Trade Promotions

Chapter Overview

10-1Discussion Slide

10• Nature of trade promotions• Types of trade promotions• Objectives of trade promotions• Concerns in using trade promotions

Trade Promotions

• Expenditures or incentives used by manufacturers and channel members to push goods through the channel.

• 7% to 10% of sales revenue goes for trade promotions.

• Approximately 50% of total promotional dollars spent.

• To be effective, must be integral part of IMC program.

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Marketing Budgets

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Trade Promotions50%

Consumer Promotions24%

Advertising26%

• Trade allowances• Trade contests• Trade incentives• Training programs• Vendor support programs• Trade shows• Specialty advertising• Point-of-purchase displays

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F I G U R E 10 . 2Trade Promotional Tools

• Off-invoice allowance: a per-case rebate paid to retailers for an order.

• Drop-ship allowance: money paid to retailers who bypass wholesalers or brokers for pre-planned orders.

• Slotting fees: money paid to retailers to stock a new product.

• Exit fees: money paid to retailers to remove an item from their SKU inventory.

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F I G U R E 1 0 . 3

Trade Allowances

Disadvantages of Trade Allowances

• Failure to pass allowances on to retail customers.

• Forward buying.• Diversion.

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Trade Contests• Used to achieve sales targets.• Funds known as “spiff money.”• Rewards can be prizes or cash.• Can be designed for various channel

members.• Some organizations do not allow trade

contests because of possible conflict of interests.

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• Cooperative merchandising agreement (CMA)

• Corporate sales program (CSP) • Producing plant allowance (PPA) • Back haul allowance (BHA) • Cross-dock or Pedal runs• Premium or bonus pack

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F I G U R E 1 0 . 4

Trade Incentives

Training Programs• Manufacturer provides training to

wholesalers’ or retailers’ salespeople.

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Vendor Support Programs

• Billback programs• Co-op advertising programs

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Trade Shows• Ranks 3rd in B-to-B marketing expenditures.• Manufacturers spend $70,000-$100,000 per show.• Retailers spend $600 per attendee.• Average trade show had 701 exhibiting firms and 13,431 attendees.• Average ratio of attendees to exhibitors was 19 to 1.• Largest trade shows are:

– International CES– The Super Show– Miami International Boat Show & Strictly Sail– International Housewares Show– Mid-America Trucking Show

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Trade Shows by Industry

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Manufacturing (18.6%)

Computer (4.6%)

Consumer (11.0%)

Education (4.6%)

Communications (5.3%)Retail/Distributors (15.8%)

Food (7.0%)

Engineering (7.7%)

General Business (8.3%)

Medical (10.3%)

Source: Danica Vasos, “Industry Profile,” Source: Danica Vasos, “Industry Profile,” ExpoExpo, January 2000, pp. 52-55, January 2000, pp. 52-55

• Integrate the brand’s image into the display.• Integrate the display with current advertising and

promotions.• Make the display dramatic to get attention.• Keep the color of the display down so the product and

signage stand out.• Make the display versatile so it can be easily adapted by

retailers.• Make the display re-usable and easy to assemble.• Make the display easy to stock.• Customize the display to fit the retailer’s store.

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F I G U R E 1 0 . 9Effective POP Displays

• Obtain initial distribution.• Obtain prime retail location or shelf space.• Maintain support for established brands.• Counter competitive activities.• Increase order size.• Build retail inventories.• Reduce excess inventories.• Enhance channel relationships.• Enhance the IMC program.

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F I G U R E 1 0 . 1 0 Objectives of Trade Promotions

Concerns about Trade Promotions

• High cost• Tend to be used outside of IMC Plan• Over-reliance on trade promotions to push

merchandise• Often used for short-term sales goals• Potential erosion of brand image• Impact on small manufacturers

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