PS Srijan Corporate Park, Tower 2, Unit 803,

Block GP, Sector V, Salt Lake, Kolkata - 700 091

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FMCG: Incentive Structure Redesign

When a regional FMCG company faced a decline in sales in a segment despite a positive market growth, and textbook retail store strategies failed to bring positive changes, it was time to look beyond the conventional and the obvious.



The FMCG Company had been leveraging its regional capabilities to the best possible extent and was delivering high-quality products at a decent price range, yet it could not manage to achieve its full potential. Based on a further study of retail stores, we found that the implementation in the present distribution channel was not as effective as it should have been. The company put additional sales personnel to focus on the matter at hand; initially, the sales  increased but could not sustain the momentum. Subsequently, the firm struggled to find an effective and permanent solution to the issue, especially with big players entering the market. We identified significant cost minimization opportunities across the value chain even though cost minimization was not a part of the initial problem statement.



We had a multi-dimensional approach to understanding the issue and finding an effective and practical solution, and went a step ahead in identifying further cost-minimization opportunities across the value chain. The approach we took included the steps listed below:

  • Study of the supply chain keeping in mind various dimensions, namely, operational efficiencies, logistics, payment structure, etc., to see if optimization was a possibility;

  • Optimal resource allocation and cost minimization across the value chain: procurement, processing, inventory management, and transportation, inclusive of restructuring, at a few key steps;

  • Survey of major distributors, retailers, and marketing team to understand the ground reality;

  • Root cause analysis to identify whether the incentive structure for their retailers was adequately adapted to the retail strategy while implementing;

  • Redesigning of the incentive program following the study of industry best practices and customizing the incentive structure to the needs of clients;

  • Design the model to help the management evaluate potential benefits of introducing the incentive program over the short term as well as the long term; and

  • Devising the right pricing strategy in alignment with the core capabilities and competition.



The significant cost savings and an increase in the sales figure over the six-month phase post the implementation of recommendations made the project a roaring success.