LEXINGTON, Ky. -- Valvoline here has become one of the first consumer goods companies in the United States to begin to track account sales and promotion performance using a return-on-investment measure.
"We now compensate our sales people based on pro forma net income statements," said Jan Robert Horsfall, vice president of consumer brand strategy for the motor oil and antifreeze marketer.
In recent years, the company has evolved its trade marketing function to align performance goals, until trade marketing had the same goals as sales, said Robert Brock, retail national account manager. "Now we are truly in this together," he said.
Horsfall and Brock explained recent developments at Valvoline in a talk they delivered to the Account Specific Marketing conference in Coral Gables, Fla., recently. The conference was sponsored by The Marketing Institute, New York.
Valvoline, a $1.3 billion division of Ashland Inc., is the auto aftermarket category manager for most of its accounts, Horsfall said. Its major brands include Zerex, Valvoline and Pyroil Chemicals.
In their presentation, the two men outlined Valvoline's No. 1 Choice program, which Brock described as "a field-activated account-specific approach" to developing and tracking promotions.
"All the programs are pay-for-performance," he said. They are funded out of a "public checkbook," a basket of trade and consumer marketing funds that are allocated based on each account's sales volume with Valvoline products.
Said Horsfall, "Each retailer receives a cents-per-gallon figure for use on account-specific promotional executions, comarketing and market development funds. Our retail managers draw from it like a checkbook to jumpstart tactics and options."
Brock said each Valvoline sales team plans the retailer's year by pulling promotional tactics and options from a master list that is created at headquarters using ideas that came from the sales force.
"Certain parameters will be required in terms of off-shelf presence and feature advertising," he said. "In virtually no cases will Valvoline simply provide consumer or trade funding to merely put up POS materials on an already existing shelf."
Brock continued, "For key accounts that need customization, we will sit down at the beginning of the year with the trade marketing team and our promotional firm and develop the 1996 program schedule. The promotional monies will not vary for these exceptions."
Discipline is important, he added. "We won't participate in over-and-above activities if the money to pay for them is not in the checkbook."
Brock said that Valvoline tracks each program to make sure the retailer is living up to his or her part of the deal. "Lack of compliance could mean the offer can be pulled or adjusted midstream, before the total trade dollars are expended," he said.
"This happens rarely, if ever. Once the retailer takes ownership, they'll support the activity just as much as you do."
Brock said that in-store merchandising support, when needed, is paid for out of the same basket of field funds. The company works with Field Flex
Merchandising, Stamford, Conn. "It's a decentralized decision, made by the account managers," he said.
"You do need a good solid set of information systems to do this effectively. You need measurement capability," Horsfall said. He added, "Volume payout won't get you too far with the retailer. It's better to know how your buyer is compensated and design activities to that account."
Brock explained that, formerly, Valvoline sold "forced" national offers to its retail customers. Today, he said, "National promotion formats per se are DOA."
The regional promotion manager, an intermediate concept Valvoline worked with until about a year ago, is now regarded at the company as a "failed experiment," he said.
"Too many promotion sources meant confused consumers. It results in brand strategy short-cuts and low optimization of overall promotion dollars. Then you have poor post-measurement, which makes it impossible to track, so there would be no way to duplicate successes," Brock said.