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Submitted in partial fulfillment of the requirements For the award of the degree of Master of Business Administration In Software Enterprise Management
Under the guidance of Mr. Amit Gupta
Centre for Development of Advanced Computing, Noida Affiliated to Guru Gobind Singh Indraprastha University
Kashmere Gate, Delhi - 110006
I hereby declare that this Project Report entitled “Study & Implementation of sales promotional Techniques used in NPIL .” submitted by me to the GGSIPU Delhi, is a bonafide work undertaken by me and it is not submitted to any other University or Institution for the award of any degree diploma / certificate or published any time before.
Signature of the Student
Enrolment No: Semester Date : :
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Sales Promotion in companies has become an essential activity for the smooth and efficient functioning of the organization. Sales are the lifeblood of a business, without sales there would be no business in the first place; therefore it is very important that if a business wants to succeed, it should have a sales promotion strategy in mind. The primary objective of a sales promotion is to improve a company's sales by predicting and modifying your target customers purchasing behavior and patterns. Sales promotion is very important as it not only helps to boost sales but it also helps a business to draw new customers while at the same time retaining older ones. A sales promotion is a tool used to get customers to buy a product or try a service. Sales promotions can come in the form of coupons, rebates, sweepstakes, contests, discounted pricing, point-of-purchase displays, trade shows, demonstrations, premiums and sampling. Typically, before a sales promotion is put into action, a company evaluates its market. If a sales promotion is warranted, the company comes up with a clear, measurable objective they'd like to accomplish through the promotion.
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I would like to express my sincere gratitude towards CDAC for providing me this great opportunity to work and learn through the Dissertation Project.
I would like to acknowledge the guidance I received from my Guide Mr. R.K. Singh, HOD – MBA (SEM), Mr. Amit Gupta, ERP Consultant – Sales and Distribution in CDAC, Noida. This project would not have materialized without their support
I am grateful to my guide Mr. Amit Gupta for imparting constant attention, useful suggestions, expert guidance and valuable suggestions during the course of this project. I would also like to thank all the faculty members of MBA department of CDAC for their support and encouragement.
I also express my sincere gratitude to my friends who have encouraged and inspired me constantly to complete this project work.
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Table of Contents
CHAPTER CHAPTER-1 INTRODUCTION 1.1 1.2 1.3 1.4 1.5 CHAPTER-2 BUSINESS PROCESS 8 2.1 Pharmaceutical Industry 2.2 NPIL Business Strategy 2.3 Types of Customers 2.4 Selling Process: 2.5 Forms of Pharmaceutical Product CHAPTER-3 ANALYSIS 3.1 Sales Promotion in Sales & Distribution 3.2 Free Goods, Cross Selling & Discount CHAPTER-4 IMPLEMENTATION CHAPTER-5 CONCLUSION & RECOMMENDATION 25-44 15-18 18-23 9-10 10 11-12 13 Company profile Organization Structure Purpose of the Project Objective of the Project Scope of the Project 3 4-5 5-6 6 6 PAGE NO
CHAPTER 1 INTRODUCTION
1.1 COMPANY’S PROFILE
NPIL is a leading pharmaceutical company in India. NPIL has the eighth position in India market. It has the strong export presence along with domestic market. NPIL has wide product range in general medicine and spread in four zones – East, West, North & South. Product Range1. Antibiotic 2. Respiratory 3. Nutritional 4. Gastro 5. Hormonal
Power brand: 1. Bandinal 2. Menticyn 3. Hensadyl 4. Opradyn 5. Ctemetil 6. Bhenergan
1.2 ORGANIZATION STRUCTURE
Finance Operations Sales and Marketing (G.M) (G.M) (G.M)
Human Resource (G.M)
South h (ZBM)
Market Advertising Pricing
U.P (East) (AM)
U.P (west) (AM)
U.P (central) (AM)
The organizational structure of the company NPIL (Noida Pharmaceutical India Limited) is shown above. It consists of five major functional areas i.e. Finance, Operations, Sales and Marketing, Human resource and Information Technology, each having a General Manager appointed responsible for their respective departments. Sales and Marketing department is further classified into two subparts Sales department and Marketing department, each having its own set of goals and responsibilities. Marketing Department is mainly responsible for Product Development, Market research, Promotion and Pricing. Sales are conducted all over the country from four zones North, South, East and West. North zone is spread over Delhi, Rajasthan, Punjab, Uttar Pradesh and Haryana. Uttar Pradesh is further categorized into three territories UP East, UP west and UP Central.
