Perceptive and experienced manufacturers always know that the quality of their sales efforts directly correlates with how profitable their business is. Thus, for organizations like FMCG, CPG, and F&B that are marked by lower prices, slimmer margins, and higher volumes, quality sales might just be the lifeblood that keeps the engine running.
But in today’s cutthroat competitive market players gear up every day to compete for shelf space that they are worthy of, there is one particular factor that tends to determine the extent of their success – Secondary Sales.
This content takes a deep into everything related to Secondary Sales and how companies can leverage the right strategies and technical tools to drive better results.
What are Secondary Sales?
A manufacturing company or a national supplier when making a sale to any location (city/state/region) distributor, is known as Primary Sales. Whereas when a distributor invoices the same product to a retailer, this transaction is known as Secondary Sales.
In the secondary sales, the company decides the landing price(RLP) of the retailer which includes the distributor margin. The company’s sales rep (SR) or the distributor sales rep (DSR) books the order and raises the invoice at the time of delivery.
In order to make a smooth path for effective management of channel participants, Secondary Sales teams consist of the following team members:
- Sales Reps (SR/TSI): Salaried employee of the organization, who takes orders from the retailers and passes those orders to the distributor to supply. In some companies, they are also referred to as Territory Sales Incharge.
- Distributor Sales Reps (DSR): Distributors hire the employee and the company reimburses the salary expenses to the distributor.
- Area Sales Manager (ASM): SR/TSI directly reports to the ASM who take care of the sales targets, achievements, and activities that are set for a particular area.
- Regional Sales Manager (RSM): They are responsible and accountable for the sale of a business’s products or services in a specified geographical region. All ASMs directly report to the RSM.
- National Sales Head (NSH): Responsible and accountable for sales management, budget control, compensation programs, and incentive planning in the entire nation.
- Distributors: Independent business owners, who are part stakeholders for every business conducted in their area (also referred to as territory). They invest upfront and trustworthy in the inventory bought from the company and they, in turn, supply the goods to the retail & wholesale channels & at a pre-decided unit price. They are also responsible and accountable for the collection of sale transactions.
In managing and maintaining a healthy supply chain for the company, all of these participants play their respective roles.
It is quite easy to know and understand that Secondary Sales are important since it acts as a helping instrument of direct demand creation for the business. However, this also means that it is often outside the purview of the control of the organization and depends upon the performance of distributors and the perseverance of the sales team to push the product into the market.
Factors affecting the quality of the sales include:
- Brand equity and popularity of the company.
- Availability of stock with the distributors.
- Credit availability and the effectiveness of the promotions of the trade.
- Awareness and knowledge of the product and business potential to retailers.
- Availability and visibility of products on shelves.
Importance of Secondary Sales Management
In any commercial commodity secondary sales management is an important aspect of the sales life cycle, especially for new product launches. Here is everything that makes secondary sales an essential part of any FMCG/CPG/F&B sales strategy:
Coverage and Placement
One of the important ways to boost sales growth is to place proliferate products in new outlets on a regular basis. An understanding of potential new markets that need to be explored is critical to realize this.
Product Availability on Shelf and Adequate Replenishment
Once the finished product has been placed in relevant outlets and regions, there is always a risk of it running out of stock during instances of high demand or peak season. Therefore, reorder booking and replenishment cycle must be accordingly well planned to be consistent. The frequency of ordering may differ from one product to another or from outlet to outlet.
Product Positioning and Brand recall factor
In an outlet placing the product on the shelf is only half the story. Equally, it is also necessary to ensure that the product moves off the shelf. For this action, it has to follow certain norms to maximize its awareness amongst customers. For instance, product must be placed at the eye level of the customer to ensure that it is easily visible to them.
Retailer Relationship and Trust
Even after diligently following all the previous steps, there is no assurance that everything will go as per the plan. In the sales funnel every retailer or shopkeeper is a vital influencer and there can be many reasons why they might be favouring one product over another. And this is possible even after the margins are good enough.
Companies regularly launch new products and some of them take off and are successful, others fail. There can be various reasons for the success and failure of a product, such as issues with the area/outlet chosen to launch the product, effort spent in activating tertiary sales, retailer and distributor knowledge of the product and schemes, lack of efforts in collecting and understanding customer feedback in time, and many more.
In order to handle higher product throughput within a diverse as well as a competitive market, it is necessary to acknowledge the noteworthy role of sales growth. The cost implications of handling and monitoring old stock in warehouses, managing returns, detecting expiration, and addressing retailer concerns cannot be left unattended. Hence, for well-established brands, it becomes essential to consistently update their inventory at every level. Provided the dynamic nature of the market with new brands and retailers entering rapidly, it’s challenging to predetermine specific inventory levels in any given situation.
Enhance Sales Performance
Evolving into a robust strategy to connect with fresh leads in a mature market can be a daunting work, frequently leading to minimal sales increases. Rather than exclusively targeting top-performing accounts, ensure targeting underserved accounts with minimal sales ratios. Maintaining a strong market position necessitates concerted efforts from sales team members, supervisors, distributors, and promoters to improve the complete sales cycle.
Assessing the Sales Team and Distributors
To provide distinct value to your product in the diverse market, it is imperative to administer a thorough marketing strategy that depends heavily on channel partners and the sales team members. Hence, when companies invest considerable amounts of resources in evaluating and hiring the accurate partners and employees, involving consultant fees, it is imperative to ensure a consistent demand for their services. Although, the main attention should shift from merely sustaining them to consistently examining their performance to assure they align with your business objective. Constant performance assessments are beneficial.
Best Practices to Boost Secondary Sales
With the previous sections in mind, it goes without saying that Secondary Sales is crucial to creating an optimal sales and distribution infrastructure to underpin sustainable sales growth. Let’s take a look at the foremost practices that will help to do so:
- Effective Sales Planning
- Sales call process Training & Product knowledge
- Art of Product Placement
- Understanding and servicing retail channels
- Optimal Marketing and Merchandising
- Trade Promotions
- Performance Monitoring KPI and KRA Tracking
- Work culture and people management
- Using the Right Set of Tool
The process of secondary sales is one of the critical beasts to handle and involves the management of numerous disparate variables. This is the essential side-effect of placing a primary business goal in the hands of external agents. However, this does not necessarily make it a con. With the above-highlighted practices, Secondary Sales can be potentially turned into a powerhouse of revenues for an organization.