Download - Trade-Oriented Sales Promotion
Trade-Oriented Sales Trade-Oriented Sales PromotionPromotion
Chapter Seventeen
Chapter Seventeen ObjectivesChapter Seventeen Objectives
• Discuss the objectives of trade-oriented promotions and the factors critical to building a successful trade promotion program
• Explain the various forms of trade allowances and the reasons for their usage
Chapter Seventeen ObjectivesChapter Seventeen Objectives
• Understand forward buying and diverting and how they are created by manufacturers’ use of off-invoice allowances
• Explain the role of everyday low pricing (EDLP) and pay-for-performance programs in overcoming forward buying and diverting
Chapter Seventeen ObjectivesChapter Seventeen Objectives
• Describe the concept and practice known as efficient consumer response (ECR)
• Understand the practice of category management
• Describe the role of cooperative advertising and vendor support programs
• Discuss the nature and role of trade shows
Objectives of Trade PromotionObjectives of Trade Promotion
• Introduce new or revised products• Increase distribution of new packages or sizes• Build retail inventories• Maintain/Increase manufacturer’s shelf space• Obtain displays outside shelf locations• Reduce excess inventory• Achieve product features in retailer’s ads• Counter competitive activity• Sell as much as possible to final consumers
Trade PromotionTrade Promotion
Key Ingredients to Success
• Financial incentive
• Correct timing
• Minimize retailer’s effort/cost
• Quick results
• Improve retailer performance
Types of Trade PromotionsTypes of Trade Promotions
• Trade allowances
• Cooperative advertising and vendor support programs
• Trade contests and incentives
• Trade shows
Trade AllowancesTrade Allowances
Trade Allowances
Used by manufacturers to reward
wholesalers and retailers for
performing activities in support of the
manufacturer’s brand
Major Forms of Trade AllowancesMajor Forms of Trade Allowances
• The fees manufacturers pay retailers for access to the slot, or location,
• Typically when a manufacturer to get its new brand accepted by retailers
• A form of bribery? or Legitimate cost of doing business?
Slotting allowances
Bill-back allowances
Off-invoice allowances
Major Forms of Trade AllowancesMajor Forms of Trade Allowances
• Retailers receive allowances for featuring the manufacturer’s brand in advertisements or for providing special displays
Slotting allowances
Bill-back allowances
Off-invoice allowances
Major Forms of Trade AllowancesMajor Forms of Trade Allowances
• Most frequently used form• Deals offered periodically to trade that
permit wholesalers and retailers to deduct a fixed amount from the invoice
• Retailers do not necessarily pass along to consumers the discounts
Slotting allowances
Bill-back allowances
Off-invoice allowances
Forward Buying and DivertingForward Buying and Diverting
• Retailers purchase enough products on deal to carry them over until the manufacturer’s next regularly scheduled deal
• Retailers’ savings from forward buying often are not passed on to consumers
• Leads to increased distribution costs• Manufacturers experience reduced margins
due to price discounts
Forward Buying Diverting
Forward Buying and DivertingForward Buying and Diverting
• Occurs when a manufacturer restricts a deal to a limited geographical area
• Retailers buy large quantities at the deal price and then resell the excess quantities in other geographical areas
• Product quality potentially suffers due to delays and serious problem could result from product tampering
Forward Buying Diverting
Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
Efficient Consumer Response Efficient Consumer Response
Efficient Consumer Response (ECP)
A broad-based concept of business
management that is oriented toward
enhancing efficiencies and reducing
costs in the grocery industry
Efficient Consumer Response Efficient Consumer Response
1. Improved product-replenishmentpractices
- move product more efficiently- Electronic Data Interchange(EDI)
2. Reduced tradepromotions
- minimize inventory costs andreduce forward buying anddiverting- EDLP,Pay-for-Performance programs
3. Improved productintroductions
- respond to consumers’ needsfor new product- avoid simply introducing me-too products
Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
Category ManagementCategory Management
Category Management
