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Worksheet · B2C via trade: Brand Pricing Health Check

Label every term passive or active

It prints on A4 with room to write.

Terms pile up over the years, and most are paid whatever the retailer does. A passive term is paid regardless. An active term is paid only when a stated condition is met. This sheet labels every term in your biggest agreement, sets the rule for new money and retires one passive term. It builds the Competent step of the check:

Every term is named as passive or active, and new money goes only into active terms with a stated condition.

Step 1. List every term in your biggest agreement

Include off-invoice discounts, rebates, allowances, co-op, fixed fees and anything paid by credit note.

Term How it is paid (off invoice, rebate, lump sum) Rate or dollars last year What it pays for today Condition written in the agreement Paid even when the condition fails? Passive or active
e.g. Promotional support allowance Rebate, quarterly 2% of gross sales Catalogue features None Yes Passive

Step 2. Test every term labelled active

A term counts as active only if it passes all four checks. If it fails one, relabel it passive.

  • The condition is written in the agreement.
  • The measure has a data source both sides accept.
  • Someone on our side checks the measure before we pay.
  • The agreement says what happens when the condition is not met.
Term Condition Measure and source Checked by Passes all four?

Step 3. The rule for new money

At the next round, every extra dollar the retailer asks for goes into an active term or is not given.

The retailer asks for Our offer as an active term Condition Measure and source Checked by
e.g. 1% more for "growth" Growth rebate on sales above last year Scan sales up 5% on last year Retailer scan data, quarterly Commercial analyst

Conditions worth paying for: display, range listed, share of shelf, sell-out growth, order size, on-time payment, scan data shared.

Step 4. Let one passive term expire

Passive term Dollars last year Why it started Replace with (an active term, or nothing) Expiry date Owner

Done when: every term in your biggest agreement is labelled passive or active, and new money at the last round went only into conditional active terms.

Adapted from our own trade spend discussion document (PSP, 2004).

From the B2C via trade: Brand Pricing Health Check. Your report links the sheet for each of its moves.