Phase 4: Design Commercial Terms

Gross-to-Net is a rather mysterious term, which even more mysteriously goes almost unnoticed in budgets reviews despite representing strikingly often the largest expense line. Notoriously managers don’t want to spend time on what they think they can’t change. But is it really so and if not what can be done to make such large investments more efficient? The objective of this chapter is to make sure that Gross-to-Net dollars are working as hard as any other investment. When we decide to provide a discount we are decreasing funds available for other areas; this could translate into less marketing, less R&D, lower profitability. The next pages explain how to set the appropriate Commercial Incentives and hand over practical frameworks that can help find answers to these and many other thorny questions. The question often gravitates around capital trade-offs conundrums: shall we invest more in discounts or rebates? Push or Pull activities? Customer service or credit financing? You will grow from strength to strength by learning to set appropriate incentive levels (by Distributor, Segment and Product), structure the Marketing Activities mix, allocate effective targets, improve the Credit Policy, and get familiar with the key concepts of List Price Setting, Forecasting and Stock Management.