Key takeaways
- For a Q+F quantitative scheme, effective discount = F ÷ (Q + F) × 100. A 10+1 is 9.09%, not 10%.
- Free goods cost you at landed cost, not MRP — costing schemes on MRP overstates outlay and gets brand claims short-paid.
- Quantitative schemes are cheapest to fund but hardest to track; value schemes are easiest to reconcile and claim.
- Scheme leakage on manual systems runs 20–30% of scheme value and is invisible without SKU-level reconciliation.
- Reconcile scheme payouts against brand claims monthly — by quarter end the supporting invoices are hard to reassemble.
The formula
Effective discount % = Total scheme value given ÷ Total value sold × 100. For a Q+F quantitative scheme: effective discount = F ÷ (Q + F) × 100.Worked examples
Example 1: A 10+1 quantitative scheme
A retailer orders 100 cases under a 10+1 scheme. Landed cost is ₹850 per case, PTR is ₹900 per case.
- Free cases = 100 ÷ 10 = 10 cases
- Total cases delivered = 100 + 10 = 110
- Effective discount = 10 ÷ 110 × 100 = 9.09%
- Scheme cost at landed cost = 10 × 850 = ₹8,500
- Value sold = 100 × 900 = ₹90,000
- Scheme cost as % of value sold = 8,500 ÷ 90,000 × 100 = 9.44%
Effective discount 9.09%; real cost to you ₹8,500
Note the two different percentages. 9.09% is the discount the retailer receives; 9.44% is what it costs you as a share of the value you invoiced. Both matter, and confusing them is a common source of claim disputes.
Example 2: A value scheme compared
The same 100 cases under a flat ₹75 per case value scheme instead, on a PTR of ₹900.
- Total scheme value = 100 × 75 = ₹7,500
- Value sold before discount = 100 × 900 = ₹90,000
- Effective discount = 7,500 ÷ 90,000 × 100 = 8.33%
- Cases delivered = 100 (no free goods to track through stock)
Effective discount 8.33%, costing ₹7,500
₹1,000 cheaper than the 10+1 and far easier to reconcile, because the discount appears on the invoice rather than moving through stock as untracked free goods.
Example 3: What 20% leakage costs
A distributor doing ₹40,00,000 a month runs schemes averaging 6% of sales, and leaks 20% of scheme value through ineligible SKUs and duplicate claims.
- Monthly scheme value = 40,00,000 × 6% = ₹2,40,000
- Leakage at 20% = 2,40,000 × 20% = ₹48,000 per month
- Annual leakage = 48,000 × 12 = ₹5,76,000
- As a share of annual sales = 5,76,000 ÷ 4,80,00,000 × 100 = 1.2%
₹5,76,000 a year — 1.2 percentage points of margin
On a 6% headline margin, that is a fifth of the entire margin lost to a problem that produces no visible symptom. This is why scheme reconciliation is the highest-return control a distributor can put in place.
Effective discount by scheme structure
What common Indian trade schemes actually cost, expressed as effective discount. The gap between the headline and the effective rate is where budgets go wrong.
| Scheme | Headline reading | Effective discount | Reconciliation difficulty |
|---|---|---|---|
| 5+1 quantitative | 20% | 16.67% | High — free goods in stock |
| 10+1 quantitative | 10% | 9.09% | High — free goods in stock |
| 12+1 quantitative | 8.33% | 7.69% | High — free goods in stock |
| 20+2 quantitative | 10% | 9.09% | High — free goods in stock |
| Flat ₹75 on ₹900 case | 8.33% | 8.33% | Low — appears on invoice |
| Slab: 5% above 80 cases | 5% | Varies with achievement | Medium — period-end gaming |
Effective discount for a Q+F scheme is F ÷ (Q + F). Reconciliation difficulty reflects SpireStock's scheme management research on Indian general trade. Figures reviewed August 2026.
Why 10+1 is not 10%
This is the most consistently misread number in Indian trade schemes. In a 10+1 scheme the retailer buys 10 units and receives 11. The one free unit is spread across all 11 units delivered, so the effective discount is 1 ÷ 11 = 9.09%, not 10%.
On a single SKU the 0.91 percentage point gap is trivial. Across a full range over a quarter, on a distributor doing ₹40 lakh a month, the difference between the assumed and actual scheme rate runs into lakhs — enough to swallow an entire margin point without ever appearing as a line item you could question.
The three scheme types and how they behave
Quantitative schemes (10+1, 20+2) give free goods. They cost you at landed cost rather than MRP, so they are cheaper than they look on paper — but the free units move through your stock without an invoice line, which makes them the hardest type to reconcile.
Value schemes give a flat rupee discount per case or per order. They are the easiest to reconcile and to claim back, because the discount appears explicitly on the invoice.
Slab and bulk-pack schemes pay only above a volume threshold. They are powerful for pushing volume but dangerous at period end, when retailers game the threshold by pulling forward orders they will not sell through — creating a sales spike followed by a dead month and, often, returns.
