Channel Revenue Management Process An Overview

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |12Safe Harbor StatementThe following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracles products remains at the sole discretion of Oracle.Copyright 2014, Oracle and/or its affiliates. All rights reserved. |2Managing Governance Challenges in the Rebate LifecycleMotorola Solutions Inc.Case StudySonal Sood Manager - Deloitte Consulting LLPEarl Eldridge Sr. Director - Oracle Corporation

02-Oct-2014

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#Copyright 2014 Deloitte Development LLC. All rights reserved.What Im here to share with you today is about the benefits that Motorola solutions realized by automating the Trade Promotion process and establishing rebate governance process that Deloitte deployed at Motorola solution using channel revenue management in version 12.1.3. Ill share with you how the solution enabled the go-to-market finance and sales operation teams with tools to monitor the performance and make adjustment to inflight promotions using the Offer adjustments feature.

Well start off with setting the stage or taking a step back by looking at the strategic information of channel rebates in companies Go-To-Market strategy and why it is important for companies to have a robust end-to-end process and an integration IT solution to manage them. Ill share with you the leading practices in trade promotion execution especially the Governance process and how those leading practices are addressed by Oracle Channel revenue management.

3 Brands Ultimate Goal4

Increase products consumption rateEnlarge a products market segment penetrationDifferentiate products from the competitionIncrease product visibility and brand awareness with the customersIncrease salesIntroduce new products and services in the market place

This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software. 2012 Deloitte Global Services Limited Increase revenue by increasing sales in order to do that brands have to continue to differentiate products from the competition, introduce new products and services, which due to the competition companies are under increasing pressure to do so. In addition to this brands have to increase product visibility and brand awareness, increase market segments and improve the consumption rate 4Adopt a Go-To-Market Strategy5BrandCustomerBrandReseller123BrandDistributorReseller123DirectIn-DirectIn-DirectEngage companies sales forceEcommerceOwn-branded storeSales ChannelGo-To-MarketRe-seller represents and sells a companys products or servicesOther terms: LAR (Large Account Reseller), VAR(Value Added Reseller), Direct Market Reseller(DMR)Distributor is engaged to reach a larger market often via multiple channel partners Other terms: Value Added Distributor (VAD)This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.Sales channel is the conduit that drives the transaction 2012 Deloitte Global Services Limited Companies can grow organically or inorganically. For this discussion let stick with organic growth. In order to do so brands adopt multiple go-to-market strategy to be successful in the market place.. # 1 is by engaging its own salesforce, adopt an ecommerce strategy, or opening its own retail outlets..This is a direct channel ..

The other strategy is for the brand to engage partners/resellers rather than engaging its own personnel . Intermediarries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tired to run a sales operation iteself. .. One can have multiple types of reseller VAR, LAR and DMR.. In addition to this

5Go-To Market Funding Strategy & ROI612Marketing FundsAdvertising on TV and RadioMarketing Collateral developmentCampaigns and Road showsOnline PromotionsMarketing R&DRecruit new channel partners with special "jumpstart" allowancesMaintain and extend existing partner relationships through co-marketing efforts Trade/Promotional allowances to channel partners to boost salesImprove channel readiness by enabling training, certificationUS GAAP : Report as incurred expenses as part of Selling, General and Administrative expenses

SOX and FASB : Expenses incurred as part of promotional allowance programs are viewed more as perks, or simply rewards for sales performance, and should be classified as contra revenueIndirectIn-DirectAllocate FundsMarketing/Trade Promotion activitiesExpense RealizationROIAn investment in supporting your greatest asset, your brandEvaluate and measure across common expense to sales ratios to determine their effectivenessPerform Average Selling price analysisMarketing expenses that successfully produce sales can offer a high return on investmentDirect & This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software. 2012 Deloitte Global Services Limited Companies allocate marketing funds for both direct and indirect channel activities. Since these are expenses that the company incurs there are certain guidelines that the companies on how these expenses be accounted for . Direct expenses should be accounted as incurred expenses and appear below the gross margin and indirect expenses are accounted as contra revenue.. Which is above the gross margin.

