80:20 it is not!

In 1987, I read an article written by Porter Henry, President of Porter Henry & Co. In an article entitled ‘The Important Few – The Unimportant Many’ he mentioned in passing that the 80:20 distribution with which we all are so familiar, does not describe the distribution of things in FMCG. In his original article he used data to construct calling plans for a territory, and to illustrate how easy it is to over-service small customers – and thus by definition under-service the few big ones who count. In fact Porter Henry did not make a big song and dance about the fact that 80:20 does not fit grocery, so I will address that issue now.

The 80:20 rule is so well known because it does describe distributions which fit many situations in business. In fact it describes accurately the distribution of sales in industrial selling, where one or two big customers will dominate your orders. But wherever consumers play a large part, there is a different distribution. In this situation the sales are far more evenly spread.

So if you are looking to:

• optimise your sales territories, and ensure your merchandisers or sales reps allocate their time efficiently
• determine if your sales are adequately distributed across a territory
• find out if your product range is too deep
• find out if you should expand your product range

Download the full article The distribution of sales in FMCG / Grocery Case Study PDF

There is extensive functionality within the Promax PX system to deal with customer terms. Terms are date-based. They can be based on the rate or lump sum. Terms can be cascading, that is, the calculation on one term can be based on the calculation of it higher level term. Terms and rebates can be calculated on retail customer turnover.

Promax PX allows the business to test a variety of promotional plans – such as adopting a high/low approach, compared to an EDLP approach. The system allows the user to simulate the anticipated results (revenue, profit, costs, etc) of a variety of scenarios. Once the user has selected the desired scenario they can activate that scenario so that it becomes the operational plan.

Periodically the business needs to develop a new strategy for the next budget period. The Promax PX strategy planner is the ideal tool to enable the account manager to model a variety of approaches to the promotional programme for the new period. Typically the account manager would want to create a scenario for each approach to the customer and the promotional programme, comparing them to see the difference in the financial outcome.

The strategy planner in Promax PX has been specifically designed to enable this scenario planning (What If Planning) to be carried out. Promotional programs can be rapidly constructed with productivity tools that enable cut-and-paste and repetitive copy. The graphical environment facilitates a drag-and-drop mechanism with colour coding of each promotional type.

The spreadsheet style of Promax PX facilitates an easy “what if” analysis of an individual promotion, and entire promotional program or multiple scenarios involving the exploration of pricing elasticity and promotional frequency. Tools like the strategic optimiser allow the business to explore new strategies of pricing and frequency to maximise profitability or marketshare objectives. The strategy planner allows the assembly of scenarios testing tactical plans for any group of products or customers. Full financial evaluation of every strategy is created and easy comparative techniques provide a clear path for the account manager to evaluate the best plan.