Turning Complexity into Control: Tata UK’s Deduction Management Success Story
Background Tata Consumer Products UK Limited is a £239 million consumer goods busine...
Don’t get confused when it comes to terms and phrases related to CPG Revenue Management. UpClear has made it easy to keep up with the jargon by listing out everything you need to know below. Navigate the world of Consumer Goods with confidence and ease.
Note: In many cases, there are different ways of describing the elements of CPG Revenue Managment. This resource contains UpClear’s definition, but we’ve included cases where multiple labels are present as much as possible.
| Account Planning | The process of creating detailed plans for key accounts that represents the manufacturer’s relationship with a distributor or retailer. Account plans cover distribution, pricing, long-term contractual agreements, slotting, and promotions. They serve as the source of information for all cross-functional stakeholders within the manufacturer and provide information used in business process including pricing conditions, volume forecasts, and financial accruals. |
| Accrual | Refers to expenses incurred that impact a company’s net income, but cash related to the transaction hasn’t yet changed hands. In the context of trade spending expenses, this includes monies paid from manufacturers to retailers or distributors in the form of bill back allowances, scan allowances, and lump sum fees. These are accrued, usually in a month-end process owned by the Finance function, in the time period in which the activity (e.g. promotion) takes place. At a later time, a payment is sent to the distributor or retailer, or they deduct the value from a payment they make to the manufacturer. There is then a process to assess if the actual expenses are more or less than the value that was accrued after which adjustments made. |
| Actual | Refers to sales and/or expenses for which transactions have taken place. |
| All Commodity Volume (ACV) | A metric produced by syndicated data companies that represents the total sales in monetary value of all products sold within a specific store or across a group of stores (not product-specific). There are a number of derivatives of this metric that include measurements of distribution and promotion, presented as %ACV. These metrics use weighting to calculate the presence of the product or promotion tactics. The ACV of the stores in which your products are sold or promoted is divided by the total ACV of the retailer. |
| Assortment | The selection of products both within in a manufacturer’s portfolio and across competitive products that are sold in a retailer. Also referred to as “listings.” |
| Base Sales | The sales volume of a product at the everyday price and from the everyday location (shelf) when promotional offers are not present (i.e. no price discount, advertising, or display). |
| Bill Back | Terminology describing a variable, deferred allowance that is given on all product shipped in a defined window of time. |
| Bottom-up Forecast | A prediction or estimate of future sales. In the context of CPG customers management, this is the customer/product estimate that is the responsibility of the customer-facing resources. Also referred to plan. |
| Brand Loyalty | The tendency of shoppers to purchase a product due to satisfaction, trust, and emotional connection with the brand. |
| Budget | A particular amount of money that is allocated/provided. In CPG customer management, this is usually used in relation to sales (revenue) and/or trade spending goal (revenue) or limit (trade spending). |
| Buy One Get One Free (BOGO) | A promotional pricing offer where consumers receive an additional product for free when purchasing one at the regular price. |
| Cannibalization | The reduction in sales of a product due the purchase of another product that is a suitable substitute. This could be a sister product within the brand or a competitive product. |
| Category Management | A retailing and supply management concept where products are grouped into categories based on shopper/consumer behavior and managed as a strategic business unit. |
| Channel | Terminology used to describe different types of retailers. Examples include “Food” (grocery stores), “Hyper markets,” “Drug” stores, “Mass Merchandisers,” “Convenience,” and eCommerce among others. |
| Cost of Goods Sold (COGS) Expense | A metric on a company’s income statement that represents the direct costs of producing the goods sold by a company. This includes the cost of the materials and labor directly used to create the good. Referred to as a “below the line” expense where the “line” is Net Revenue. |
| Cross Merchandising | The practice of displaying complementary products together to drive sales by encouraging customers to purchase additional items. |
| Dead Net Cost | The price a distributor or retailer pays for a product after all discounts, rebates, and promotional allowances have been applied, often used to determine the actual profitability of a product. |
| Deduction | A practice used by distributors and retailers that reduces payments to manufacturers for a variety of reasons including settlement of promotional agreements, contractual discounts, prompt payment discounts, damaged/spoiled products, and fine/fees levied by the distributor or retailer for business rule infractions (e.g. price discrepancies, late truck arrival, shortages). |