Retailers and manufacturers must work together, share market
intelligence, and develop strategies that are mutually beneficial
Category ManagementCategory Management
Reviewing the product category
Targeting consumers
Planning merchandising
Implementing strategy
Evaluating results
Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
Everyday Low Pricing (EDLP)Everyday Low Pricing (EDLP)
EDLP
A manufacturer charges the same
price for a particular brand
day in and day out
Why Some Retailers Resist Why Some Retailers Resist
• Many retailers have established distribution infrastructures to avail themselves of high-low prices
• EDLP pricing benefits the manufacturers
• EDLP pricing takes some of the excitement out of retailing
Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
Pay-for-Performance ProgramsPay-for-Performance Programs
Pay-for- Performance Programs
Designed to reward retailers for
selling the brands supported with
trade allowances rather than merely
buying these brands
Pay-for-Performance ProgramsPay-for-Performance Programs
• Provide incentive to the retailer only for the items that are sold to consumers during the agreed-upon time period
• Benefit all parties: consumers, retailers, and manufacturers
• A natural correlate for the efficient consumer response (ECR)
Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
Account Specific MarketingAccount Specific Marketing
Account Specific Marketing
Also called co-marketing,
characterizes promotional and
advertising activity that a manufacturer customizes to specific retail accounts
Account Specific MarketingAccount Specific Marketing
• Relatively recent innovation
• e.g., Local radio tie-in advertising, loyalty programs
• Requires a lot of effort and can be costly
• The future of this practice is uncertain yet
Cooperative AdvertisingCooperative Advertising
Cooperative (co-op) advertising
An arrangement between a manufacturer
and reseller whereby the manufacturer
pays for all or some of the advertising
costs undertaken by the reseller
Cooperative AdvertisingCooperative Advertising
Five Common Elements
• Specified time period
• Accrual
• Payment share
• Performance guidelines
• Billing for reimbursement
Why is Co-op Advertising Used?Why is Co-op Advertising Used?
• Manufacturers can achieve advertising support on a local-market basis
• Provide them with a way to associate their products in the consumer’s mind with specific retail outlets
• Stimulates greater retailer buying and merchandising support
• Enables manufacturers to have access to local media with lower rates
Open-Ended Co-op AdvertisingOpen-Ended Co-op Advertising
Open-ended Co-op Advertising
Involves paying for part of the
retailer’s advertising cost without
relating the reimbursement to the
amount of products purchased from
the manufacturer
Why is Open-Ended Co-opWhy is Open-Ended Co-op Advertising Used? Advertising Used?
• Wants to encourage the use of funds by smaller retailers
• Manufacturer sells through intermediaries and does not have access to retailers’ purchase figures
• It simplifies the record-keeping task
Vendor Support Programs Vendor Support Programs
Vendor support programs (VSPs)
A retailers develops an advertising program in
consultation with local advertising media and
then invites its vendors to pay for a specific
percentage of the media cost for the
proposed campaign
Vendor Support Programs Vendor Support Programs
• Retailer benefits
• Often a manufacturer pays a large sum but receives very little actual promotion
• The less powerful a manufacturer, the more susceptible to retailers’ demands
• The more the manufacturer invests in the retailer’s advertising, the less funds available to it own brands
Trade Contests and IncentivesTrade Contests and Incentives
Trade contest generally based onmanagers meeting a salesgoal
Tradeincentives
given to retail managers andsalespeople for performingcertain tasks
Push money provide financial incentivesto retail salespeople toaggressively sell toconsumers a selected item
Trade ShowsTrade Shows
Trade show
A temporary forum for sellers of a
product category to exhibit and
demonstrate their wares to present
and prospective buyers
Functions of Trade ShowsFunctions of Trade Shows
• Servicing present customers
• Identifying prospects
• Introducing new or modified products
• Gathering information about competitors’ new products
• Taking product orders
• Enhancing the company’s image