Are supplier co-op incentives really the best use of industry dollars?
A different point of view
In the beverage distribution industry, co-op dollars are often used to fund sales rep incentives in order to promote and sell the brewery’s products. However, I wonder if this is the best use of brewery and distributor time and money. Is it possible that these incentives have influenced sales rep behavior in ways that may not be optimal for long-term success?
It is important for distributors to carefully consider the return on investment of co-op incentives and to evaluate whether they are truly the most effective way to drive sales.
As someone who is interested in the beer distribution industry, I am always looking for ways to strengthen the relationships between distributors and suppliers. While co-op incentives can be an effective way to drive sales and promote products, I believe it is worth considering alternative approaches that could help to build a more collaborative and mutually beneficial relationship between distributors and suppliers.
How did we get here?
The beer distribution industry has traditionally relied on a variety of co-op incentives to drive sales and engage sales reps. These incentives have included distribution drive incentives, new package placement payments, and display tracking dollars, among others.
These incentives were designed to influence sales rep behavior in specific ways, such as by encouraging reps to focus on certain products or to promote products in particular locations. The industry has effectively “told” sales reps exactly what to do in order to be successful, which has made it relatively straightforward for reps to understand how to earn their incentives.
As the industry has evolved and tracking systems have become more sophisticated, it is time to consider whether this reliance on co-op incentives is still the most effective approach. While these incentives have certainly been successful in the past, it may be possible to achieve even better results by adopting more thoughtful processes for tracking and analyzing results, and by exploring alternative strategies for driving sales and building relationships between distributors and suppliers.
I can’t take distribution drive targets to the bank
The ultimate goal in a business is to drive profits and take them to the bank— that’s par for the course. While co-op incentives and other marketing and sales strategies can certainly be effective in driving sales and increasing brand awareness, they are ultimately only valuable if they contribute to the bottom line.
For this reason, it is important for suppliers to focus on profits when working with their distributors. While distribution drives and other supplier sales tracking reports may be impressive and rewarding in their own right, they are only useful if they ultimately lead to increased profits for both parties.
Distributors and suppliers need to work together to identify more effective and sustainable approaches to driving sales and growing profits. This could involve aligning goals and objectives, sharing insights and data, and exploring alternative marketing and sales strategies that go beyond traditional co-op incentives.
Sustainable alternative – grow my gross profit
Reallocating co-op dollars from the supplier to a higher Gross Profit per Case Equivalent (GP/CE) for the distributor is a sustainable approach to growing profits for both parties. By redirecting co-op dollars towards strategies that increase GP/CE, we can build a more sustainable and profitable business model that benefits both the distributor and the supplier.
I am asking our suppliers to consider reorganizing the investment in our partnership to focus on long-term sustainable growth. This could involve redirecting co-op dollars towards strategies that increase GP/CE, such as by identifying opportunities to increase pricing or to sell higher-margin products, reducing costs, or investing in training and support for sales reps. By working together to implement these strategies, we can build a stronger, more mutually beneficial partnership that is better equipped to thrive in the competitive beer distribution industry.
Why did I make this change?
Reallocating supplier co-op dollars to grow our Gross Profit per Case Equivalent (GP/CE) has been a part in my company’s path through the sales transformation that our company has achieved. By redirecting these dollars towards strategies that increase GP/CE, we have been able to build a more sustainable and profitable business model that benefits both us and our supplier partners.
Our focus on selling the highest volume and profit packages and connecting those results to our sales team incentives, has helped us to drive significant increases in sales and profits. And by getting our supplier partners to invest in growing our GP/CE, we have been able to further increase our company’s profitability over time.
You can make this transformation too
Are you looking to transform your distribution business and increase profits for both yourself and your supplier partners? The VXP system can help you fast track these changes in just 60 days.
The VXP system is a proven process for helping distributors and suppliers to grow their Gross Profit per Case Equivalent (GP/CE) and build a more sustainable and profitable business model. By working with the VXP system, you can identify opportunities to increase volume and sell higher-margin products, reduce costs, and invest in training and support for your sales team.
Don’t wait any longer to start your transformation. With the VXP system, you can be well on your way to increased sales and profits in just 60 days. Contact us today to learn more and get started on your journey towards success.