| Deferred Allowances/Fees | Refers to the timing of payment for a contracted discount or lump sum fee that is after invoicing. Usually applies to bill back and scan variable allowances, ad fees, display fees and slotting. Opposite of (off/on) invoiced allowances, where discounts are subtracted from the manufacturer’s invoice. Distributors and retailers provide invoices for deferred allowances/fees and they can be settled with a) a payment from the manufacturer, or b) deduction by the distributor or retailers. |
| Demand Planning | A category of software used by CPG manufacturers and a supply chain management process used to project future sales demand for use in raw material procurement, product production, and distribution to customers. |
| Direct Customer | A distributor or retailer that purchases product directly from a manufacturer. |
| Direct Sales | Sales from a manufacturer to a customer with no intermediary. Opposite of indirect sales. |
| Direct Store Delivery (DSD) | A distribution method where manufacturers deliver products directly to retail stores, bypassing warehouses. |
| Display | Presentation of a product at a location that is not its regular shelf home. These locations include end of aisles (endcaps), in aisles, dedicated areas within stores. A display can be created with product received in cases (open stock) and/or pre-build, free-standing display units offered by the manufacturer. |
| Distribution | The process of a a) manufacturers fulfilling orders, arranging logistics, and transporting products to distributors and retailers, b) distributors and retailers distributing products from warehouses or distribution centers to retail stores. An expense metric on a company’s income statement that representing the cost of these activities. Referred to as a “below the line” expense where the “line” is Net Revenue. |
| Electronic Data Interchange (EDI) | The electronic exchange of business documents (e.g. purchase orders) between companies in a standardized format. |
| Endcap | A display located at the end of an aisle in a retail store, often used to feature promotional items or high-margin products to increase visibility and sales. |
| Facing | The number of units or facings of a product that are displayed on the retail shelf. |
| Feature | Terminology used for an advertising executed by retailers. These can be physically printed and distributed in stores, newspapers, or mail, or digitally distributed on websites and/or apps. |
| Forecast | A prediction or estimate of future sales and/or spending for which transactions have not taken place. |
| Forecast Accuracy | The degree to which a company’s forecasts match actual sales, with higher accuracy leading to better inventory management and reduced costs. |
| Fund | In the context of CPG Revenue Management this refers to a categorization of money that is approved to be used for activity at the customer. Funds align to a manufacturer’s general ledger accounts and may have constraints placed on them that define where, when, and how money can be used, including customers, products, windows of time, and types of activities. |
| General Ledger (GL) | Financial document used to record a company’s ongoing transactions. Transactions are organized into assets, liabilities, revenues, expenses, and owner’s equity. |
| General Ledger Account | Categorization of transactions within a general ledger. In the context of Revenue Managment in CPG, general ledger accounts define where an expense category is located on the manufacturer’s income statement (AKA P&L). |
| Gross Profit | The financial gain of a company after deducting the costs associated with producing and selling its products or services. It is calculated by subtracting the cost of goods sold (COGS) from total revenue. Gross profit and derivative metrics like gross margin show how well sales cover the direct costs related to the production of goods. |
| Gross Revenue | A metric on a company’s income statement representing total value of goods sold in a period. Also referred to gross sales, turnover, and topline sales. |
| Income Statement (P&L) | A financial artifact that details the revenues and costs of a business over a period of time. The income statement starts with revenue, then subtracts direct and indirect costs. Direct costs are those that are directly related product production (COGS). Indirect costs are those administrative and selling costs that are necessary for running the business (also known as overhead). Revenue minus all costs is profit(loss), also referred to as net income. Income statement also referred to as Profit/Loss statement or P&L. |
| Incremental or Uplift | In the context of CPG Revenue Management, incremental refers to sales and/or expenses that are attributable to promotional tactics (e.g. discounted price, display, advertising) that influence shopper decisions and lift sales beyond what they would be under normal circumstances. Also known as uplift and promotion “impact.” |
| Indirect Customer | A retailer that sells a manufacturer’s products but does not buy them directly from a manufacturer. The manufacturer may engage in selling activities, like listing and promotional offers, creating spending commitments directly with an indirect customer. |
| Indirect Sales | Sales from distributor or wholesaler to a retailer. The opposite of direct sales. |
