Tracking Success of the Top 5 Wine Sales Promotions: BTG, Quantity Discounts, Closeouts, Incentives, and Samples
In the three-tier wine industry, there are a variety of pricing and promotion strategies you may implement with a distributor in hopes of driving more sales. But, do you know which discounts are worth it? Which ones work the best and when or where? What promotional dials you should turn up, and which ones you should turn down? The truth is many wineries and wine suppliers are operating on pure guesswork, instinct, and industry “standard” strategies when it comes to overall sales promotions.
When looking at whether or not your discounts are having a positive impact on both sales and bottom-line dollars, you need to be able to answer succinctly answer the question: is the spend driving the intended lift?
Let’s look at the most common promotions that suppliers utilize with distributors and how you should be tracking them to determine success:
- By-The-Glass (BTG):
- Target Customer: Intended for on-prem sales such as restaurants.
- Goal: By-the-glass wine sales tend to be expensive because a restaurant or bar sees it as risky. However, it gives wineries a low-risk way for consumers to try their products. This combination is why suppliers often offer some of their best incentives to get on BTG lists.
- How you’ll know if it’s working: Ultimately, if your on-premise by-the-glass promotions are working, you’ll see a trend of higher sell-through at retail, often around the area where the BTG is offered.
- Why it’s important to track: By-the-glass depletion allowances (DAs) are not intended for grocery or liquor store sales, but it’s not uncommon for a buyer from one of those retailers to put pressure on the distributor to receive better pricing. Ultimately, distributors should be responsible for monitoring leakage; however, the onus is truly on the supplier to check that the distributor isn’t offering the incentive level to everyone, negatively affecting critical brand standards.
- Quantity Discount:
- Target Customer: Retailers such as grocery or liquor stores.
- Goal: Move cases of product in quantity, not just single bottles.
- How you’ll know if it’s working: If your quantity discount promotion is working, you’ll see a more significant number of cases running through your targeted channel, such as retail chains and large off-premise retailers.
- Why it’s important to track: A “case sale” means something different to you as a supplier than to a distributor. You view a case sale as a full case of your own label. However, your distributor may view a case sale as a full case of whatever mix of bottles their retail customer wants. Unfortunately, that could mean your distributor offers the quantity discount promo on a case of wine that’s mixed with your competitor, and instead of selling a full case of your product, the sale could be as few as 2 bottles of your own label, which in the end, defeats the purpose of the promotion altogether.
- Target Customer: Anyone
- Goal: Wine is an annual gain. After each year’s harvest, there’s an influx of inventory with limited warehouse space to store it. Not to mention if the year is a bumper crop, there are even more cases to store, both for the supplier and the distributor. The previous year’s vintage needs to be cleared out to make space, and so a closeout promotion is created.
- How you’ll know if it’s working: If your closeout promotion is working, you’ll see older vintages selling through and warehouse space clearing up.
- Why it’s important to track: As mentioned, the point of a closeout promo is to sell completely out-of-stock of a particular label. That means that once the label is gone, the promo should be discontinued. Unfortunately, what we see all too often is that the closeout price gets left in the system for months, sometimes years, after that vintage year is gone, but no one has bothered to check, and distributors are continuing to use the DA.
- Target Customer: Distributors and their sales teams
- Goal: The goal of incentives is dependent on the incentive type. For example, if your goal is to increase the number of PODs (points of distribution), you may offer a SPIF(Sales Promotion Incentive Fund) to any sales team member that opens a minimum number of new PODs. Offering a standard dollar discount off cases for a marketing allowance is another common incentive. Any incentive can be done on a regional level as well.
- How you’ll know if it’s working: So long as your incentives are directly tied with a quantifiable and specific goal, you’ll know what you’re offering is working if your metrics on that goal are being met.
- Why it’s important to track: Incentives are a large portion of billbacks for suppliers, but most pricing platforms can’t and don’t track it. By setting up a budget to bill against, it’s easier to identify trends of what is and isn’t working. In addition, when your SPIF is based on a specific region, you’re able to mark that spend to that region, not just the state the distributor is located, which further identifies the program’s success.
- Target Customer: Retail customers and targeted on-premise accounts
- Goal: Along the lines of a by-the-glass program, the goal of sampling is to drive trial that ultimately results in more sales and PODs.
- How you’ll know if it’s working: You’ll know your sampling program is working if your overall case sales and PODs increase.
- Why it’s important to track: Sampling programs are arguably the most misused promotion. Ideally, they target new account placements, but sampling programs are also used for events and auctions or other fundraisers as a goodwill gesture from the distributor. Distributors will pull from inventory they have already paid for, then just send the supplier a billback. General ledgers will show a dollar amount spent on samples but with no level of detail. It’s important to track and see the product being sampled, quantity, vendors, etc., to identify where the program is working, where it isn’t, and any potential misuse of the program.
As with any business, anytime you spend money to make money, you need to be able to track it. Hope is not a strategy, and gut feeling only goes so far. If you’re calculating a gross-to-net number, but you’re not counting all discount and promotion types, then you’re not actually getting true data.
On the same side of that coin, if you’re inadvertently allowing distributors to drive the promotional system because you simply don’t have the complete price management and tracking tools in place for proper oversight, you don’t give yourself the ability to push and pull to the results you desire.
These promotional tracking gaps don’t just compromise the overall brand; it jeopardizes the bottom line.
Using a full-cycle promotion and spend management platform like Tradeparency, the only industry solution available that captures 100% of spend, you can accurately track every dollar. With Tradeparency, you will gain insight into the whole promotion picture, giving you the opportunity to create profitable promotional models, support your brand objectives, and drive sales at any level.
Ready to turn those dials? Schedule a demo of Tradeparency today.