How to Manage Retail Trade Spend

Jordan Buckner: [00:00:00] So if you're a brand growing in retail, you might be thinking, when is it time to start planning or managing my promotions and trade spend? You know, deductions, promotions, they get pretty complicated once you expand beyond a couple of retailers. You know, have you thought about what you need internally to be ready for such a system?

Do you have the right team in place? And does that team have the skill sets needed? How much guidance are you actually going to need to make sure that you're covering everything that you need to know and tracking how successful your programs are? So to answer these questions, I invited on Chris Ambarian, who's the co founder of Promomash, to provide his perspective after working with dozens of brands through this transformation. Chris, welcome. 

Chris Ambarian: Thanks, Jordan. Nice to see you again. 

Jordan Buckner: No, I love talking to you. So looking forward to jumping in. I'd love to have you for the audience, like share what brands typically do when they're managing create, spend promotions when they're getting started at retail.

I know a lot of their price starting in Excel, right? Like, what does that look like? 

Chris Ambarian: Yeah. Yeah. You know, [00:01:00] God bless Excel. It's a wonderful tool until it's not. And brands typically go through you know, probably everybody on here realizes Unless it's your first rodeo that as you grow at some point, Excel just becomes untenable.

Probably a couple of million dollars in the first headache that becomes completely unmanageable is deductions which is kind of the spend half of it. But then even eventually the promotion part, probably around 5 million, 10 million for sure. In. Promotions and managing that part of income generation that starts to become untenable.

And then as your business grows, even beyond that, every aspect of it is both too big to handle and also needs to be integrated. If you're going to get a good picture of what's going on in your business. 

Jordan Buckner: So I know when I started selling to Whole Foods with TeaSquares, they would say things like, all right, you know, a number of years ago, like, we want to do a 20 percent off promotion across all our stores in the Midwest region during this time period, right?

And , we are selling direct, so [00:02:00] those are going right to Whole Foods. But if you're selling to them through UNFI, then they'll go through a distributor. So right at the complexity start to happen when you're running promotions. 

Chris Ambarian: Gosh, I mean, the whole subject is a little bit complex.

I like to back up to give you a, just a perspective of, you know, why even bother with TPM. I think TPM is like so many things, a bit of a misnomer or maybe doesn't even describe the The challenge is you're in business and in business you're generating income and you're having expenses. That's kind of the lens through which you ought to be evaluating everything you do.

In CPG, it starts to get complex really fast because it's not a matter of just saying, Hey, please buy my stuff. They send you an order, you send them a bill, they pay you and it's done. there's this whole infrastructure built around promoting your product and then multiplies the income generating side of activities by a factor of five, and then.

Because you promoted, you generate a bunch of expenses and that multiplies that by about a factor of 10. And so you end up with all of this data trying to [00:03:00] piece the picture back together after you've already broken it into a million pieces. And so in order to look at everything, you need to look at all the transactions, non promoted promotions, and all the expenses that the promotions generate and all the expenses that the non promotions generate.

So it's every day, it's promotions. It's. Three levels of distribution. It's super complex and it's hard to keep track of it all. 

Jordan Buckner: Yeah. I think , the thing that a lot of brands start to realize is that if you're doing a promotion in a single retailer, it's fairly easy to track what's going on.

But it gets complicated. I think at two levels, once you start working with a distributor, because the thing that, you know, if you've been in the industry, you realize it, but those new don't always realize it. It's this complicated relationship where. Technically the distributor is your customer, but in the retailer, it's just like a weird, mostly solid line where they're still dictating a lot of, you're not actually being the, 

Chris Ambarian: if you, if you couldn't, you couldn't make it more complex and unworkable if you set out to do it. So I [00:04:00] know only something that happens over nature of our beast. 

Jordan Buckner: If you do the 20 percent off, let's say promotion through a retailer. Then distributors also add in like a management fee on top of that, let alone the type of discount. So you talk for a second around like off invoice promotions versus OIs versus manufacturer chargebacks and how those kind of play into things.

Chris Ambarian: That's an interesting question. So the thing I like to do is Always go back to the original question. What's the original question? Is this piece of business good? How am I doing here? And in order to do that, you need to stack up all your incomes. And all your expenses, whether it's direct or indirect or whatever.

And the problem for, for us is number one is a ton of data. And number two, it's kind of Swiss cheesy. They ask, you don't have the whole picture at every step. And so a lot of times , you're having to. Fill in the blanks or make best educated guesses. But really your effort dollar is best spent trying to get the data and filling in the picture and then actually looking [00:05:00] at the picture.

And it's so easy to fall down any one of those pieces. And that's why I think, you know, the subject coming into today is, you know, are we ready for TPM? I think the biggest challenge is. Mentality going in and what are your expectations? So when it comes to like a, an OI type of promotion you have to be able to see the eye, the invoice that you're looking at, and you have to keep track of that expense.