1.3 PURPOSE OF THE PROJECT
Sales promotions can come in the form of coupons, rebates, sweepstakes, contests, discounted pricing, point-of-purchase displays, trade shows, demonstrations, premiums and sampling. Typically, before a sales promotion is put into action, a company evaluates its market. Using Sales Promotion, you can define the various sales promotional activities which will be useful for the organization. Here I am taking three types of promotional techniques Free goods. Inclusive Exclusive Discounts Customer specific discount Material specific discount Cross selling
1.4 OBJECTIVE OF THE PROJECT
The objective of my project is to implement Sales promotional activities in the leading pharmaceutical company NPIL using SAP.
1.5 SCOPE OF THE PROJECT
The scope of the project is spread over the following: Study the complete existing business process of the company. Identification of different types of customers for NPIL sold to party, ship to party, bill to party and payer. Study the Various Sales Promotional Activities. Free Goods Cross Selling Discounts
Implement Sales Promotional activity in NPIL using SAP.
CHAPTER 2 BUSINESS PROCESS
2.1 PHARMACEUTICAL INDUSTRY
Pharmaceutical industry’s challenges are patent expiry and thin pipeline, reducing drug approvals, declining R&D productivity, stringent regulations, increasing development costs, reducing periods of exclusivity, increasing generic penetration and others. Additional and increasing pressure on pharmaceutical company over drug safety (because of updated regulations) has increased the clinical trial period. This led to higher development costs and increased time-to-market. Hence, the pharmaceutical companies are looking for various opportunities to reduce cost, improve efficiencies, improve pipeline and reduce the time-to-market. To reduce cost, the pharmaceutical companies are adopting different strategies like outsourcing (in areas like research, manufacturing, clinical trial management and other functions), restructuring R&D models, moving part of business functions to low cost countries (like China, India, Puerto Rico), adopting efficient sales and marketing functions (to have more impact with less sales force) and other related initiatives. A competent strategy that the pharmaceutical companies are adopting is “virtual” execution delivery model as this model allows companies to focus on their core-competencies and leverage others partner’s capabilities. In this model, companies use in-house resources for some functions of their value chain and collaborate with external partners for other functions. Apart from outsourcing non-core support services (for example, IT, F&A and others), research manufacturing, sales and marketing, clinical trial/development activities are also considered for outsourcing through this model.
2.2 NPIL BUSINESS STRATEGY
One of the constants of pharmaceutical company strategy over the past decade has been increasing scale. Only by growing larger are companies able to afford the considerable costs of drug development and distribution. Within this broad approach at least two business models are discernable: Blockbuster model involving the search for and distribution of a small number of drugs that achieve substantial global sales. The success of this model depends on achieving large returns from a small number of drugs in order to pay for the high cost of the drug discovery and development process for a large number of candidates. Total revenues are highly dependent on sales from a small number of drugs. Diversification model in which a larger number of drugs are marketed to smaller niche markets. The advantage of this model is that its success is not dependant on sales of a small number of drugs. However without a blockbuster to help pay for the high development costs, the model only works for small markets where distribution cost is low. Intermediate model which borrows some of each.
NPIL follows intermediate model borrowing advantages of both the models i.e. blockbuster model and diversification model. The development and management of distribution system is highly costly hence for the metropolitan market blockbuster strategy is used in which huge revenues are earned from small number of selected drugs supplied in large quantities. These returns are used for the further discovery of new drugs. Whereas, sales in other parts of India in all four zones are carried out using diversification model in which large number of drugs
are marketed to smaller niche markets. In this the quantity of drug ordered is less but the number of drugs ordered is large.
