10
Trade Promotions
Chapter Overview
• Nature of trade promotions
• Types of trade promotions
• Objectives of trade
promotions
• Concerns in using trade
promotions
Discussion Slide
10-1
Trade Promotions
• Expenditures or incentives used by manufacturers
and channel members to push goods through the
channel.
• 7% to 10% of sales revenue goes for trade
promotions.
• Approximately 50% of total promotional dollars
spent.
• To be effective, must be integral part of IMC
program.
10-2
Marketing Budgets
Advertising
26%
Consumer Promotions
24%
Trade Promotions
50%
10-3
FIGURE
10 . 2
Trade Promotional Tools
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Trade allowances
Trade contests
Trade incentives
Training programs
Vendor support programs
Trade shows
Specialty advertising
Point-of-purchase displays
10-4
FIGURE
10.3
Trade Allowances
• Off-invoice allowance: a per-case rebate paid to
retailers for an order.
• Drop-ship allowance: money paid to retailers who
bypass wholesalers or brokers for pre-planned
orders.
• Slotting fees: money paid to retailers to stock a
new product.
• Exit fees: money paid to retailers to remove an item
from their SKU inventory.
10-5
Disadvantages of Trade Allowances
• Failure to pass allowances on to retail
customers.
• Forward buying.
• Diversion.
10-6
Trade Contests
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Used to achieve sales targets.
Funds known as “spiff money.”
Rewards can be prizes or cash.
Can be designed for various channel
members.
• Some organizations do not allow trade
contests because of possible conflict of
interests.
10-7
FIGURE
10.4
Trade Incentives
• Cooperative merchandising agreement
(CMA)
• Corporate sales program (CSP)
• Producing plant allowance (PPA)
• Back haul allowance (BHA)
• Cross-dock or Pedal runs
• Premium or bonus pack
10-8
Training Programs
• Manufacturer provides training to
wholesalers’ or retailers’ salespeople.
10-9
Vendor Support Programs
• Billback programs
• Co-op advertising programs
10-10
Trade Shows
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Ranks 3rd in B-to-B marketing expenditures.
Manufacturers spend $70,000-$100,000 per show.
Retailers spend $600 per attendee.
Average trade show had 701 exhibiting firms and 13,431 attendees.
Average ratio of attendees to exhibitors was 19 to 1.
Largest trade shows are:
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International CES
The Super Show
Miami International Boat Show & Strictly Sail
International Housewares Show
Mid-America Trucking Show
10-11
Trade Shows by Industry
General Business (8.3%)
Manufacturing (18.6%)
Medical (10.3%)
Engineering (7.7%)
Food (7.0%)
Computer (4.6%)
Consumer (11.0%)
Education (4.6%)
Retail/Distributors (15.8%)
Communications (5.3%)
Source: Danica Vasos, “Industry Profile,” Expo, January 2000, pp. 52-55
10-12
FIGURE
10.9
Effective POP Displays
• Integrate the brand’s image into the display.
• Integrate the display with current advertising and
promotions.
• Make the display dramatic to get attention.
• Keep the color of the display down so the product and
signage stand out.
• Make the display versatile so it can be easily adapted by
retailers.
• Make the display re-usable and easy to assemble.
• Make the display easy to stock.
• Customize the display to fit the retailer’s store.
10-13
FIGURE
10.10
Objectives of Trade Promotions
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Obtain initial distribution.
Obtain prime retail location or shelf space.
Maintain support for established brands.
Counter competitive activities.
Increase order size.
Build retail inventories.
Reduce excess inventories.
Enhance channel relationships.
Enhance the IMC program.
10-14
Concerns about Trade Promotions
• High cost
• Tend to be used outside of IMC Plan
• Over-reliance on trade promotions to push
merchandise
• Often used for short-term sales goals
• Potential erosion of brand image
• Impact on small manufacturers
10-15