I can't tell you how many brands I've seen who just in the spirit of expediency, you know, they just They kind of deal with net numbers and don't keep track of what came off the invoice as an expense item that they can then look at as part of some P and L somewhere. It just disappears.

And so that this mysterious source of low margins that you can't manage. And and so it's really hard to have the temperament, the mentality, the discipline to keep track of everything and have a place to put everything so that you can later stack it up and slice it and dice it and find out how you're doing.

You know, I would probably say, and let me know if you agree [00:06:00] that any brand who's running promotions through a distributor is losing more money than they think they are. There's some under 

understatement of this. Century, as far as I know, that's for sure, for sure. People are, you know, , we have a pretty thorough system ourselves that we bring , to brands and it's surprising, you know, I I'm people ask who I am.

I say , I'm the world's best disguised optimist. Mike Frito is that the truth shall set you free. But first it's going to piss you off or upset you and, and and , that's brands coming in, getting a picture for the first time and they're like horrified at just where the money's going and how much of it's going, but it does explain why things are worse than they thought.

And they have a handle on the football now that they can. Grab and manage and, improve and make it workable. 

Jordan Buckner: So if you're looking as well, like when the brand is doing a deduction, right, as we were kind of talking about, they're [00:07:00] setting a promotion schedule, usually with the retailer, and then that needs to come through a distributor who's actually maybe buying product, maybe a different volume for that promotion.

And then that gets charged back as a deduction and as the brand, you also need to make sure that. Number is correct, right? That they're discounting the correct percentage along with then tracking what the impact on that promotion was at retail, right? If you discount the crop, what are you getting back from it?

What's that return on the investment? And that calculation really, what , you help brands with? 

Chris Ambarian: Yeah. Yeah. Well, I mean, that's a really good question. So in order to properly answer it, you really need to look at, What does it take to get that result? that view of what's going on.

And you need, first of all, you need to have a structure. You need to have a place to put the data. Second, you got to go get the data and input it. And then third, you have to kind of analyze it. And the getting the data part of it is there's some expertise in there, but there's a lot of [00:08:00] tedium also.

You know, that's another thing that people fall down on is like, who wants to You sit and enter all the data all the time, it gets to be a bit of a grind. So you need to be really systematic about it and need to do it at scale. Most brands either don't have the time or the skillset or the desire.

And then your option, if you don't want to do it, is you either don't do it or you have somebody else to do it. It's one of the only way around it. If you want to see what's going on, you have to do it though. the expenses you're talking about, probably aside from your cost of goods, it's the biggest expense item on your P& L.

You have to look at this if you want to manage it because it's far more manageable than anything else on your P& L. 

Jordan Buckner: Yeah. And I would actually say that as a brand. You need to build that habit early because if you don't build that habit early, then you're going to lose so much money as you mentioned, right?

You are, you are too young to be so wise. Right? Like, and I'll tell you just a quick story as well. Like when I was selling Teasquares, we were selling through Kehe to Jewel Oscar Alberts in the [00:09:00] stores. And we kept getting all these deductions, deductions off every invoice too. And after five months of seeing those, I finally sat down to calculate what we were seeing.

And it was something like 30 percent of everything that we sold to that retailer. Came back as a charge back where we sold them product and they requested a refund from it. And it took me another, you know, weeks to really get an answer. Turns out like some of our product went to the retailer. They weren't selling it.

It was coding. They can return it back to the distributor for full refund. And there was a fee on top of it. And it's because of the retailer. Wasn't, and we, weren't able to work with them to properly merchandise and get that moving because we had no relationship with their retail team. And so we just wasted, you know, tens of thousands of dollars.

And if we had seen that and had a system in place from the beginning, we caught that a lot earlier, stop shipping them product earlier, or find a way to work with the retailer better to get that product sold instead of losing out on everything we sold to them. 

Chris Ambarian: Yeah, absolutely. , and that [00:10:00] we hear that all the time, you know, I'm not talking, you know, your audience is not a PNG.

It's not, you know, any of the ConAgra companies. This is people trying to break into the industry , and establish a firm foothold, you know, somewhere less than, let's say half a billion dollars a year. That's probably where your audience is. And those bigger companies, the reason I mentioned that is the bigger companies, they have all these systems in place.

Establishing the systems, preferably early on, is critical. Let me tell you why. If you're one of those smaller companies, if you want a scale of what you're up against, just imagine yourself and your brand as a truck. Okay. And you pull up to the docks of Kehe or UNFI, any one of their distribution centers, and you see that flow of trucks coming in and out of that place.