While marketing may be considered an expense under a profit and loss statement, it is an investment in supporting your greatest asset, your brand. Where possible, its important to measure your marketing expense against its return on investment. Although marketing can be called an expense for accounting purposes, a profitable marketing campaign that returns a net profit should be considered a practical investment and primary driver of immediate sales and revenues.6Trade Promotions Spend67% of the Consumer & Industrial Product Companies indicate increasing trade promotion spend in 2014*10-25% of sales

70% of marketing spend2nd largest expense item on P&L Types of Trade PromotionsOff-Invoice DiscountsPerformance IncentivesSales QuotasCO-OPMarketing Development FundManufacturers deduct some percentage from the invoice price for purchases made during the deal periodQuantity based and price reduction in the form of additional merchandise Program provides partners with marketing allowance that accrue as a percentage of sales.Discretionary funds provided by manufacturers to their eligible channel partners based on the negotiated goals.Discounts on merchandise that the retailer sells at a discount to its customersManufacturer pays the channel after having verified the sales performed to end usersDiscounts or rebate payments offered to retailers who meet the manufacturers sales quotaHaving an effective trade promotion strategy and process is critical in order for companies to benefit from ROI and allocate funds for other strategic initiatives7* http://www.acosta.com- The_Trend_Behind_The_Spend/trend-behind-spend.pdf 2012 Deloitte Global Services Limited Since there is a lot of money involved it is critical for companies to calculate the ROI. 7How to design effective Trade Promotion execution plan?Effective trade promotion practices involve the coordination of strategy, process, people andtechnology. StrategyIncrease sales, overall or for a specific productFocus spending behind specific products(new product introductions or end-of-life itemsProcessPromotional Fund allocation and managementHow funds are earned - discretionary or earned accruals

People Train resources on global standard processes across the organization

TechnologyIntegrated planning, funding, rebate accrual, payment and accounting systemAutomation of rebate accrual and accounting along with robust approval workflow

Increase utilization rates for select partners, or select geographyUp-sell and Cross-sell productsTrade Promotional Plan creation and eligibility criteriaPerformance tracking for disbursing rebates

Accounting, claim audit and deduction management, and settlementRobust post-implementation monitoring and adjustmentWell defined roles and responsibilitiesIncentives to maintain KPIs.Post implementation analysis and trackingAccurate revenue forecasting analytics at product/customer level Target new market segments Onboard new channel partners8This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.1234

Channel Marketing is one of the most comprehensive disciplines in the business environment which extends corporate initiatives across multiple disciplines including sales, marketing, finance, supply chain and sales operations 2012 Deloitte Global Services Limited 8Trade Promotion Management process Leading Practice9StrategizeAllocateBudgetCreate Promotion PlanInternal/Customer ApprovalExecute Promotion PlanEvaluateHistoric sales dataHistoric consumption dataPast Promotion resultsDistributor/Retailer performanceMarketing PlanPromotional Strategy for the brand/ProductUnderstanding of the customer

Establish Allocation methodTop-down/Lump sumBottom-upAccrual basedAllocate to customer account group, region, or specific accountGet approval from Go-To-Market team

The process to create a plan should be re-useable on quarterly/yearly basisReview and approve Products included in the promotionRebate accruals based on expected salesPayment methods (off-invoice, bill back, separate check etc.)Eligibility criteria

Discretionary trade promotion allowances do not require approval as they are executed behind the sceneOther promotions need approval from the customerShare the promotion plan in detailCommunicate how performance will be measured in order for customers to be eligible for the promotionLock down the payment method for settling claims against rebatesReview actual product shipments to calculate rebate accruals Authorize payments/settle claims against rebate accruals if customer is eligibleMake payments (Check, Credit Memo, On-account etc.)Reconcile deductions against the promotion plan and proof of performance Restrict booking manual accounting entriesThis presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.Evaluate whats working and whats not workingShift fundsPerformance Metrics% LiftPass-through analysisTrade Margin AnalysisProfit and cost per incremental sale etc. 2012 Deloitte Global Services Limited 9Trade Promotion Governance Process Leading Practice

LOREM IPSUM This is dummy text it is not here to be read. This is dummy text it is not here to be read. This is dummy text it is not here to be read. This is dummy text it is not here to be read. This is dummy text it is not here to be read. This is dummy text it is not here to be read. ExecutePlanMonitorTrack Average Selling Price (ASP)Track Actuals vs. PlanActual revenue generatedParticipationCompliance with Promotional parametersPrevent Out-of-Stock during promotional periodExpenses and LiabilitiesAlign program with the current forecast of total sales, spending and customer performanceEnsure promotions programs align with strategic goals and planModify the program to account for variancesObtain approval for revisions as it has an impact on projected revenues or budgetDiscontinue promotions which are not profitableMake accounting adjustments where applicableReview actual product shipments sent to customersReview actual consumption data (sell through) rather than on shipments to prevent forward buying and divertingAuthorize payments/settle claims against rebate accruals Reconcile deductions against the promotion plan and proof of performance AdjustStrategizeAllocateBudgetCreate Promotion PlanCustomer ApprovalEvaluate10This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.10

Enable business process with Channel Revenue Management

ExecutePlanMonitorAdjustStrategizeAllocateBudgetCreate Promotion PlanInternalApprovalEvaluate11This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.