2.3 TYPES OF CUSTOMERS
NPIL being a leading pharmaceutical company has a wide range of customers. They can be classified into four major categories: 1. Medical Institutions a. AIIMS b. SAFDARJANG 2. Research Centers a. PGI CHANDIGARH b. JIPMER 3. Wholesalers a. SINGH PHARMACEUTICALS b. SONA MEDICALS 4. Doctors a. Dr. Batra b. Dr. Rajvanshi
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2.4 Selling Process:
Order Processing Procurement
Shipping Delivery Goods Issue
Billing Billing Document
Customer Payment/ Accounting
Material Stock Account
The sales and distribution process of the NPIL is shown above. It consists of five stages:
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1. Pre-Sales 2. Order Processing Procurement 3. Shipping 4. Billing 5. Customer Payment/ Accounting
In a simple scenario, the sales process begins with the customer ordering goods and services and asking for the requested delivery date. This mainly involves two documents, inquiry sent by the customer, asking for material details and time of delivery, and quotation sent by the seller to the customer, specifying the details of material required by the customer along with the delivery date. This basic information can be used to create a document in sales and distribution called Sales Order, which consists of all the details regarding customer, organization, materials ordered, price of materials, and mode of payment and delivery conditions. You can then trigger your shipping activities at an appropriate time so that the customer receives the material in time. As soon as the material leaves the company, a goods issue order is posted to update stock and values. Then a billing document is created and an invoice is sent to the customer. Customer verifies the invoice against the materials received and makes payment. As soon as the customer pays for the materials, the incoming payments are posted in financial accounting department in accounts receivables.
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2.5 FORMS OF PHARMACEUTICAL PRODUCTS
Expert manufacturing and packaging of pharmaceutical products in various forms:
I Solid dosage forms: Tablets Film coated tablets Capsules.
II Soft dosage forms: Ointments Creams Jells
III Injection dosage forms: Solutions in vial Solutions in prefilled syringes
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CHAPTER 3 ANALYSIS
3.1 SALES PROMOTION IN SALES AND DISTRIBUTION
Sales are the lifeblood of a business, without sales there would be no business in the first place; therefore it is very important that if a business wants to succeed, it should have a sales promotion strategy in mind. The primary objective of a sales promotion is to improve a company's sales by predicting and modifying your target customers purchasing behavior and patterns. Sales promotion is very important as it not only helps to boost sales but it also helps a business to draw new customers while at the same time retaining older ones. There are a variety of sales promotional strategies that a business can use to increase their sales, however it is important that we first understand what a sales promotion strategy actually is and why it is so important. A sales promotion is a tool used to get customers to buy a product or try a service. Sales promotions can come in the form of coupons, rebates, sweepstakes, contests, discounted pricing, point-of-purchase displays, trade shows, demonstrations, premiums and sampling. Typically, before a sales promotion is put into action, a company evaluates its market. If a sales promotion is warranted, the company comes up with a clear, measurable objective they'd like to accomplish through the promotion. Sales promotion - Sales promotions are short-term incentives to encourage the purchase or sale of a product or service. Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or purchase. Examples of devices used in sales promotion include coupons, samples, premiums, point-of-purchase (POP) displays, contests, rebates, and sweepstakes.
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Sales Promotion Strategies
There are three types of sales promotion strategies: Push, Pull, or a combination of the two.
A push strategy involves convincing trade intermediary channel members to "push" the product through the distribution channels to the ultimate consumer via promotions and personal selling efforts. The company promotes the product through a reseller who in turn promotes it to yet another reseller or the final consumer. Trade-promotion objectives are to persuade retailers or wholesalers to carry a brand, give a brand shelf space, promote a brand in advertising, and/or push a brand to final consumers. Typical tactics employed in push strategy are: allowances, buy-back guarantees, free trials, contests, specialty advertising items, discounts, displays, and premiums.
