Trade Promotions Trade Promotions

In America, more than 80 percent of In America, more than 80 percent of all marketing dollars are spent on all marketing dollars are spent on marketing activities other than marketing activities other than consumer advertising. Look at the consumer advertising. Look at the following pie chart; only 18 percent following pie chart; only 18 percent of a typical promotions budget is of a typical promotions budget is spent on consumer advertising. spent on consumer advertising. 54 percent is spent on trade 54 percent is spent on trade promotions. promotions.

Consumer promotions

$288.3 billions – 28%

Consumer advertising

$177.5 billions –

18%

Trade marketing

$546.6, 54%

Breakdown of Marketing Expenditures (in Billions of Dollars)

Trade Promotion Tools Trade Promotion Tools

1.1. Trade allowancesTrade allowances2.2. Trade contestsTrade contests3.3. Trade incentivesTrade incentives4.4. Training programsTraining programs5.5. Vendor support programsVendor support programs6.6. Trade showsTrade shows7.7. Specialty advertisingSpecialty advertising8.8. Point-of-purchase advertising Point-of-purchase advertising

Individual firms select trade Individual firms select trade promotions based on several factors. promotions based on several factors. These include:These include:

The nature of the business – The nature of the business – manufacturer versus distributormanufacturer versus distributor

Type of customer to be influenced – Type of customer to be influenced – sale to a retailer versus wholesalersale to a retailer versus wholesaler

Company preferencesCompany preferences Objectives of IMC planObjectives of IMC plan

Trade allowancesTrade allowances

The purpose of the trade allowances is to offer The purpose of the trade allowances is to offer financial incentives to other channel members financial incentives to other channel members to make them carry the company’s products. to make them carry the company’s products.

1.1. Off-invoice allowances – financial incentives Off-invoice allowances – financial incentives given for each item, case, or pallet. Most of given for each item, case, or pallet. Most of trade allowances are given away in this mannertrade allowances are given away in this manner

2. Drop-ship allowance – money paid to 2. Drop-ship allowance – money paid to retailers who bypass wholesalers or retailers who bypass wholesalers or brokers for preplanned salesbrokers for preplanned sales

3. Slotting fee – money paid to retailers for 3. Slotting fee – money paid to retailers for stocking a new productstocking a new product

4. Exit fees – money paid to retailers to 4. Exit fees – money paid to retailers to remove an item from their SKU inventory remove an item from their SKU inventory (when new or modified products are to (when new or modified products are to replace old ones, etc.)replace old ones, etc.)

Disadvantages of trade allowancesDisadvantages of trade allowances1.1. Failing to pass along allowances to retail Failing to pass along allowances to retail

customers whereby the channel members customers whereby the channel members increase their marginsincrease their margins

2.2. Forward buying occurs when a retailer Forward buying occurs when a retailer purchases extra inventory while it is ‘on-deal’. purchases extra inventory while it is ‘on-deal’. (on-deal promotion period for passing along the (on-deal promotion period for passing along the trade allowance). The retailer may then sell the trade allowance). The retailer may then sell the ‘on-deal’ merchandise after the sales period is ‘on-deal’ merchandise after the sales period is over at regular prices. over at regular prices.

3.3. Diversion occurs when a retailer purchases a Diversion occurs when a retailer purchases a product on-deal in one location and ships it to product on-deal in one location and ships it to another location where it is off-deal.another location where it is off-deal.

Trade Contests Trade Contests To achieve sales targets and other objectives, To achieve sales targets and other objectives,

manufacturers sometimes, use trade contests. manufacturers sometimes, use trade contests. Rewards are given as contest prizes to brokers, Rewards are given as contest prizes to brokers, retail sales people, retail stores, wholesalers and retail sales people, retail stores, wholesalers and agents. These funds are also know an ‘spiff agents. These funds are also know an ‘spiff money’. These can be items such as luggage, money’. These can be items such as luggage, stereo sets, television, or a trip to an exotic stereo sets, television, or a trip to an exotic holiday spot like Nepal or Dubai. Contests are holiday spot like Nepal or Dubai. Contests are held at various levels like: held at various levels like:

Agents, wholesalers, retail stores within a chain, Agents, wholesalers, retail stores within a chain, different retail chains, individual sales people different retail chains, individual sales people within a retail chain or among a few selected within a retail chain or among a few selected retail chains in a sales district retail chains in a sales district

Trade IncentivesTrade Incentives Trade incentives are similar to trade Trade incentives are similar to trade

allowances. The difference is that trade allowances. The difference is that trade incentives are given to retailers against incentives are given to retailers against performing some specific function. This is performing some specific function. This is given to retailers to make them push the given to retailers to make them push the sale of the products or to increase retailer sale of the products or to increase retailer off-take of a brand. off-take of a brand.

The most comprehensive trade incentive is The most comprehensive trade incentive is a cooperative merchandising agreement a cooperative merchandising agreement (CMA) entered into between the (CMA) entered into between the manufacturer and retailer to undertake a manufacturer and retailer to undertake a two-way marketing effort. two-way marketing effort.