Oracle Channel Revenue ManagementProcess Enablement

11Case Study12About Motorola Solutions13Footer

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This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.

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2012 Deloitte Global Services Limited Motorola Solutions, Inc. designs, manufactures, and sells communications infrastructure, devices, system software, and applications. The company operates in two segments, Government and Enterprise. The Government segment provides public safety communications systems, professional and commercial two-way communication systems, devices, system software, and applications. This segment serves government, state and local public safety, first-responder agencies, and municipalities, as well as commercial and industrial customers who operate private communications networks and manage a mobile workforce. The Enterprise segment offers rugged and enterprise-grade mobile computers and tablets; laser/imaging/radio frequency identification based data capture products; wireless local area network; and integrated digital enhanced network infrastructure, software, and applications. This segment serves customers in retail, hospitality, transportation and logistics, manufacturing, energy and utilities, education, and healthcare industries, as well as warehouse and distribution centers through distributors, value-added resellers, and independent software vendors13Increase Sales of Products and other value-added services by engaging more reseller in new markets Drive transactions at the point of sales by having channel partners promote products vs. the competitions Improve channel readiness by enabling training and sales incentive programsPromote cross-sell and up-sellMotorola Solutions Inc. Channel Go-To-Market Strategy14This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.End-UserReseller123DistributorResellerTrade Promotions MOU( Memorandum of Understanding) : Channel partners earn a rebate on their purchases once their revenue target/KPIs/measureable criteria are reachedMDF(Marketing Development Funds): Discretionary funds allocated to partners to help them create and participate in joint marketing and business development programs that can help to increase sales of Motorola Solutions products and their value-added services. CO-OP: Designed to help business partners leverage valuable resources to enhance business development initiativesStrategyGoals

Marketing DistributionPromotion ConstructSignificant business volume and complex rebates structure e.g.; Tired discounts by dollar volume and quantity 150+ MDF, CO-OP, MOU, SF) across 12 countriesCountry specific requirements adds another layer of complexity

Motorola Solutions Inc. 2012 Deloitte Global Services Limited 14Issue-to-ImpactRebate calculation inaccuracies due to lack of system capabilities to use accurate data to compute simple to complex rebatesManual creation of JE for Expense and Liabilities in GL results in transaction traceability and audit issuesAverage Selling Price (ASP) for shipped and backlog orders is not reflected accurately until end of the monthEverything is booked at Invoice price and during the end of the month the ASP suddenly dropsInability to course correct within an incentive program duration Manual claim settlement process results in inaccurate and duplicate rebate payments along with delays in payments

ProcessPeopleLack of communication between marketing, pricing and IT to setup promotional pricingResource intensive manual accrual, revenue forecasting, and claim processing reduces operational efficiency and increases operating costTechnologyPromotional plans maintained in ExcelShipment and Billing information was exported out of reporting system in Excel and complex macros were written to compute accruals and Journal entries

ProcessPeopleTechnologyIssueSolutionImpact

Automated accrual calculation eliminated inaccuracies rebate calculationIncreased operating efficiency as users can focus on more value added activitiesProvides visibility into net ASP for what is sold and what's in the backlog in the subledger for the first timeFinance teams have real-time visibility into liabilities and expenses resulting in accurate revenue forecastingSales operations teams can respond to any ASP issues in timely manner and make adjustment to offers midwayUsers can drill down to the original transaction from the subledgerSales team can perform promotion health check s frequently and alter strategy or approach in a timely mannerTimely and accurate claim settlement processingUsers were able to pull reports directly from the GL during month end for reconciliation purposesAutomated accrual calculation and settlement processEstablished one global process for offer setups, accrual tracking, revenue forecasting and claim settlement processEstablished a central command center to review the offers and claims being created in the system and catch inconsistencies