| Integrated Business Planning (IBP) | Terminology that describes a category of software for CPG manufacturers and/or work completed by stakeholders across functions that participate in a business process. In CPG this typically refers to the planning work across supply chain, sales, accounting, and finance teams and the sharing of relevant information across these functions in sales forecasting, execution of plans, financial accrual definition, and settlement of customer claims. |
| Latest Estimate | See Projected. |
| Lump Sum Fee | A charge from a distributor or retailer that is an absolute monetary value. Commonly used for slotting and to secure advertising and/or display promotions. |
| Manufacturer Charge Back (MCB) | Term used by distributors and indirect retailers referring to allowances/discount on all products shipped (i.e. not register scans), similar to what other channels refer to as a billback. It is offered by the manufacturer to either the distributor (who can then offer the deal to many retailers) or to a specific indirect retailer. In most cases, MCBs are processed by the distributor and settled via deduction. |
| Manufacturer Profit | A metric on a company’s income statement representing a financial gain. Calculated as the difference between the amount earned (revenue) and the amount spent in buying, operating, or producing products. Also referred to as net income or contribution, is said to be “the bottom line.” |
| Manufacturer Profit Margin | A financial ratio that measures the percentage of financial gain (profit) earned by a company in relation to its revenue; profit divided by gross revenue. |
| Merchandising | The practice of promoting the sale of products via their presentation in retail outlets, including product placement, discounted pricing, and displays. |
| Net Revenue | A metric on a company’s income statement representing a company’s sales (gross revenue) minus returns, discounts, and allowances. In CPG, trade spending is the majority of monies categorized as “discounts” and/or “allowances.” It reflects revenue after direct sales-related expenses are subtracted. Also referred to as net sales. |
| Net Revenue Management (NRM) | A holistic approach to managing the net revenue of a business by optimizing sales-related expenses; pricing, promotions, and product mix. |
| Off Invoice/On Invoice | Terminology used to describe a discount that is present on the manufacturer’s invoice to their customer and reduces the total of the invoice. Companies in North America refer to this as “Off” Invoice (OI). Companies in other parts of the world refer to this as “On” Invoice. |
| On-Shelf Availability (OSA) | The measure of how often a product is available on the shelf for customers to purchase, with high OSA indicating effective inventory and replenishment processes. |
| Out of Stock (OOS) | A situation where a product is not available on the shelf for consumers, leading to missed sales opportunities and customer dissatisfaction. |
| P&L | See Income Statement. |
| Plan | See Bottom-up Forecast. |
| Planogram | A visual representation of a store’s products or services on display, designed to maximize sales by placing items in the most effective locations. |
| Point of Sale (POS) | The location and system where a retail transaction occurs, often involving the scanning of products, payment processing, and receipt generation. |
| Price Discount | The difference between the everyday price and the promoted price. Typically calculated as an absolute value and percentage |
| Price, Everyday | The retail price of a product when there are no promotional discounts. |
| Price, Offer Type | The way the price is presented to shoppers when a product is promoted. This can be a % discount, multi-buy (e.g. 2/$4), Buy X Get Y Free, Buy X Save Y %. |
| Price, Promoted | The retail price of a product when there is a promotional discount. |
| Product Mix | The variety of products that a company offers for sale. |
| Product Turnover | The rate at which inventory is sold and replaced over a specific period. |
| Projected (sales, spending) | Refers to metrics that are a combination of actuals to-date and forecast to-go. Also referred to as Actual+Estimate and Latest Estimate. |
| Promoted Group | Products within a brand’s portfolio that are priced the same and promoted together. E.g. 12-pk Sodas: regular cola 12-pk, diet cola 12-pk, zero sugar cola 12-pk, lemon lime 12-pk. Also called Promoted Price Group (PPG) and SKU Group. |
| Promotional Calendar | A schedule outlining the timing and details of planned promotions throughout the year. |
| Promotion Effectiveness | A metric that assesses the success of a promotional activity in driving sales and achieving the desired return on investment (ROI). |
| Retail Audit | A systematic process of evaluating retail store operations, including product availability, pricing, and merchandising. |
| Retailer | A business that sells products to the public. Retailers buy products in bulk from wholesalers (indirect) or manufacturers (direct) and sell them in small quantities to shoppers. |
| Retail Price Markup | The percentage added to the cost to determine the retail price. Used to set prices; an important metric to ensure that costs are covered by the selling price. =(Retail Price-Cost)/ Cost |
| Retailer Profit Margin | The percentage of the retail selling price that is profit and enables understanding of profitability across products or time periods = (Retail Price – Cost)/ Retail Price |
