How to Solve Your Major Three-Tier Pricing Challenges With Winery Software
When was the last time you revisited your pricing and trade spend management strategies? Was it five years ago? Ten? More?
As we get rolling in 2022, this is your opportunity to address the common pricing challenges winery and import businesses face so you can better manage (and improve) your margins, run DAs more efficiently and effectively, home in on your brand, hit your sell-through goals, and start increasing profits.
Of course, improving your processes and performance means adjusting your approach to the entire cycle of pricing and three-tier distribution management. This includes everything from promotions, depletion allowances, your QBRs, and your gross-to-net—and we can help.
This article will address the 4 most common three-tier pricing challenges in the wine industry, how winery software can help solve them, and link you to resources that will help you learn more and take practical next steps.
Challenge #1: Tracking Promotions in Real-Time
Planning and tracking your promotions should be straightforward. Unfortunately, they rarely are. There’s no doubt you’re sitting on lots of vital information about promotions and pricing. Still, it’s probably disorganized, living in emails, on a dozen (or more) different spreadsheets, or even inside your head.
If promotion management isn’t integrated with your ERP, likely, you aren’t accurately tracking them. Furthermore, you can’t fully leverage data on promotions performance to know which you should repeat, which to scrap, and which markets could use new ones. It’s also challenging to anticipate important events like chargeback invoices from distributors—which should never be a surprise but often are).
So, how do you track promotions in real-time? You can start by choosing winery software that helps you get a complete picture of the real promotion spend and pricing data all in one system. Tradeparency lets you track all your promotions, such as by-the-glass programs, depletion allowances (DAs), free goods, incentives, and samples.
You’ll be able to plan profitable promotional models at any level from the most comprehensive view of your trade program performance. Automating pricing approvals from any device will enable your sales team to serve and coordinate promotions with your distributors more effectively in the moment, without waiting for long allowance authorizations that only come after lengthy accounting exercises.
Challenge #2: Getting the Full Picture on Gross-to-Net
It can be easy to focus exclusively on depletion allowances (DAs) when managing your pricing and margins, especially when most pricing tools focus just on DAs too. But they don’t tell the whole story and are only one in a long list of expenses you need to account for. These other expenses include sales incentives, non-distributor vendors, and sample costs.
Distributors could be running multiple samplings a month, and each one will have a different agreement. But do you know the particulars of each agreement? A 50% sampling cost with the distributor? Or maybe it’s 60-40. Are you covering the whole thing?
Then there’s the sales tax that appears on the invoice from the distributor. How do you account for the tax in your calculations?
There are also the challenges of tracking and attributing expenses from non-distributor vendors. Does your system let you invoice across specific geographic regions after running a demo across multiple areas? Your regional sales rep likely isn’t capturing expenses against sales and bottom-line pricing. Why? Because they presumably can’t expense an invoice from non-distributor vendors across specific geographic regions (instead of the region where the company happens to have its headquarters).
On top of all that, you may also have expenses stored in separate systems —billbacks are in one spot and other expenses in Concur. This creates more work for you to pull expense reporting, making it nearly impossible to get accurate pricing and margin analysis without significant administrative work.
Using winery software that centralizes every one of your expenses will give your winery more visibility and more control over the profit margin. Start by learning what is absent from your pricing and margin analysis, and then read our article on how to fix it.
Challenge #3: Covering the Gap in Third-Party Depletion Data
Most traditional wine pricing strategies and solutions use third-party depletion numbers that won’t account for all agreed-upon deals and real invoices. It sounds reasonable in theory (especially since it’s standard industry practice) but relying only on external information results in at least a 30% gap in pricing data.
The gap is especially evident when you reconcile chargebacks and are missing the actual agreement data with the distributor. You stand to leave thousands of dollars (sometimes tens or hundreds of thousands) on the table going this route.
But when you lean on modernized winery software that uses real-time data and actual invoices integrated with centralized pricing grids and accounting records, you will remove all the guesswork associated with chargebacks and recapture the rest of 30% to protect your profit margin. You’ll have the ability to verify that the price and promotion commitments you made align with the chargebacks and invoice adjustments thanks to 100% coverage on distributors, marketing, and promotions.
Read 5 Ways to Cover the Common 30% Gap in Wine Margin Management to Stop Leaving Money on the Table.
Challenge #4: Putting Your Quarterly Business Reviews (QBRs) to Work
Often long and rarely about more than tracking down finances, QBRs between suppliers and producers is something sales teams have come to dread. Quarterly regroups with the ambassadors of your brand could be about more effective consumer reach, brand placement, and how to increase sales while strengthening your winery and distributor relationships. Instead, they’ve become tedious and inefficient meetings that focus on chasing down invoices because you don’t have the correct data or insights at your fingertips.
How do you make your QBRs more productive and strategic? Start by ensuring that during the QBR meeting, your sales team can track your existing promotions and automate pricing approvals. If you’re using centralized full-cycle winery software, your sales, finance, and IT teams can all be ready to ensure price cohesion and processing at a moment’s notice.
Your sales team will be empowered to respond to status questions because they’ll have access to accurate reports, and your finance team will be free from the painful process of gathering data to approve DAs and promotions (that usually slowed down the QBR in the process).
IT will no longer be burdened with adding custom reports that make it possible to determine the predicted efficacy and margin of a proposed trade plan. Neither finance nor IT will be a bottleneck for the sales team making deals and pushing goals through distributors.
Read How to Improve Your Distributor Sales Quarterly Business Reviews (QBRs) in 3 Easy Steps to get more practical pointers.
Selecting The Centralized Winery Pricing Software That Works for You
Many wineries continue to fall victim to overspending, misallocating funds, or repeating ineffective promotions and incentives in the distribution channel, but centralized pricing software has evolved to meet and solve these challenges.
From accurately reconciling chargebacks to prevent the outflow of unwarranted funds to analytics and insight that delivers a market advantage, there is a reason that comprehensive trade-spend and pricing solutions are rising in popularity.
But not all pricing management solutions are created equal. Where do you start? What functionality do you look for? As with any product or service, some solutions will fit your business, goals, and budget more than others.
We recommend you start by identifying and documenting your top pricing and trade management challenges. Some questions you can ask to jumpstart this are:
- Am I able to track, analyze, and see approved deals by all the product, market, distributor, and region breakdowns I need? Which ones might be missing?
- How do I currently know which promotions are working and which aren’t?
- Can I accurately track spending across all my promotions and distributors, including BTG, samples, and incentives?
- How do we handle deals with distributors who don’t send their pricing with depletions?
- What is our supplier-controlled billback pricing process?
- Does finance ever pay a chargeback invoice on depletion allowances that are no longer valid or aren’t verified?
- What, if any, are current challenges or gaps in our chargeback reconciliation process?
- How do sales managers access their price grids?
In addition, you can use this comprehensive evaluation checklist for wine pricing management software as a personalized guide for your assessment of pricing solutions and help identify additional gaps in your pricing process.
The three-tier wine distribution system is complex and difficult to navigate effectively and efficiently with distributor pricing, promotions, and programs. If you are looking for additional help overcoming the challenges of this model by making it easier to adjust your approach and processes, please get in touch with the wine industry data and pricing experts at Tradeparency today!