Automated Trade Promotion process using Channel revenue management which has standard integration with Pricing, OM, AR, AP, SLA, GL and other modulesThe solution is deployed with pure Oracle vanilla out-of-box functionality in R12.1.3Reports in OBIEE were developed to provides users real time visibility into rebates and liabilities for both shipped and backlog ordersFollowed crawl-walk-run approach to train users on the new tool and engaged them starting from the CRP1through CATAdopted train the trainer approach to train others and new hires

15This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software. 2012 Deloitte Global Services Limited 15Issue-to-Impact (Trade Promotion Governance)Each region had established its own execution plan in terms of how they allocate budgets, structure promotions, computer accruals, settle claims, and account for Budget and Promotions offer approvals were via emailsOffers were maintained in excel with no governance around changes being done to the offersManual Journal entries during month end to record liabilities and expenses for trade promotionsEach region was using a separate balance sheet and expense account, making reconciliation and consolidation of promotion expenses a challengeAt year end Go-To-Market finance users would perform write backs of liabilities booked against discretionary fundsManual Credit memos were created for settling claims and were not associated against eligible offers

Process

ProcessIssueSolutionImpact16This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.

ExecutePlanMonitorAdjustGovernanceEstablished standard template for all offers which also took into account regional variancesPerformed GL account consolidation for multiple liability and expense accounts into on global accountAccount reconcilers were also consolidatedCorporate guidelines were established and communicated to ensure no direct journal entry into GLResponsibility to process claims was also shifted from Accounts receivables to Go-To-Market financeEstablished a monthly cadence call with sales and finance operations team to review actuals vs. plan and whether any adjustments are required prior to month end

PeopleTechnology

Constructed a core group within Go-To-Market finance who would approve all new offers and claims to ensure adherence to guidelinesThis group would be a single point of contact for managing all activities associated with execution

Monitor Utilization and Earnings for promotions offers in Trade ManagementEstablished two key OBIEE reports that would provide insight into current liabilities and expenses incurred for both shipped and backlog orderMandated use of Offer adjustment feature to make any mid-term adjustmentsStandardized processes Integrated solution provides comprehensive visibility which is imperative for successful channel revenue management. Complete traceability and auditabilityUsers were able to proactively find exceptions and react on-timeSubledger is always in sync with your GL making reconciliation easierReduced month-end close by 2 days 2012 Deloitte Global Services Limited Not all marketing programs are the same and may find a high percentage of unused or misused dollars at the end of the year. 16Handling adjustments to in-flight trade promotions17This presentation should not be interpreted as a representation about or endorsement of any third party products, including Oracle software.Sales and Marketing strategy changes

Promotional Performance based Adjust offers to distributors or resellers who are performing better to give better benefits

Reverse Liabilities and expenses for unused/unallocated marketing development or CO-OPS

1243Complete traceability on promotion adjustments from subledger to GLAccurate revenue forecasting and ASP (Average Selling Price) at any given timeComplete audit trailNo manual GL adjustments required

BenefitsBusiness EventsProduct Feature 2012 Deloitte Global Services Limited 17Oracle Applications: Current Release and RoadmapContinued OA Framework updatesOffers create and update OAF UIOffer adjustment OAF UI

Channel Rebates & POS ManagementVolume Offer Enhancements including backdating flowsOngoing Endeca Integrations Enhanced offer and budget checkbookMiscellaneous Offer Enhancements includingTCA Hierarchy SupportLine Level Advanced Option

AR Deductions SettlementAutopay Settlement by OU

Continued OA Framework updatesClaims, Budgets, Offers

Channel Rebates & POS ManagementMobile Support for Offer & ApprovalsOngoing Endeca Integrations

AR Deductions SettlementDeferred AccrualsRevenue RecognitionAutopay Settlement by OUMobile Support for Claims & Approvals

Oracle Supplier Ship & DebitManual Approve/Reject for Ship & Debit BatchesAME Integration for all ChRM products

AR Deductions SettlementOngoing Endeca IntegrationsProvisional Accruals and Reconciliation Support

Channel Rebates & POS ManagementCompletion of Offers in OACascading Offers/PromotionsFlow through Offers/PromotionsSellers Workbench with OMIndirect Sales Error Processing

Oracle Supplier Ship & DebitVertical Industry Support

Oracle Price ProtectionSell side supportRelease 12.2.4August 2014Whats Next0-12 month planning cycleFuture DirectionsPost 12 month planning cycleRestricted to event use only.18Copyright 2014, Oracle and/or its affiliates. All rights reserved. |18

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#Copyright 2014 Deloitte Development LLC. All rights reserved.20