Seize new pricing opportunities

As with any strategic decision-making process, you should start with understanding the data supply chain and the level of insight and understanding that can be gained before beginning the GtN transformation journey. Develop and align on a clear understanding of the major data sources, spend allocation logistics, assumptions, and the must-have versus nice-to-have data fields in order to identify data-related roadblocks early on. However, don’t let perfection get in the way of an agile approach to creating momentum. Developing “imperfect” prototypes of analysis helps surface priorities and needs.

Use granular analysis, versus averages, to understand all GtN investment contributions and identify opportunities. However, rather than negotiating each investment individually, agreements should be optimized, negotiated, and tracked on a total customer investment basis. Investment levels should be allowed to shift across buckets to create win-win opportunities based on buyer and seller priorities and investment performance levels, as opposed to managing each P&L line item in isolation.

Ensure the total spend distribution is balanced between fixed allowances and growth-related conditions. This mix is typically driven by customer account goals and market dynamics, with a goal to incent growth or profitability-enhancing customer behaviors without providing unearned payments.

Regularly consider whether you are investing in the right customers and whether your investments are driving desired results. Review inherited agreements from M&A activity or other outdated programs to ensure they are accounted for in the broader category strategy and avoid leakage from discount “stacking” or customer cherry-picking.

Ensure the eligibility logic of your gross-to-net spend investments is in line with your commercial planning process and strategy. Some accounts benefit from aligning all incentives at a certain brand level, while some businesses prefer managing programs at the category or business-unit level.

Maintain similar term structures (e.g., program mechanics such as growth tiers and rate structures) and policies (e.g., same calculation of “growth” for all customers and programs) across the business for easy aggregation and performance measurement. Your architecture should be flexible enough to optimize ROI but simple and clear enough to drive the actual customer behavior you are seeking and avoid costly back-end management and leakage.

As they set commercial investment strategies, companies tend to prioritize their top accounts. However, when considered in aggregate, smaller accounts can offer a substantial opportunity to standardize deals and improve investment ROI—and changes may be easier to execute. Instead of managing single agreements with each account, we have the following recommendations:

• Design a logical growth journey: Ensure your volume qualifiers, growth tiers, and payouts are set to avoid incentive “stalling” between one program tier and the next.
• Communicate transparently: Ensure that customers understand the eligibility logic and tier progression and that program eligibility truly adheres to the logic in order to avoid spend leakage and promote strong account relationships.
• Revisit programs annually: Perform ongoing analytics on customer performance, and revisit goals every year or planning cycle.