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  • Writer's pictureArvind Dang

Sales & marketing cost reduction: 85 Opportunities


This article includes the following aspects

A) Why is cost reduction necessary?

B). Ten Key Business functions where cost reduction opportunities can exist

C). Tabulation of 85 Cost reduction opportunities in sales and marketing functions

D). Process-wise cost reduction opportunities-67 identified

E). Using AI to target additional cost reductions in sales & marketing function-18 identified

F).  Identifying AI tools for use in ERP –SAP environments

G). Activities(including unethical) that can affect business adversely



A)Why is cost reduction necessary?

·      Increased Profit margins

·      Competitive advantage

·      Financial stability

·      Improved resource utilization

·      Meeting Investment and expansion requirements

·      Improved employee morale

·      Enhanced customer’s and investor’s satisfaction

·      More flexibility to the company

·      Increased efficiency


B).Ten-10 Key  Business functions where cost reduction opportunities do exist


·      Sales and distribution

·      Finance and accounts

·      Materials management

·      R&D-Research and development

·      Manufacturing and engineering

·      Quality control and Quality assurance

·      Construction

·      Legal & secretarial

·      Human resource management

·      Administration

·      And so on


C). Tabulation of 85 Cost reduction opportunities in sales and marketing functions


The following business aspects have been deep-dived, and 85 cost reduction/cost-saving opportunities have been identified below.

·      Knowledge/experience based =67

·      Using AI-tools/Algorithm         =18


The CFO's role in implementing these can be either direct or facilitative.








Role of CFO team


Pricing  for end products or spares-Local market-


















Domestic Delivery ,shipping & transportation






Rendering after-sale service by the company






Doing sales promotion






Controlling sales receivables






Procuring of marketing materials & services by the company sales team/depot






Making payments to vendors/marketing agencies/service providers






Accepting sales returns from customers






Designing incentive schemes for channel partners 






Accepting warranty claims from customers






Managing inventory of products and spares






Sale of scrap products or spares sat plants or depots or warehouse 








Indeed, the CFO and his team can identify additional opportunities depending on the skills/competencies and business type, size, complexity, and significance accorded to cost reduction initiatives.


D). Process-wise cost reduction opportunities-67 identified


D1-Process: 1st)Pricing  for end products or spares-Domestic (3)


1 Minimizing sale of Loss-making products /spares with consent amongst sales head and CFO,

1.             Manufacturing variable costs: Direct costs vis a vis

·      Material costs

·      Consumables  

·      Labor costs 

·      Power

·      Rejections,

·      Tools

·      Software


2.           Ensuring that the selling price of each product/spare includes Marketing variable costs: Direct costs vis a vis

·      Pre-dispatch inspection & testing

·      Packing, including material and labor

·      Freight outward/shipping

·      Marine insurance

·      Software

D2- Process: 2nd ) In the following cases, recovering shortfall in prices from customer (7)

1 Actual billing at per the old (lower)rates vs. agreement rates to be applicable on the invoice date.

2 Free of costs invoicing done erroneously or not properly authorized. 

3 Discount is given higher than rate agreement.

4 Incentive computed and paid higher than due in the agreement.

5 GST/taxes charged differently than applicable.

6 Actual Delivery terms in deviation from agreed, for example:

 Delivery term in Agreement: By customer, Actual: Borne by company.

 Delivery Mode in Agreement: Part truckload, Actual: Full truckload-door delivery

7 Marine insurance Agreement: By customer,  Actual: Borne by company

D3 Process: 3rd)Exporting (6)

1 Minimizing export of Loss-making products /spares with consent  amongst  export division  head and CFO,

2 Ensuring rate negotiations lead to positive contributions after considering manufacturing costs and marketing variable costs (net of export incentives)

3 Recovery of the extra costs (incurred in the destination country) from the export customer in case not explicitly mentioned in the customer’s purchase order /company’s export order but borne by the company/debited by the customer.

