in wholesale market from another area, u shall have to make a choice
between crying, running to your boss and breaking the nose of the colleague). Add to all
this, the rush of numbers and set targets to deliver. Let me also say that there is nothing
like a plum posting or areas that deliver and areas that dont. There have been people
who have had areas with no metros no 5lakh+ towns and still delivered each and
every quarter and there have been people who havent delivered even in the big
areas.
Marketing activation: ACTIVATION involves 3 phases Artwork, network and no
work. (You know which phase I wouldve been in while writing this one). A AC TIVATION
manager is the custodian for the brand in an OpCo and is responsible for managing the
performance of the brand in the country. What this jargon basically means is that the
ACTIVATION manager manages the dhandha for a specific brand in the country so
taking calls like should I give 25gm extra or give 5% off or write Free Free Free
everywhere. The ACTIVATION manager is responsible for managing the brand and the
other marketing gibberish associated (imagery, equity, brand health et al). This also
involves, therefore, all activities that are needed to deliver on this. E.g. media planning,
consumer promotion, tactical activities. This helps you understand what the brand
means to the user/ consumer and its role in the category and at the same time also
understand how to manage the same. The role therefore involves creativity from the
marketing side of things but the actions are influenced more by the fact that the efforts
tend to be tactical and short term plus also affect the consumer and customer. The ro le
also involves media management and also trade activation. The role does not involve a
lot of subordinate management but because of a lot of different stakeholders (read
agency, mindshare, PR firm, Supply chain), each one with their own back sides, it
involves good people management. The process of managing all of these happens
through networks and hence the stint teaches you managing networks. The stint also
teaches you how to read, understand and utilize market research, basically meaning
how to thrash out the trash from the overload of data that comes in the name of MR. Let
me assure you that if the MR ppt is less than 4MB and 85 slides there is something
wrong with the research, result, your MR counterpart or all of them. The ACTIVATION
stint also involves set targets and numbers. The stint teaches you how to therefore keep
the brand relevant for both the consumers first and then also for the selling teams as
they focus on overall delivery and not delivery by brand.
One very important thing about the ACTIVATION stint actually is the implementation of
global plans for the local environment and then ensuring brilliant execution in the
market. The other truth is that if there are brands with long innovation cycles ( meaning
something that is not in skin category or hair care category where innovations and re
launches take lesser time than it takes Bhajji to say maa ki) there is a lot more scope
to work on doing non-innovation led work to sustain momentum on the brand. It is also
said that the best way to learn ACTIVATION is to sleep with your agency and well ..
Innovation: The beautiful world of Brand innovation. INNOVATION gives you the ability
to work in unstructured, not very specifically defined situations. This basically means
that there are no specific growth numbers to follow and no Field force to shout at or to
pass the buck in terms of putting the blame. Here you define what the brand shall mean
to the consumer over a longer period of time ACTIVATION ensures that the consumer
sees it the way they should. The other good learning in this stint is managing work with
peers or peer management. Almost everything that you are supposed to do is done by
someone else MR, technical feasibility by Technical, production/ trials by Factory,
Sourcing by Supply chain, product/ packaging ideas by the product/ packaging guys (
what did u think, Michael Jackson?) etc. So you shall need to get work done by people
who are not necessarily reporting to you. You get to go out of the shackles of an Op co
and work for a regional/ global team. Basically meaning you get to do consumer
contacts in Brazil on beach Copacabana for Surf Excel (who cares about the brand if
the contact happens at Copacabana). It gives you a first hand experience in product/
communication development. Basically you shall be credited with creating an amazing
product or film. ACTIVATION does communication development only if there is
something local happening. (E.g. making a film that sells a price point or a local pack
size innovation). INNOVATION stint gives you a deeper understanding of MR as every
breath you take, every move you make, every leg you break, every cake you bake
depends on research results. Also, INNOVATION gives you an in-depth understanding
of marketing and its concepts (in INNOVATION you realize that Kotler isnt that waste).
The initial stints shall also involve a lot of operational work and it is not as if you shall be
launching something new everyday. The other challenge is to keep one busy all the
time. E.g. if a research is commissioned and its a show stopper, (meaning that if the
research says no then nothing happens) then what would you do in the interim? (Big tip
prepare for GMAT, remember the Investment bank job?)
Thats more or less it. The three streams are not mutually exclusive and the interaction
happens often, though not a lot between Sales and INNOVATION. So now as
Morpheus told Neo the choice is with you.
Whenever there is trouble, remember this God made work but god made beer too!! In
fact there is new data that proves that first there was God. Then there was beer. God
sat and had beer for 2 weeks non stop post which he wanted to go take a leak. He hit
the empty bottles and fell down. At this point in time God said let there be light you
know the rest of the story.
p.s. my question is how he managed to have beer for 2 weeks without the ehem .

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A day in the life of an ABM

Trade Marketing Explained

Understanding Price Calculation & Trade Schemes in

Posted by Kaushik at 4:29 AM 4 comments:

Consumer Brands Convergence

Posted by Kaushik at 8:46 AM 1 comment:

144 pcs 6% discount

I will explain this pictorially like a true MBA:

Calculating Dealer ROI

RoI or Return on Investment = Returns/ Net Investment

Returns = Earnings Expenses

Earnings = Gross Margin that the dealer enjoys (Usually 6% - 8% in FMCG

Therefore Total Expenses = 6,000 + 6,000 = 12,000

Posted by Kaushik at 7:47 PM 17 comments:

Glossary of basic sales terms

Working With Numbers - Part 4

Working with Numbers - Part 3

Working with Numbers - Part 2

Accurate Geographical Mapping as long as you are looking at All India

Key Metrics to look at in internal numbers are as follows:

Key Drill downs for each of the above should be:

By SKU/Variant e.g. 100 gms, 50 gms, a particular variant like in shampoos or

By pack type bottles vs sachets, wrappers vs cartons, jars vs cartons etc

o By Metros, Tier 1 Cities & Rest of India

Key Nielsen Metrics to look at:

Marriage b/w Reality & the Bitter Truth

Posted by Kaushik at 4:51 AM 2 comments:

Working with Numbers - Part 1

Make hypothesis and then prove or disprove them

Usage & Attitude Study

Marketing, Sales or Innovation?

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