Cooperative merchandising Cooperative merchandising agreement (CMA)agreement (CMA)

May involve:May involve: Prominently feature the Prominently feature the

manufacturer’s brand as part of an manufacturer’s brand as part of an in-house offer by the retail storein-house offer by the retail store

Using a special shelf display of Using a special shelf display of brands featuring a price incentive brands featuring a price incentive

Special in-store display of a brand Special in-store display of a brand during certain time periodsduring certain time periods

A corporate sales program (CSP) is A corporate sales program (CSP) is another form of trade incentive. The CSP another form of trade incentive. The CSP could be a promotion across a specialized could be a promotion across a specialized manufacturer’s total brand portfolio. The manufacturer’s total brand portfolio. The firm may ship individual products to the firm may ship individual products to the retailer in ready-to-display pallets. The retailer in ready-to-display pallets. The retailer does not have to indulge in any retailer does not have to indulge in any merchandising effort. The manufacturer merchandising effort. The manufacturer provides incentives to the retailer for provides incentives to the retailer for carrying the entire range of the carrying the entire range of the brands/products. brands/products.

Training Programs Training Programs

Manufacturers often offer training Manufacturers often offer training programs to sales persons of retailers programs to sales persons of retailers and wholesalers. This improves the and wholesalers. This improves the chance that the salespeople of retailers chance that the salespeople of retailers or wholesalers will push the or wholesalers will push the manufacturer’s brand manufacturer’s brand instead of the instead of the competitor’s brand. competitor’s brand.

Vendor Support ProgramsVendor Support Programs These programs are meant to support vendors These programs are meant to support vendors

like retailers, wholesalers, and agents. Two like retailers, wholesalers, and agents. Two popular vendor support programs are:popular vendor support programs are:

Billback programBillback program in which manufacturer fully in which manufacturer fully reimburses the retailers for the cost of special reimburses the retailers for the cost of special product displays, advertisements, and price-cuts.product displays, advertisements, and price-cuts.

Cooperative Advertising ProgramCooperative Advertising Program – the manufacturer shares a certain – the manufacturer shares a certain proportion of the cost of advertising proportion of the cost of advertising done by the retailer featuring the done by the retailer featuring the manufacturer’s productsmanufacturer’s products

Trade Shows Trade Shows

Trade shows are normally the third highest Trade shows are normally the third highest expenditure for B2B marketing programs. expenditure for B2B marketing programs. Only advertising and sales promotion Only advertising and sales promotion receive greater amount of funding. The receive greater amount of funding. The advantage of trade shows are:advantage of trade shows are:

Trade shows offer the manufacturer to Trade shows offer the manufacturer to discover potential customers and sell new discover potential customers and sell new productsproducts

Trade shows track competitors activitiesTrade shows track competitors activities Trade shows help to boost the images of Trade shows help to boost the images of

the company and its brands. the company and its brands.

Trade shows allow buyers to Trade shows allow buyers to compare products and get in touch compare products and get in touch with more vendors- in some cases, with more vendors- in some cases, they may even strike deals with such they may even strike deals with such new vendorsnew vendors

Trade shows are an ideal place for Trade shows are an ideal place for buyers and sellers to meet in an buyers and sellers to meet in an informal, low pressure setting to informal, low pressure setting to discuss how to work together discuss how to work together

Specialty Advertising Specialty Advertising

Also know as Also know as giveaways, giveaways,

Special Advertising involvesSpecial Advertising involves

Gifts such as pens, pencils, Gifts such as pens, pencils,

Torches, coffee mugs, etc.Torches, coffee mugs, etc.

The items bear messages The items bear messages

and logos of brands and logos of brands

Point-of-Purchase Advertising Point-of-Purchase Advertising

POP displays are normally found near check out counters in POP displays are normally found near check out counters in retail shops or at the end of an aisle, store entrances, or retail shops or at the end of an aisle, store entrances, or places where they will be noticed. places where they will be noticed.

POP displays are highly attractive and POP displays are highly attractive and effective in increasing sales of products. effective in increasing sales of products. About 50% of money spent by consumers About 50% of money spent by consumers at mass merchandisers and supermarkets at mass merchandisers and supermarkets are unplanned. Many of these purchases are unplanned. Many of these purchases are impulsive buys. Consumers many are impulsive buys. Consumers many times do not decide upon a particular times do not decide upon a particular brand until the last minute. brand until the last minute.

Coca Cola claims that only 50% of soft-Coca Cola claims that only 50% of soft-drink sales are made from regular store drink sales are made from regular store shelf; 50% results from product displays shelf; 50% results from product displays from other parts of the store from other parts of the store

American Express found American Express found that 30 percent of that 30 percent of

purchases charged on purchases charged on the American Express the American Express

Card came from impulseCard came from impulse decisions made by decisions made by

customers after they had customers after they had seen the “American Express Card seen the “American Express Card Welcome” sign. Welcome” sign.