·      Unloading charges,

·       Material handling  charges,

·      Port charges,

·      Custom duty,

·      Surveyor’s charges for cargo,

·       Road freight charges and so on

4) Extra costs incurred due to deviation in INCO terms  in actual shipment vs Export agreement

i)           EXW-Ex-works. 

ii)          FCA-Free carrier.

iii)        CPT-Carriage paid to.

iv)        CIP-Carriage & insurance paid to.

v)         C&F - carriage & freight paid.

vi)        FOB- Free on board or

vii) CIF- Cost, insurance & freight paid.

vii)       DDP- Delivery duty paid and so on       

5) Ensure timely filing of the application to authorities for claiming statutory export benefits  and their recovery

6) Reviewing payment terms /methods to minimize  risks of export receivables becoming bad debts,


i)         Shipment not to allow against unsecured payment terms & re-negotiating terms as

ii)         Advance payment or TT (Telegraphic transfer)

iii)        Documents at sight or

iv)        Irrevocable LC or

v)         Documents are collected through the Bank using SWIFT.

vi)        Net banking/online payment

 D4 Process: 4th )Domestic Delivery /shipping & transportation-(6)

1 Ensure recovery of the amount towards FOC deliveries that are not properly authorized or intentionally shipped.


    2)Ensure recovery of costs from customers. E.g. In case the shipping mode requisitioned by the customer is different the signed agreement,

i)       Road: part load, full load, door delivery

ii)      Sea: break bulk or container 20ft or 40 ft or customized ship type, departure date

iii)      Air – consolidation

  3) Ensure recovery of costs of damaged/short deliveries from transporter/shipper or insurance company in case of short or damaged delivery,

  4)Optimize placement /layout on truck cargo / to enable efficient utilization of truck  

   5) Optimize truck routing to destination to reduce freight costs  

   6) Loading on Cargo bed as per truck capacity, i.e. no overloading in weight or length of cargo or height of the cargo to avoid penalty or consignment confiscation

D5-  Process: 5th) Rendering after-sale service by the company (4) 


Recover costs from customers in case of the following: 

1 Incorrect spare part rate applied on part replaced  on product

2 Any spare parts consumed  for product service but not charged

3 Incorrect Labour rate  applied on  product service

4 Discount allowed without authorisation


D6- Process: 6th )Doing sales promotion (3)

1. Ensure timely debit and recovery of promotion costs from channel partner as per agreed % terms in case of sales promotion done by the company

Conventional sales promotion

2 Short-passing reimbursement claims/bills of channel partner (In case of sales promotion directly by channel partner) if there are no support documents or no evidence of physical verification carried out by a Marketing authorized person for advertisements such as   :

·      A press release  or magazine or

·      Hoardings or  roadshows

·      Events sponsorships or merchandising purchased

·      Digital Sales Promotion directly

Digital sales promotion


3 short-passing reimbursement claims/bills of channel partner in case of no support/evidence of digital timestamp/ verification by a Marketing authorized person

·      TV or  cinema  or Radio

·      Google ads, YouTube ads, Facebook ads, LinkedIn  ads

·      Any other

D7 -Process: 7th) Controlling sales receivables(6)

1 Evolving customer-wise credit limits and implementing at the point of invoicing and sharing with each customer.

2 Ensure dispatch/invoice lock in case credit goes beyond the permitted limit and allow invoicing only if the CFO & Head of Sales allow.

3 Rigorous reporting and monitoring of receivables, customers-wise, product-wise, area–wise, country-wise, and along with aging and recovery as per norms

4 Ensure export receivables comply with RBI norms. 

5 Exploring charging of interest on overdue as per agreed rates.

6. Monitor & ensure channel partners maintain paid-up stocks as per norms


D8- Process: 8th) Procuring of marketing materials & services by the company sales team/depots (3) 


Type 1-Parts of end products or consumables or service tools 


1 Ensuring that Type 1 materials are procured through stock transfers from the company’s manufacturing plants /warehouses to have the advantage of lower rates and genuineness and not from local markets in different states/cities.

 Type 2 -marketing materials like Packing, sales promotion merchandise


2 Ensuring that Type 2 materials are negotiated by Marketing HQ rather than individual spread out offices/warehouses/depots or offices to have the advantage of lower rates and  are ordered on authorized vendors approved by Marketing HQ

Type 3 (services like sales promotion –Conventional, Digital, Security, Transportation, etc.)


 3 Ensuring that Type 2 services are negotiated by Marketing HQ rather than individual spread offices/warehouses/depots so as to have the advantage of lower rates  and  are ordered on authorized vendors approved by Marketing HQ

D9  Process: 9th) Making payments to vendors/marketing agencies/service providers (2)


1.  Ensuring 3-way matching before bill passing to ensure payment release is accurate and fair with no extra costs incurred.