And all the trucks are bigger than yours and they come multiple times a day. And there's 58 docks and, and it's. You realize, man, I'm up against a big machine here and they're established. They've been around for decades. I've been [00:11:00] around for five years or 10 years or whatever. And so you're coming into this game.

You're sitting down at a poker table and you're kind of wondering what's going on. Guess what? You're going to get your clocks cleaned unless you are managing this. You've done your homework and you are managing this tightly. And you need , to get in there and not let things get five months, let alone five years out of hand because everybody gets used , to dragging that much money out of you until you Either die or call them out.

Jordan Buckner: So let's break down what it takes to then get set up with a TPM or a trade promotion management system. What does that process look like? I know you help a lot of brands get set up. Is it easy to start building those processes or what does it really take? And when do brands, whenever? 

Chris Ambarian: Well, let's get back to the old the truth shall set you free idea.

The truth is it's going to be work. Now you can minimize your work, but it's still going to be work. And it's going to be heartbreaking, backbreaking, but breaking [00:12:00] work. We can have a conversation with you. We don't have to sell you anything. You just, we can have a conversation with you, let you know what you're in for.

But there's going to be work in setting it up. If you do it yourself, it's going to be a lot. Basically you're inventing the wheel and figuring out how to produce them and all that stuff along with every other brand. That's not the efficient way to do it. You want to go buy a wheel from somebody.

Focus on what you do and be efficient about buying. Search for a good deal and buy effectively. So assuming that , you're going to outsource at least part of this. And that's also a big question. You do outsource everything, lock, stock and barrel, or do you outsource parts of it or whatever?

And that is again, back to the mentality idea. What are you up for? You need to know that you need somebody in your company who's responsible, responsible for the information flow and responsible as a fiduciary. You could have somebody do a lot of the work for you and present it to you, but you still have to make the decision and you still have to take responsibility for the decision.

So you kind of got to take responsibility for [00:13:00] ensuring that everything flowed right. They made all the same assumptions as you would have if you had done it. That you're good with the decision. It's the best possible presentation and decision that you can make. So you have to be up for that. You can't hand it off to somebody else and blame them.

That's not the way it's. So if you're going into it, you should be going into it, looking at it, not only as a functional service, but also as a partnership, I think definitely should be oriented to, I got to go get married here, 

Jordan Buckner: Where does the time come into it? Is it making sure I'm sure it's probably a combination of all of it, but there's time for the time for the brand, do you mean?

Well, yeah, the time for the brand in terms of getting set up with, with a TPM. Is it in managing it? Is it making sure you're accurately putting in all your sales programs? Is it linking and looking at deductions kind of? 

Chris Ambarian: Yeah. Yeah. Well, so, so the good news is. That this kind of thing probably took a year and a half, a couple of decades ago, and it's come way down, but you're still talking about like, I would say nominal is about four [00:14:00] months.

 If you're deliberate about it, it take you about four months to get it up running and you know, somewhat smooth, there'll still be a few things to work out for a few months, but you'll, you'll be in a better spot than you were when you started. If you are super focused . And throw a lot of money at it.

You can probably get it down to a couple of months, three months, maybe. So you're talking about two to four months in an aggressive case, it can take longer as long, as long as you want. If you drag it out. 

Jordan Buckner: Is this something to you where you find it's best for companies? I know you've mentioned like having five to a million dollars, like having a dedicated head of sales who is like managing this, is it usually like they end up having, An analyst or someone who's helping set this up and put data and then having a had a sales who's analyzing, who's making decisions from it.

What does that team structure look like in terms of , who succeeds at using it? 

Chris Ambarian: Gosh it's a really good question. And I have to think about that because in dealing with a bunch of brands, I've seen all of the above, but I'm not sure which one right off hand is. The ideal person head of sales.

[00:15:00] Yeah, but they're kind of, they're not as focused on the overall success. They're focused on making sure the sales happen. And I think a lot of the problems that we encounter is because you delegate the responsibility to a salesperson who really doesn't have P and L responsibility. And they're just going to go make sales happen at whatever cost.

And you really don't want salespeople being in charge of profit. So I think that's not ideal. I think an accounting. Person you know, a clerical level person is not ideal because they can't, they don't have the wherewithal to take responsibility for it. So ultimately I think the best person is somebody who is that fiduciary, the person who has P and L responsibility for whatever part of the brand we're talking about.

That could be in early stages. That could be the founder slash CEO. It could be as you start to get a little bit bigger and maybe overdue for a system. Or maybe you're currently having a system that isn't working for you. It might be a sort of product manager type of level where it's kind of the [00:16:00] CEO's P& L right hand person who does all the pricing administration and P& L analysis and whatever.