A pull strategy attempts to get consumers to "pull" the product from the manufacturer through the marketing channel. The company focuses its marketing communications efforts on consumers in the hope that it stimulates interest and demand for the product at the end-user level. This strategy is often employed if distributors are reluctant to carry a product because it gets as many consumers as possible to go to retail outlets and request the product, thus pulling it through the channel. Consumer-promotion objectives are to entice consumers to try a new product, lure customers away from competitors’ products, get consumers to "load up" on a mature product, hold & reward loyal customers, and build consumer relationships. Typical
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tactics employed in pull strategy are: samples, coupons, cash refunds and rebates, premiums, advertising specialties, loyalty programs/patronage rewards, contests, sweepstakes, games, and point-of-purchase (POP) displays.
Car dealers often provide a good example of a combination strategy. If you pay attention to car dealers' advertising, you will often hear them speak of cash-back offers and dealer incentives.
How to use Sales Promotions
Sales promotions are a great way to boost sales for a period of time for a specific product or service. You can also rotate through different sales promotions to always have a sales promotion going on. They key to a sales promotion is to position a product as "a good value". Know what you are selling. Make sure you and your sales associates can accurately articulate the company's product line, in words everyone can understand. Choose one product or package of products to promote. Be specific about what you are about to offer your customers, and be clear about what customers need to do to qualify for the promotion. Make sure all sales associates are on the same page with this. Make sure the total price tag for the promotion is lower than it would be was it not being specially promoted. Alternatively, make sure the total value of the services is higher than normal. Either way, the customer is getting a deal. Advance the promotion to the forefront of your advertising strategies. You need to get the maximum return on your promotion. To do that, you need to make it among your top three messages during the promotion (the other two being brand and image).
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To engender trust on the part of the consumer, stay true to your word about the promotion. Give them everything you promised. Charge exactly what you asked for in the beginning. If you have advertised the promotion as a "limited time" offer, you must end the promotion when you said you would. This will prove to the customer that you mean it when you say "limited time". This will encourage customers to act fast the next time you use a deadline on a promotion. Rotate through different products, markets and regions. Adjust your marketing campaign accordingly as you go. The marketing, advertising, and promotions of a business need to be synchronized. As master political propagandist Karl Rove says, "Stay on message." This maxim applies to all businesses.
3.2 CROSS SELLING, FREE GOODS & DISCOUNTS
Cross-selling is defined as "the action or practice of selling among or between established clients, markets, traders, etc." or "that of selling an additional product or service to an existing customer". The strategy of pushing new products to current customers based on their past purchases. Cross-selling is designed to widen the customer's reliance on the company and decrease the likelihood of the customer switching to a competitor. In practice businesses define cross-selling in many different ways. Elements that might influence the definition might include: the size of the business, the industry sector it operates within and the financial motivations of those required to define the term. The objectives of cross-selling can be either to increase the income derived from the client(s) or to protect the relationship with the client(s). The approach to the process of cross-selling can be varied. Unlike the acquiring of new business, cross-selling involves an element of risk that existing relationships with the
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client could be disrupted. For this reason it is important to ensure that the additional product or service being sold to the client(s) enhances the value the client(s) get from the organization. Also called suggestive selling, sales technique whereby complementary products are presented to a customer after the customer has demonstrated a desire and willingness to purchase a particular product. For example, when selling electronic equipment, a salesperson may attempt to sell a service contract for the extended maintenance of the equipment after the customer has decided to purchase the equipment. While cross-selling may make accessorizing more convenient for the customer, it also enables the salesperson to sell more products
Broadly speaking, cross-selling takes three forms. First, while servicing an account, the product or service provider may hear of an additional need, unrelated to the first, that the client has and offer to meet it. Thus, for example, in conducting an audit, an accountant is likely to learn about a range of needs for tax services, for valuation services and others. To the degree that regulations allow, the accounts may be able to sell services that meet these needs. This kind of cross-selling helped major accounting firms to expand their businesses considerably.
Selling add-on services is another form of cross-selling. This happens when a supplier shows a customer that it can enhance the value of its service by buying another from a different part of the supplier's company. When you buy an appliance, the salesperson will offer to sell you insurance beyond the terms of the warranty. Though common, this kind of cross-selling can leave a customer feeling poorly used. The customer might well ask the appliance salesperson why he needs insurance on a brand new refrigerator. Is it really likely to break in just nine months?
