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Promotional Strategy: Group 8ABHISHEK (PGP30122) | BHANU (PGP30306) | NIKHIL (PGP30323) |NISHANT (PGP30155)
THE COSTLY BARGAIN OF TRADE PROMOTION
November 6, 2015
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SHIFT IN POWER
Manufacturer to Trader
Rise of trade promotions
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Problems of trade promotions:
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FORWARD BUYING
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Preserve self space against competitors Secure Trial for new product
PROBLEMS IN FORWARD BUYING
PILING UP OF INVENTORY
STORAGE COSTS
INTEREST EXPENSES
INSUARANCE COSTS
TRANSPORTATION COST
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NO-TRADE-DEAL DISTRIBUTOR INVENTORY
SAVINGS
COST OF BUYING
COST OF STOCKING
COST OF DOUBLE HANDLING
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FRACTION OF FORWARD BUYING OF TOTAL SALES
INTERVAL BETWEEN PROMOTIONS
NUMBER OF SKUs
RISE IN UNCERTAINITY
COST TO MANUFACTURERS
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GM CLOSES GUJARAT PLANT
NO FORWARD PURCHASES IN SHORT LIFE PRODUCTS
COST TO THE SYSTEM
A PART OF THE COST OF TRADE PROMOTION WHICH CAN BE QUANTIFIED
A PART OF THE COST OF TRADE PROMOTION WHICH CANNOT BE QUANTIFIED
Transportation & Handling cost Selling, General & Administrative expenses 16
SOME LIKE IT ! SOME DONT !
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SOME LIKE IT ! SOME DONT !
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DETERIORATION OF IN-STORE SERVICE
Living with Promotions
Trade Promotions( Forward Buying, Coupons, Contests)
High Cost
Manufacturer Retailer
How to Tackle?
EDLPP
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Everyday Low Purchase Price Example - India
What is EDLPP?
Followed By Walmart Inc., Leads to better relations among channel partners
Results in Low Fixed Cost(Less advertising, less labour, simple inventory management)
Involves low cost price strategy, Low SG&A expense
Less fluctuations in demand
Is EDLPP the solution to all the woes?Definitely NOT
BUT
Right Direction
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How to go about trade promotions?
They should be the last resort of any company – should be tried only after advertising andpackaging changes lead to minimal result.
If the company is going for promotions take the following steps
Focus on particular need of distributors Look for ways to reduce administrative burden Spread trade promotion funds fairly among distributors
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THANK YOU