Scheme leakage: where the money actually goes
Leakage is the gap between the scheme the brand funded and the scheme you actually paid out. It comes from four places: schemes applied to SKUs that were never eligible, claims made twice across overlapping scheme periods, payouts made after a scheme has expired, and discretionary extensions granted by a salesman trying to close a month.
Distributors running on paper or spreadsheets routinely leak 20–30% of total scheme value. It persists because it is genuinely invisible without SKU-level scheme reconciliation — no single transaction looks wrong, and the aggregate only shows up as a margin that is mysteriously thinner than the price list implies.
Claiming back from the brand
Most schemes are brand-funded, wholly or partly, and you recover the cost by raising a claim. Claims fail on documentation far more often than on entitlement: missing invoice references, period dates that do not match the scheme circular, or scheme value calculated on MRP rather than landed cost.
Reconcile scheme payouts against claims monthly rather than quarterly. By quarter end, the invoices needed to substantiate a disputed claim are scattered across three months of records, and the practical outcome is that you write off the difference rather than fight for it.
Choosing the right scheme for the objective
Schemes are not interchangeable, and the common mistake is running whichever structure the brand circulated rather than the one that fits what you are trying to achieve in the territory.
To open new outlets, a small quantitative scheme works best — free goods lower the perceived risk of stocking something untried, and the retailer's cash outlay stays the same. To clear ageing stock, a value scheme is cleaner, because the discount is explicit, easy to time-box and does not add more units to a godown that is already long. To lift volume from existing outlets, a slab scheme rewards incremental purchase — but only if the threshold is set from that outlet's actual historical offtake rather than a flat territory-wide number.
To protect a shelf position against a competitor, sustained small schemes beat one large burst. A single deep discount trains the retailer to wait for the next one, which is how a promotional calendar quietly becomes a permanent price cut.
The period-end distortion
Slab schemes and month-end targets produce a predictable pattern: a spike in the last week of the period, then a dead first fortnight in the next one. The volume was not created, it was borrowed from the future — and it arrives with real costs.
Retailers who overbuy to cross a threshold hold stock they cannot sell through, which shows up later as returns, damage claims, or pressure for another scheme to move what they took last time. Meanwhile your own stock and receivables spike exactly when your books close, distorting the working-capital picture the ROI calculation depends on.
The practical defences are to set slab thresholds per outlet from historical offtake rather than uniformly, to cap scheme quantity as a proportion of an outlet's average monthly purchase, and to measure secondary sales — what the retailer actually sold — rather than primary dispatch. A scheme that lifts primary but not secondary has cost you money and moved nothing.
Frequently asked
How do you calculate the effective discount on a 10+1 scheme?
Divide the free quantity by the total quantity delivered. In a 10+1 scheme, 1 free unit across 11 delivered units gives an effective discount of 9.09%, not 10%. The general formula for a Q+F scheme is F ÷ (Q + F) × 100.
What is scheme leakage in FMCG distribution?
Scheme leakage is the difference between the scheme value the brand funded and what you actually paid out. It comes from schemes applied to ineligible SKUs, double claims across overlapping periods, post-expiry payouts, and discretionary extensions by field staff. Distributors on manual systems typically leak 20–30% of scheme value.
Are trade schemes costed on MRP or landed cost?
Free goods in a quantitative scheme cost you at landed cost, because that is what you paid for them. Calculating scheme cost on MRP overstates your outlay and is a common reason brand claims get rejected or short-paid.
What is the difference between a quantitative and a value scheme?
A quantitative scheme gives free goods, such as 10+1. A value scheme gives a flat rupee discount per case or per order. Value schemes are easier to reconcile and claim; quantitative schemes are cheaper to fund but harder to track through stock.
Why are slab schemes risky at period end?
Because retailers pull forward orders to cross the threshold, creating a sales spike they cannot sell through. The result is a dead following month and often returns, so the scheme buys reported volume rather than genuine secondary sales.
How often should scheme claims be reconciled?
Monthly. By quarter end the invoices needed to substantiate a disputed claim are spread across three months of records, and most distributors end up writing off the difference instead of recovering it.
Which scheme type should I use to open new outlets?
A small quantitative scheme. Free goods reduce the perceived risk of stocking something untried while keeping the retailer's cash outlay unchanged. Value schemes work better for clearing ageing stock, and slab schemes for lifting volume from outlets that already stock you.
Why do deep one-off discounts backfire?
Because they train the retailer to wait for the next one. Sustained small schemes hold a shelf position more cheaply than a single deep burst, which tends to turn a promotional calendar into a permanent price cut.
Should scheme performance be measured on primary or secondary sales?
Secondary — what the retailer actually sold through. A scheme that lifts primary dispatch but not secondary has simply moved stock into the retailer's godown, and it usually returns as damage claims, returns, or pressure for another scheme to clear it.
Sources & method
Benchmark ranges on this page are drawn from SpireStock's published research on Indian distribution economics. Calculations are indicative: your own brand terms, territory and credit discipline will move the result.