·      Availability of approved agreement /MOU carrying rates and payment terms

·       Evidence/proof of receipt of materials or services vis a vis Quantity, Quality, and date

stamp and proper authorization by sales /marketing manager  

·       Bill of vendor /marketing agency or service provider are duly authorized by sales head.  

2 Recovering excess payout if any


D10- Process 10th )Accepting sales returns from customers (5)


Before giving credit to the customer towards sales return, ensure that:

1 Sales return is as per “ sales return policy” in terms of reasons permitted  &   timelines

2 The sales model returned is the same as what was  invoiced

3     The physical condition of the returned product is okay.

4 Returned Products have been physically received by the company.

5 Credit note amount towards sales return is per the original invoiced rate.    

D 11 Process: 11th) Designing incentive schemes for channel partners (2)


Incentive schemes can be designed to enable meeting different objectives such as:

                                            i.     Increase sales and market share.

                                            ii.     Promoting newly launched products

                                            iii.     Boosting sales in new territories or countries

                                            iv.     Reducing sales receivables

                                            v.     Enable Strategic advantages.

                                            vi.     Encouraging channel partners and sales team morale

                                           vii.     Enable higher cash inflows.

     The incentive schemes to be reviewed to  ensure that

1 Estimated sales revenue  of the company and resultant increases in  profit/contribution i and higher cash flow  would far exceed the cost of incentive payout (well-documented demand –price elasticity model)

2 Provide each channel partner with a fair opportunity to increase sales by fixing  targets that are fair & based on documented past performance and sales potential

D 12 Process: 12th) Accepting warranty claims from customers (7)


Before giving credit to the customer towards the warranty claim, ensure that:

  1 Warranty claim is raised within the warranty period.

  2 warranty documents are approved by the after-sale service person /quality team as technical assessment and warranty terms.

   3 Parts being claimed under warranty is eligible.

   4 Defective part (particularly high value as per norm) is returned to the company.

5     The credit amount towards warranty claims is as per the original invoiced rate in case free replacement is not given to the customer.

  6. Warranty costs should be debited to the concerned supplier if it is technically established that warranty failure is attributed to poor design/quality supplied by the vendor.

   7 Ensuring recovery of warranty costs from dealer/customers in case warranty claim has been erroneously accepted

D 13 Process: 13th )Managing inventory of products and spares (6)


1 Ensure stocking of the products & spares is as per inventory limits both for finished products and spares and not excess to reduce inventory costs

   2 Safe keeping of products/spares to prevent physical damage and their periodic maintenance till sold.

   3 obtaining Insurance policy for stocks for fire, theft, damage, etc.

    4 Fixing, channel- partner wise, inventory holding norms for products and spares at each channel partner and implementing to reduce inventory carrying costs at the company end.

5 Periodic verifications of the genuineness of parts stocked at channel partner warehouse from  product performance, customer safety  and sales volume perspectives

6Periodic verification of Products and spare inventory across the company plants, depots, spare warehouses  etc  and enhancing inventory control systems  to minimize inventory shortage and loss


D 14 Process: 14th )Sale of scrap products/spares at plants/depots/warehouse (7)


1 Ensure that before any used /damaged products or damaged/defective spares are moved to the scrap yard, prior inspection is done by QC and service person persons to prevent good material from going to the scrap yard

2 Ensure that, before allowing the sale, proper write-off is obtained from the CFO.

3 Ensure that scrap rates are based on negotiation by appropriate level person and quotes obtained from  3-4 scrap dealers and properly authorized

4 Ensure that advance payment is realized from the approved scrap dealer before allowing the pick of scrap & loading.

5 Ensure that products/spares being sold as scrap are completely mutilated to prevent their  re-use

6 ensure that the scrap sale is against the authorized gate pass and invoice & not in cash.

7 Ensure that the security supervisor measures scrap quantity before loading for shipment.

You can refer to my 2nd book , available on Amazon as per below links to get more insight on the roles of CFO in enhancing profitability

 Paper back-amazon link : India


Book 2-paper back-Amazon link-Global


 E). Using AI (Artificial Intelligence) - to target cost reductions in sales & marketing function-18 identified


Process-wise,18  opportunities have been identified as below.