They may have analytical people reporting to them, but I think it's gotta be somebody Who really the buck stops there for that person, that's going to be the most motivated person and they need to have the ability to order people around, Hey, make sure that Promomash has all the backups, you know, set up the systems, do this, do that.

and they can either do it themselves or they, they have people that will follow , their guidance. 

Jordan Buckner: Yeah, that makes a lot of sense because I'm sure you've also seen companies who have gotten started, but aren't fully utilizing systems or fall out because they don't, we're not alone in that for sure right now, everyone, it happens across every type of software, but they don't come in with the right expectations.

So I think a lot of times it might be a founder who's like, Oh, this is going to be great. Yeah. But then having the consistent data entry and strategy, I think that's the hard part, right? You need to someone, as you mentioned, who knows the P and L, has the strategy, who knows the promotions, but [00:17:00] also has an eye on the deductions and understand.

Chris Ambarian: It's hard. It's a, it could, you know, you also, not everybody has a unicorn like that who has, you know, all that. You might have a committee of people who've banded together and said, we've got to help the situation out here. And no one of us is smart enough , to do this by ourselves.

So So let's, let's all get together and we'll knock it out together. So I think, yeah, that is a possibility, a probability. 

Jordan Buckner: Well what was the first part of the question? Yeah, I was probably thinking like there's some like decision maker who's in control. Yeah. Yeah.

And probably a couple people who are working on it, who are checking on the different parts, someone from sales, probably someone in accounting who's looking at deductions. . To see how they all tie together, but ultimately it probably needs to come from one, one champion. 

Chris Ambarian: Yeah. The, I think the challenge starts with human nature.

You know, I talked about optimism before people tend to look at something and go, Oh, that's the solution to my problems. And the problem for us humans is that many of us, most of us. Wait until something is bad before we [00:18:00] actually jump into action. And so then you continue to make decisions that are kind of short term in nature, which is how it got bad to begin with.

You don't make the long term decisions. And then by making another short term decision, you're just going to be disappointed again. So really, I think the thing that we can do to assist ourselves the most is be really disciplined about suffering in the short term, but making a good long term decision about how you approach it and investing in that long term decision until it pays off.

So you, you're really, you're taking a risk by saying. Hey, this is going to hurt a little bit in the short term, but I'm going to benefit from it. 

Jordan Buckner: Yeah. I think there's probably even more of , a reason to get started early because if you only go with one retailer, you can develop , the standard operating procedures and get into the system and get into the habit and the groove.

And then, so it's repeatable when you grow versus trying to back data and information for everything that's ongoing. 

Chris Ambarian: I think. Okay. I think that's, while I'd say idealistic or idealistic, I don't think it's going to happen. [00:19:00] I don't know. Again, people don't do stuff until they have to and you can, if you can get by on the back of an envelope or in an Excel workbook or whatever, I've seen, I've seen people come in literally, they've got an Excel workbook with 120 tabs in it, one for each of their banners.

And I'm like, holy and It's they wonder why it's broken. They wonder why it's going to take, you know, nine months to onboard and to replicate all their systems and everything is because they're approaching their business and just a really, I don't want to use the C word, but crazy way. And these things happen.

You see all spectrum. Some people come in and they have their. There's stuff all together and it's just, it's like just sliding into home base, but others it's really, really your, what we're doing ultimately is we're just modeling your business in software and then maintaining the model.

And if your business is super well run, no problem. And if your business. Is not set up, [00:20:00] right? We're going to model that, or we're going to attempt to model it, and we're going to bump into those problems and probably need to resolve it. And a lot of our function sometimes is, is to just say, guys, best practice is not this way.

We should, we should go and streamline this , or do this a different way. And. Something that works better and that other people have demonstrated succeeds. 

Jordan Buckner: Well, I'll end with this. I think if you're brand listening to this and you're looking for a better way to manage your promotions and make sure that you are getting the money.

And the ROI that you're expecting, you know, look at a TPM like Promomash to really save you headache. It requires some work as you mentioned, Chris, and I appreciate your honesty there, but then once you get set up, you can develop that muscle in that system so that it's repeatable, you can understand your business, so ultimately you reduce your cost, make more money.

Can better dispute deductions and chargebacks and ultimately run a successful business. 

Chris Ambarian: Yes. And ultimately, again, I'm an optimist. The reason we're in business is because it [00:21:00] does make sense. You're going to benefit from it long term. It might be a little less than that sort of idealistic optimistic idea you had in your mind, and it might be a little bit more work.

If you approach it as, Hey, I'm looking for a partner who I can work with to make sure that this happens. Then I think you're in good stead. 

Jordan Buckner: appreciate it, Chris. Thanks so much for being on. We're going to drop information in the show notes about Promomash as well, but definitely this is something to keep an eye out for your business and as you grow, put those systems in place, Chris, thanks for being on 

Chris Ambarian: You bet on take care.