Situation

Why are we paying the incentives?

ChemCo is a global manufacturer of branded products sold through its wholesalers to individual retail distributors. ChemCo was experiencing low overall sales growth despite volume incentive agreements in place with wholesalers and large incentives being paid out.

Synaptic was asked to improve the current incentive program to better facilitate sales growth.

Approach

Restructuring the incentives

Our approach was to:

• Perform a detailed review of current wholesaler incentive agreements and wholesaler performance
• Identify key issues and problem areas
• Design a new program to achieve volume and performance growth

Insights & Recommendations

Paying for non-performing

ChemCo had an existing volume incentive program that paid incentive based on individual retail site performance and not total wholesaler performance. Therefore, wholesalers declining in overall sales were still receiving significant incentives because of performance at one or more sites. An additional implication was there were no contract incentives for wholesalers to re-deploy capital tied up in poorly performing sites to new and better performing sites to optimize product through-put. We designed new incentive and retail site improvement reimbursement programs to facilitate volume and performance growth.

Results

Reducing payment while maintaining performance

Client implemented new programs tied to wholesaler volume growth and performance 
Achieved substantial savings while maintaining total sales volume and growth