Trade promotion
Encyclopedia
In business
and marketing
, “trade” refers to the relationship between manufacturers and retailers. Trade Promotion refers to marketing activities that are executed in retail
between these two partners. Trade Promotion is a marketing technique aimed at increasing demand for products in retail stores based on special pricing, display fixtures, demonstrations, value-added bonuses, no-obligation gifts, and more.
Trade Promotions can offer several benefits to businesses. Retail stores can be an extremely competitive environment; trade promotions can help companies differentiate their products from the competition. Companies can utilize Trade Promotions to increase product visibility and brand awareness
with consumer
s. Trade Promotions can also increase a product’s consumption rate, or the average quantity of a product used by consumers in a given time period. Furthermore, effective Trade Promotions can enlarge a product’s market segment
penetration, or the product’s total sales in proportion to the category’s competition
. Moreover, companies use Trade Promotions to improve distribution of their product(s) at retailers and strengthen relationships with retailers. Lastly, Trade Promotions can be leveraged to introduce new product launches into retail stores.
, which are located near cash register
s to encourage impulse buying; Floor Stickers, or advertisements for products on the aisle of a store; Feature Displays, which can be located at the end of an aisle to draw attention to a product; and Special Racks, or manipulation of a store shelf to make more space available for a product or bring attention to the promoted product. In-store Displays can be perceived as more visually appealing to consumers than product alone on a retail shelf.
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s offer instantly redeemable savings on certain products. Coupons can be featured on In-Store Displays, on their own, or on the product. Coupons instantly reduce the price of a product, making it more desirable to consumers.
Coupons can have both advantages and disadvantages. Coupons create brand awareness. The consumer sees the brand name on the coupon even when the coupon is not redeemed. Coupons, also, encourage consumers to purchase brands on the next trip to the store.
The disadvantages that come along with using a coupon are:
s normally require the participant to perform some type of activity. The winner is selected based on who performs best or provides the most correct answers. No purchase is required to enter a sweepstakes
. Consumers can enter as many times as they wish, although it is permissible for firms to restrict customers to one entry per visit to the store or some other location. The problems with Contest and Sweepstakes are the cost, consumer indifference and clutter.
s offer money back to the consumer. Unlike coupons, rebates cannot be used immediately, but instead must be mailed to the product’s manufacturer. Consumers benefit from the lower price, while companies benefit because not every consumer will redeem the offer.
s incentivize consumers to purchase a product with a tangible benefit, such as a no-obligations gift. Premiums make the product offer more valuable to consumers by including a related product for no additional cost.
s before buying it. This can reduce consumers’ apprehension about buying a new product or introduce them to a product they were unfamiliar with before.
. Some potential problems associated with trade promotions programs are costs, the potential impact on small manufacturers, and the tendency to rely too much on trade promotios to move merchandise.
tell manufacturers and retailers how trade promotions performed relative to their pre-determined objectives. A lack of understanding on what trade promotion data to measure and how to measure performance can hinder the overall process. Manufacturers and retailers will not know what made a promotion effective or ineffective unless they have predetermined data points to measure and analyze.
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
and marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
, “trade” refers to the relationship between manufacturers and retailers. Trade Promotion refers to marketing activities that are executed in retail
Retail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
between these two partners. Trade Promotion is a marketing technique aimed at increasing demand for products in retail stores based on special pricing, display fixtures, demonstrations, value-added bonuses, no-obligation gifts, and more.
Trade Promotions can offer several benefits to businesses. Retail stores can be an extremely competitive environment; trade promotions can help companies differentiate their products from the competition. Companies can utilize Trade Promotions to increase product visibility and brand awareness
Brand awareness
Brand awareness is a marketing concept that enables marketers to quantify levels and trends in consumer knowledge and awareness of a brand's existence...
with consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s. Trade Promotions can also increase a product’s consumption rate, or the average quantity of a product used by consumers in a given time period. Furthermore, effective Trade Promotions can enlarge a product’s market segment
Market penetration
Market penetration is8th growth strategies of the Product-Market Growth Matrix defined by Ansoff. Market penetration occurs when a company enters/penetrates a market with current products. The best way to achieve this is by gaining competitors' customers...
penetration, or the product’s total sales in proportion to the category’s competition
Competition (economics)
Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services...
. Moreover, companies use Trade Promotions to improve distribution of their product(s) at retailers and strengthen relationships with retailers. Lastly, Trade Promotions can be leveraged to introduce new product launches into retail stores.
In-store displays
In-store displays are promotional fixtures in retail stores. Variations of in-store displays include Point-of-Sale DisplaysPoint of sale display
A point-of-sale display is a specialized form of sales promotion that is found near, on, or next to a checkout counter . They are intended to draw the customers' attention to products, which may be new products, or on special offer, and are also used to promote special events, e.g. seasonal or...