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The third kind of cross-selling can be called selling a solution. In this case, the customer buying air conditioners is sold a package of both the air conditioners and installation services. The customer can be considered buying relief from the heat, contrary to just air conditioners. Free goods are what is needed by the society and is available without limits . The free good is a term used in economics to describe a good that is not scarce. A free good is available in as great a quantity as desired with zero opportunity cost to society.
A good that is made available at zero prices is not necessarily a free good. For example, a shop might give away its stock in its promotion, but producing these goods would still have required the use of scarce resources, so this would not be a free good in an economic sense.
There are two main types of free goods:
Resources that are jointly produced. Here the free good is produced as a by-product of
something more valuable. Waste products from factories and homes, such as discarded packaging, are often free goods.
Ideas and works that are reproducible at zero cost, or almost zero cost. For example, if someone invents a new device, many people could copy this invention, with no danger of this "resource" running out. Other examples include computer programs and web pages.
This function allows you to offer your customers a product free of charge in the form of free goods when a certain quantity of products is ordered. Free goods are a kind of quantity discount, and are granted in the form of a goods delivery that is free of charge when a certain quantity is purchased. You can use it to encourage your customers to order greater quantities.
The following types of free goods exist:
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● Inclusive bonus quantity: The customer only pays for part of the goods he or she has ordered. The rest of the products are provided at no extra cost. For example, a customer orders ten notebooks but only has to pay for nine. ● Exclusive bonus quantity: The customer pays for the goods he has ordered, and also receives additional products for free. The materials delivered as free goods do not have to be the same as the goods ordered. For example, a customer orders ten notebooks, and additionally receives a handheld free of charge.
The customer only pays for a part of the goods required. The rest of the goods are free. This is called Inclusive free goods and means that part of the purchase quantity is designated as free goods and is not billed. The material supplied as free goods always has the same unit of measure as the purchased quantity.
Often bottles of wine, two are designated as free goods. If you order ten bottles, then ten are delivered but you are not billed for two of them. You have received inclusive free goods.
The customer pays for the goods ordered and receives additional goods. This is Known as exclusive free goods and means that free goods is granted for an additional quantity to that in the purchase order. More is delivered than was ordered and the additional quantity is not billed.
The goods delivered as free goods do not have to be the same as material ordered. When four coffee machines are ordered, the vendor supplies a packet of coffee as free goods. Therefore, if you order four coffee machines, you receive a free packet of coffee.
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Discounts are reductions to a basic price of goods or services. They can occur anywhere in the distribution channel, modifying either the manufacturer's list price (determined by the manufacturer and often printed on the package), the retail price (set by the retailer and often attached to the product with a sticker), or the list price (which is quoted to a potential buyer, usually in written form). The market price (also called effective price) is the amount actually paid. The purpose of discounts is to increase short-term sales, move out-of-date stock, reward valuable customers, and encourage distribution channel members to perform a function, or otherwise reward behaviors that benefit the discount issuer. Some discounts and allowances are forms of sales promotion.
Here are some of the discounts you can offer to your customers.
Quantity Based Discount you must have noticed a huge difference between wholesale and retail price. Whenever you buy something in large quantities you expect some discount from the seller. People are more than happy to offer low prices to a buyer who will purchase in large quantities because it allows the seller to save in many ways. But normally these quantities are too large for a normal consumer and only businesses can afford to purchase a product in these quantities, however you can offer some sort of off-price if the customer buy more than one units, for example 5% off if someone purchases 10 units or more.
Payment Based Discount: If majority of your customers make purchase on credit then you can offer payment based discounts to these customers, tempting them to pay as soon as possible by offering a small discount on paying cash without delay. Prompt payments will save you all those collection costs and help you with daily expenditures of the business, as well.
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Trade Discounts: These are the discounts you have to offer to the middleman, be it the wholesaler, retailer or distributor, so that they can cover all costs of marketing that may be needed before the product reaches to the ultimate consumer. Trade discounts are in fact, the biggest of all.