    E1-Process 1 Pricing for end products or spares-Local market (1)


·      AI can analyse historical data and market trends through benchmarking and Identify price elasticities to optimize pricing based on customer segments to suggest optimal pricing strategies and thus reduce manpower costs


E2 Process 2 Invoicing (1)

AI-powered invoicing systems can automate invoice generation, reduce billing errors, and Identify potential fraud or discrepancies through anomaly detection.


 E3 Process 3 Exporting (1)

AI can optimize export logistics by analyzing shipping routes and customs regulations and automating document preparation and submission for faster processing, thus reduce overall costs.


E4 Process 4 Domestic Delivering and Shipping (1)

AI algorithms can optimize delivery routes( for road delivery) and track /manage shipping schedules(sea shipment).

·      Utilize AI-powered chatbots for customer service inquiries regarding deliveries. And reduce manpower costs.


E5 Process 5 Rendering after-sale service: (1)


·       AI-driven chatbots and virtual assistants can handle routine customer inquiries and troubleshooting.

E6 Process 6 Sales promotion (conventional & digital): (1)


·      AI can analyze customer data and preferences to personalize promotional messages and offers.

·      AI  can Identify the most effective marketing channels and optimize spending based on return on investment (ROI).


E7 Process 7 Controlling sales receivables (1)



·      AI can enable sending personalized reminders for timely payments.

·       AI algorithms can analyze customer payment behavior, predict payment patterns, and prioritize collections efforts to reduce outstanding receivables.


E8-Process: 8th) Procuring of marketing materials & services by the company sales team/procuring marketing materials like packing. Promotion merchandise etc: (1)


·      AI can optimize procurement processes by analyzing supplier performance, negotiating better terms, and identifying cost-effective sourcing options for marketing materials

E9-Process: 9th) Making payments to vendors/marketing agencies/service providers (1)



·      AI can Automate payment processing based on pre-defined rules and approvals.

·      AI analysis can identify potential duplicate payments or fraudulent activities.

·      AI can Optimize payment schedules to take advantage of early payment discounts

E 10-Process 10th Accepting sales returns from customers Sales return: (1)


·      AI can analyze return patterns, identify product defects or customer dissatisfaction trends, and optimize return processes


E11-Process: 11th) Designing incentive schemes for channel partners  (1)



·      AI analytics can analyze sales performance data, identify top performers, and predict the impact of different incentive structures on sales performance.


E12 Process: 12th) Accepting warranty claims from customers Managing warranty: (1)


·      AI can analyze warranty claims data, predict potential product failures, Automate workflows for claim processing and resolution and optimize warranty coverage policies to minimize warranty-related expenses


E13 Process: 13th )Managing inventory of products and spares (1)


·       AI-Algorithms and AI-driven inventory management systems can help optimize inventory levels, forecast demand more accurately, minimize stock-outs and overstocking, and enable replenishment ordering

F. Identifying AI tools for use in ERP-SAP environments


Three options are available for identifying and using AI tools

F1-Option 1-

a)SAP Business AI: This is a suite of pre-built AI capabilities embedded within SAP.

b)SAP website can be used to learn more about features and by going through a Demo

F2-Option 2-

a)Develop customized AI tool options in-house using SAP AI Foundation for highly specific needs.

   b)This platform provides tools and services for building and deploying custom AI models tailored to the company's unique data and processes.


 F3-Option 3-

a)Use 3rd party AI tools that integrate with the SAP SD module.A few of these are listed below.

a)  Velocity:

b)  Intelligence:

c)  Strikingly:

d)  Blue Yonder:

e)  Celonis:


Each of these options requires in-house AI expertise or partnering with a consulting firm to take full advantage of AI tools


Activities (including unethical) that can affect business adversely

1. Inadequate focus from the leadership team and cost savings not being a part of KPI for performance appraisal


2.  F&A senior professionals mostly engaged in daily business operations.


3. Colluding amongst the following in return for favors and not implementing cost reduction opportunities in 14 key business processes tabulated above.

·      Channel partners like distributors/dealers.

·      End customers.

·      Vendors

·      Service providers.

·      Other business associates

·      Amongst employees

3.Not doing benchmarking of costs


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