The deductions management process, for many consumer products manufacturers, is wrought with both operational and cost inefficiencies that can leave trade promotion programs disorganized and unprofitable. Effectively addressing these inefficiencies in your business can not only eliminate operational waste – it can significantly improve your bottom-line and transform your program to one with real returns.
Fortunately, there are steps any consumer goods company can take today to regain control over the deductions management process. While Marie Kondo might not be the first name in trade promotion or deductions management, the core tenets of her KonMari method can be applied outside the home to create an organized, sustainable, and value-focused deduction management approach.
Commit to Clean Up
Fixing your deductions process isn’t as simple as just purchasing a new system, mining for chargebacks, or performing a onetime clean up – it’s really about a holistic look at your organization, your processes, and your systems. Truly reevaluating your approach to deductions positions you better for future success as opposed to sporadically combing deduction data for chargebacks.
Imagine Your Ideal State
Understand what you can unlock with better deduction information such as true customer P&Ls, insights into customer habits, or supply chain signals. Deductions are a window into your customer. With more visibility, you have the ability to be more strategic rather than reactionary to customer preference. Use appropriate metrics to realize and understand growth towards your ideal state. Clarkston uses industry benchmarks for metrics, such as percentage of deductions that are invalid, to enable better management and identification of problem areas in your trade program.
Finish Discarding First
With deductions, a purge of the old is an important and necessary step. The ability to evolve into new ways of working can’t first happen without throwing out the old ways. Hanging on to the mindset of “this is how we’ve always done it” will keep your business from truly letting go and moving forward. For example, do you have a customer policy? If you had one before and it didn’t work, don’t let the stigma of past failures hinder your ability to improve. A customer policy is the right strategy for any business managing deductions.
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