In some cases you can offer discounts to some specific group of customers to capture that special segment of the market. This niche group can be of students, house wives, doctors, your previous customers, small business owners or any other strategically targeted group.
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CHAPTER 4 implementation
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In many sectors of industry it is common to provide products free of charge, or not to charge the customer for some of the goods sold when a customer purchases certain goods. Activate free goods determination
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Determining free goods procedure in sales
Features You create a free goods agreement in the same way as you do a condition. You can set the requirements governing when free goods are granted at as many levels as required, e.g. at customer/material level or customer hierarchy/material level. The standard system provides for Customer/material level. The free goods agreement has a validity period. In the free goods agreement you can save different rules for determining the free goods quantity. You can determine a minimum amount for the sold material. The free goods only then apply from this minimum amount. The free goods quantity can be defined proportionally to the quantity of the material sold. Another rule defines the free goods quantity per full unit of the material sold.
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I.e., free goods might be granted only for a certain number of full pallets and not for partially loaded pallets. Free goods processing is supported in the sales order for direct sales. When creating the sales order, the free goods items are created automatically according to free goods agreement. The free goods are represented as an item. The free goods item is a sub item of the originating item. The free goods items are relevant for delivery and are copied to the delivery. The free goods item can be copied to the billing document. It is possible to have the free goods in the invoice as free of charge items. In the sales order and in the billing document, pricing can be carried out for a free goods item. An automatic discount of 100 percent at the end of pricing ensures that the item is free of charge. This facilitates representation in the statistics and in the Profit Analysis. The free goods can be represented there not only as manufacturing costs but also as a special type of sales deduction. Create Free Goods
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Create free goods determination
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Constraints Free goods are currently only supported on a 1:1 basis. This means that an order item can only be the source of one free goods item. This means that agreements involving relationships such as 'Buy material 1 and get material 2 and material 3 free of charge' or 'Order material 1 and material 2 together and get material 3 free of charge' are not supported. Free goods are not currently supported in combination with material structures (e.g. product selection, bills of material, variants with BOM explosion). Free goods are currently only supported for sales orders with document category C (not for quotations, for example). Free goods are not currently supported for deliveries without reference to a sales order. Free goods are not currently supported for make-to-order production, third-party order processing and scheduling agreements. Maintaining Free Goods Master Data Use
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Free goods master data must be maintained before automatic free goods determination can be carried out. The condition technique is used for free goods in the same way as for pricing. Features The free goods master data has the following features: Free goods can be maintained as either inclusive or exclusive. You can set the requirements governing when free goods are granted at as many levels as required, e.g. at customer/material level or customer hierarchy/material level. Just as in pricing, condition tables are used for this which you can enhance according to your own requirements. You can specify a validity period for the free goods agreement. You can specify a minimum quantity for which free goods is to be granted. Stages can be defined with regards to the minimum quantities and their dependent free goods. For exclusive free goods, you can define a material other than the material sold to be granted as free goods. You can define different rules for determining the free goods quantity: o proportional (rule 1) o related to number of units (rule 2) o only for whole units (rule 3) You grant 10 pieces of a material as exclusive free goods for an order of 100 pieces. A customer orders 150 pieces. Depending on the rule used, the customer receives the following free goods quantity:
Configuration of Cross Selling in SPRO
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Maintain Customer procedures for Cross Selling
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Define document procedure for Cross Selling
Assign Standard order to cross selling
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Define and assign Cross Selling Profile
Define Cross Selling Profile
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New Entries for Defining cross selling profile
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Create Cross Selling
Initial Screen for creating cross selling Document type – CS01
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Entry for Cross Selling
Discounts: Material Specific Discounts Customer Specific Discounts
Create Material Specific Discounts
Using Transaction code – VK11
Document type: k004
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Create Material Condition (k004): Fast Entry
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For Customer specific Discounts Condition type: k005 Create Condition Record
Create Customer/Material Condition (k005): Fast Entry
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