, which are located near cash register
Cash register
A cash register or till is a mechanical or electronic device for calculating and recording sales transactions, and an attached cash drawer for storing cash...
s to encourage impulse buying; Floor Stickers, or advertisements for products on the aisle of a store; Feature Displays, which can be located at the end of an aisle to draw attention to a product; and Special Racks, or manipulation of a store shelf to make more space available for a product or bring attention to the promoted product. In-store Displays can be perceived as more visually appealing to consumers than product alone on a retail shelf.
Temporary Price Reductions (TPR)
(TPR) are either directly or indirectly lower the cost per unit of a product. Examples include “cents off” promotions, where manufactures or retailers temporarily reduce the price of a product, and Bonus Pack promotions which offer extra product for free. Consumers benefit from either paying a lower price on a product or getting more of a product for less money.>
Coupons
CouponCoupon
In marketing, a coupon is a ticket or document that can be exchanged for a financial discount or rebate when purchasing a product. Customarily, coupons are issued by manufacturers of consumer packaged goods or by retailers, to be used in retail stores as a part of sales promotions...
s offer instantly redeemable savings on certain products. Coupons can be featured on In-Store Displays, on their own, or on the product. Coupons instantly reduce the price of a product, making it more desirable to consumers.
Coupons can have both advantages and disadvantages. Coupons create brand awareness. The consumer sees the brand name on the coupon even when the coupon is not redeemed. Coupons, also, encourage consumers to purchase brands on the next trip to the store.
The disadvantages that come along with using a coupon are:
- Reduced revenueRevenueIn business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
s - Mass-Cutting
- Counterfeiting
- Misredemptions.
Contest and sweepstakes
ContestContest
A contest is an event in which at least two teams or individuals compete. There may be an award to a winner or awards for multiple top performers, but a contest may be imposed for training...
s normally require the participant to perform some type of activity. The winner is selected based on who performs best or provides the most correct answers. No purchase is required to enter a sweepstakes
Sweepstakes
The United States consumer sales promotion known as a sweepstake has become associated with marketing promotions targeted toward both generating enthusiasm and providing incentive reactions among customers by enticing consumers to submit free entries into drawings of chance...
. Consumers can enter as many times as they wish, although it is permissible for firms to restrict customers to one entry per visit to the store or some other location. The problems with Contest and Sweepstakes are the cost, consumer indifference and clutter.
Rebates
RebateRebate
Rebate can refer to:* Rebate or rabbet, a woodworking term for a groove* Film rebate, the term for the border around photographic film- Money :* Rebate , a type of sales promotion used in marketing* Tax rebate, a reduction in taxation demanded...
s offer money back to the consumer. Unlike coupons, rebates cannot be used immediately, but instead must be mailed to the product’s manufacturer. Consumers benefit from the lower price, while companies benefit because not every consumer will redeem the offer.
Premiums
PremiumPremium
Premium may refer to:* Premium , a promotional item that can be received for a small fee when redeeming proofs of purchase that come with or on retail products....
s incentivize consumers to purchase a product with a tangible benefit, such as a no-obligations gift. Premiums make the product offer more valuable to consumers by including a related product for no additional cost.
Sampling
Sampling allows consumers to try the product either in-store or via free sampleFree sample
A product sample is a sample of a consumer product that is given to the consumer so that he or she may try a product before committing to a purchase.-Free samples:...
s before buying it. This can reduce consumers’ apprehension about buying a new product or introduce them to a product they were unfamiliar with before.
Issues in trade promotions
In 2004, less than 30% of Trade Promotions in the Consumer Packaged Goods industry were profitable. Several issues cause such lack of profitabilityProfit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
. Some potential problems associated with trade promotions programs are costs, the potential impact on small manufacturers, and the tendency to rely too much on trade promotios to move merchandise.
Lack of accurate and timely information
Trade promotion decisions are often rushed and based on sub-par data. While Sales and Marketing managers are surrounded by promotion information, questions on retail commitment and product forecast accuracy can hinder the process. Multiple data sources and conflicting needs from various departments further complicate the issue.Inability to plan promotions based on analytics
Historical trade promotion data should be analyzed in order to continually improve trade promotions. If a company does not utilize processes and systems that measure trade promotion performance, future trade promotion executions could be less effective than if they’d been planned using past analytical information.Ineffective organization and partner integration
Lack of integration both internally and with external partners can hinder trade promotion success. Key elements of organizational integration include standardized metrics, regular information sharing, cross-functional department collaboration, and collaborative processes4. Integration with retail partners is important to executing promotions successfully, as well as maintain strong relationships with retailers over time.Lack of appropriate Key Performance Indicators (KPI)
KPIsKey performance indicators
A performance indicator or key performance indicator is an industry jargon for a type of performance measurement.. KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged...
tell manufacturers and retailers how trade promotions performed relative to their pre-determined objectives. A lack of understanding on what trade promotion data to measure and how to measure performance can hinder the overall process. Manufacturers and retailers will not know what made a promotion effective or ineffective unless they have predetermined data points to measure and analyze.