Selecting Trade Promotion Tools

Manufacturers use a number of trade promotion tools than that for consumer promotion. Manufacturers award money to the trade (1) to persuade the retailer or wholesaler to carry the brand, (2) to persuade the retailer or wholesaler to carry more units than the normal amount; (3) to induce retailers to promote the brand by featuring, display, and price reductions; and (4) to stimulate retailers and their sales clerks to push the product. The growing power of large retailers has increased their ability to demand trade promotion at the expense of consumer promotion and advertising. These retailers depend on promotion money from the manufacturers. No manufacturer could unilaterally stop offering trade allowances without losing retailer support The Company’s sales force and its brand managers are often at odds over trade promotion. The sales force says that the local retailers will not keep the company’s products on the shelf unless they receive more promotion money, whereas the brand managers want to spend the limited funds on consumer promotion and advertising.

Manufacturers face several challenges in managing trade promotions. First, they often find it difficult to police retailers to make sure they are doing what they agreed to do. Manufacturers are increasingly insisting on proof of performance before paying any allowances. Second, more retailers are doing forward buying that is, buying a greater quantity during the deal period that they can sell during the deal period. Retailers might respond to a 10-percent-off-case allowance by buying a 12 week or longer supply. The manufacturer has to schedule more production than planned and bear the costs of extra work shifts and overtime. Third, retailers are doing more diverting, buying more cases than needed in a region in which the manufacturer offered a deal, and shipping the surplus to their stores in non-deal regions. Manufacturers are trying to handle forward buying and diverting by limiting the amount they will sell at a discount, or producing and delivering less than the full order in an effort to smooth production.

All said, manufacturers feel that trade promotion has become a nightmare. It contains layers of deals, is complex to administer, and often leads to lost revenues.

Major Business and Sales Force Promotion Tools:

Trade Shows and Conventions:

Industry associations organize annual trade shows and conventions. Business marketers may spend as much as 35 to 35% of their annual promotion budget on trade shows. Thousands of trade shows take place every year, drawing millions of attendees. Trade show attendance can range from a few thousand to a few lacs for large shows held depending up on the industry and duration of the show. Participating vendors expect several benefits, including generating new sales leads, maintaining customer contacts, introducing new products, meeting new customers, selling more to present customers and educating customers with publication, videos and other audiovisual, materials.

Sales Contests:

A sales contest aims at inducing the sales force or dealers to increase their sales results over a stated period, with prizes (money, trips, gifts, or points) going to those who succeed.

Specialty Advertising:

Specialty advertising consist of useful low cost items bearing the company’s name and address and sometimes an advertising message that salespeople give to prospects and customers. Common items are ballpoint pens, calendars, key chains, flashlights, tote bags, ad memo pads.