| Return on Investment (ROI) | A financial ratio that measures the percentage of financial gain in relation to expenses incurred for to achieve that gain. Return divided by investment. In CPG Revenue Management, ROI is commonly used as a measure of promotional effectiveness. Return is incremental profit and investment is trade spending. |
| Revenue Growth Management (RGM) | A strategic approach to managing pricing, promotions, and product mix to drive sustainable revenue growth while balancing profitability and market share. |
| Scan Allowance | Terminology describing a variable, deferred allowance that is calculated by multiplying a per unit rate by the number of products sold to shopper in a defined window of time. |
| Secondary Shipments (SS) | Sales from a distributor or wholesaler to a retailer. Also referred to a distributor shipment. The data representing secondary shipments is sometimes referred to as “spins” data or “depletion” data. |
| Sell-In (SI) | Direct sales from a manufacturer to a distributor or retailer. Also referred to as shipments. |
| Sell-Out (SO) | Sales from a retailer to shoppers. Also referred to as retail sales. |
| Sell-Through Rate | The percentage of inventory sold over a specific period, indicating how quickly a product is moving through the supply chain. |
| Selling, General, & Administrative (SG&A) Expense | A metric on a company’s income statement representing all non-customer, non-production expenses. Examples of these expenses are marketing, advertising, compensation, rent, and utilities. Referred to as a “below the line” expense where the “line” is Net Revenue. |
| Shelf Life | The length of time a product can be stored before it becomes unsuitable for sale or consumption, influencing inventory management and pricing strategies. |
| Shopper Marketing | The practice of understanding and influencing consumer behavior in-store through targeted marketing and promotions to drive purchases. |
| Stock Keeping Unit (SKU) | A unique identifier for each distinct product and service that can be purchased, used to track inventory and sales. |
| Supply Chain Management (SCM) | The management of the flow of goods and services, including all processes that transform raw materials into final products, ensuring efficiency and cost-effectiveness. |
| Target | Refers to a goal, usually sales in revenue or cases, for which an account team is accountable. |
| Terms | Terminology use to describe discounts or other spending with customers that is generally not promotional in nature. These can be long term, contractual discounts or lump sum amounts that are for specific purposes. |
| Trade Deal | An agreement for a discount that is usually a variable rate of sales between a manufacturer and a distributor or retailer. These are usually for promotional activity. |
| Trade Promotion Management (TPM) | Terminology describing a category of software for CPG brands and/or the business process of planning, executing, and analyzing business with customers. |
| Trade Promotion Optimization (TPO) | Terminology describing a category of software for CPG brands and/or the business process of analyzing past promotions and simulating new promotions/combinations of promotions in an effort to achieve the best outcome possible within internal rules that have been established and customer requirements. |
| Trade Rate | A financial ratio that measures the percentage of trade spending relative to revenue; trade spending divided by gross revenue. Trade rate is often a control metric, defining the level of trade spending a customer is allowed to use in customer activities. Trade rate is often compared across customers and product as a measure of efficiency. |
| Trade Spending | A metric on a company’s income statement representing an expense category made up of spending for activities executed with/through customers. The spending is usually promotional in nature supporting discounted prices, and fees for advertising and in-store displays. It may also include slotting or placement fees that secures space in customer warehouses and shelves. These expenses are included in the calculation of Net Revenue, or “above the line.” |
| Universal Product Code (UPC) | A barcode symbology widely used for tracking trade items in stores, scanned at the point of sale. |
| Uplift | In the context of CPG Revenue Management, uplift refers to sales and/or expenses that are attributable to promotional tactics (e.g. discounted price, display, advertising) that influence shopper decisions and lift sales beyond what they would be under normal circumstances. Also known as incremental and promotion “impact.” |
| Variable Allowance | A discount that is calculated multiplying a rate per unit or case by quantity. |
| Velocity | The rate at which a product sells through retail channels, often used to measure the success of a product launch or promotional activity. |
| Volume Decomposition | A method used to break down sales volumes into different contributing factors, such as baseline sales, promotional lift, and cannibalization, to understand the impact of various elements on total sales. |
| Wholesaler | An intermediary entity that buys goods in bulk from manufacturers (direct) and sells them to retailers or other businesses, typically at a markup. |
UpClear makes software used by Consumer Goods brands to improve the management of sales & trade spending. Its BluePlanner platform is an integrated solution supporting Trade Promotion Management, Trade Promotion Optimization, Integrated Business Planning, and Revenue Growth Management.
