Sealy
9
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700 mattress manufacturers
Quality products
Brand name - advertising
Strong relationships with channel
members through
• First in product and service quality
• Best in meeting customer needs
• Most in every facet of business
relationships
• Improve by continually examining
the company’s operations
Discussion Slide
© 2007 for Prentice Hall
9-1
9
Trade
Promotions
Chapter Overview
• Nature of trade promotions
• Types of trade promotions
• Objectives of trade promotions
• Concerns in using trade promotions
Discussion Slide
© 2007 for Prentice Hall
9-2
Marketing Budgets
Consumer Advertising
18% ($177.5 Billion)
Consumer Promotions
28% ($288.3 Billion)
Trade Promotions
54% ($546.8 Billion)
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9-3
Trade Promotions
• Expenditures or incentives used by
manufacturers and channel members to
push goods through the channel
• $16 billion in trade promotions
• Percentage of promotional expenditures
• 1980s  38%
• Today  54%
• Should be integral part of IMC program
© 2007 for Prentice Hall
9-4
FIGURE
9.3
Trade Promotions Tools
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•
•
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•
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Trade allowances
Trade contests
Trade incentives
Training programs
Vendor support programs
Trade shows
Specialty advertising
Point-of-purchase displays
© 2007 for Prentice Hall
9-5
Sales by Manufacturers
Impact of Promotions
Trade Promotions Only
16%
Full Price
58%
Consumer
Promotions Only
24%
Trade & Consumer
Promotions
2%
Source: Promotions Decision Study, Santella & Associates (http://www.santella.com/coupon.htm)
© 2007 for Prentice Hall
9-6
FIGURE 9.4
Trade Allowances
• Off-invoice allowance: a per-case rebate
paid to retailers for an order.
• 33% of all trade dollars
• 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.
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9-7
Slotting Fee
Controversial
Charged by 82% of retailers
$1.5 - $2 million per new product
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9-8
Slotting Fees
Justification by Retailers
• Cost to add new product to inventories
• Deleting or reducing shelf space for
other products
• Aids retailers in making decisions about
new products
• Add to a retailer’s profit
© 2007 for Prentice Hall
9-9
Slotting Fees
Manufacturers Opposition
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Viewed as extortion
Impact on small manufacturers
Favors large manufacturers
Favors incumbent suppliers
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9-10
Exit Fees
Only used by 4% of retailers
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9-11
Disadvantages of
Trade Allowances
• Failure to pass allowances on to retail
customers
• Only occurs 52% of the time
• Retailers like only one brand on-deal at a time
• Forward buying
• Pass savings on or pocket higher margin
• Additional carrying costs
• Diversion
• Pass savings on or pocket higher margin
• Additional shipping costs
© 2007 for Prentice Hall
9-12
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.
© 2007 for Prentice Hall
9-13
FIGURE 9.5
Trade Incentives
• Cooperative merchandising agreement
(CMA) - Calendar promotions
• Corporate sales program (CSP)
• Producing plant allowance (PPA)
• Back haul allowance (BHA)
• Cross-dock or pedal runs
• Premium or bonus pack
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9-14
Training Programs
• Provided by manufacturers
• Goal is to bias salespeople
• Provide knowledge
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9-15
Vendor Support Programs
• Billback programs
• Co-op advertising programs
• $8 million (1/3) unclaimed co-op money.
•
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Errors in filing
Purchase accruals traced inaccurately
Retailers unaware of co-op monies
Restrictions not followed accurately
© 2007 for Prentice Hall
9-16
Trade Shows
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Ranks third 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
© 2007 for Prentice Hall
9-17
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
© 2007 for Prentice Hall
9-18
FIGURE
9.7
Five Categories of Buyers Attending Trade Shows
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Education seekers
Reinforcement seekers
Solution seekers
Buying teams
Power buyers
Source: English, “On Displays,” Business First - Western New York, (Nov. 29, 1999),
Vol. 16, No. 31, pp. 31-32.
© 2007 for Prentice Hall
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Making the Most of Trade Shows
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Ask right questions.
Spend time with right attendees – MAN.
Listen.
Use customer service personnel.
Do not bombard attendees with literature
Avoid overcrowding booth.
Watch booth etiquette and body language.
Follow up leads PROMPTLY.
• Only 30% followed up
© 2007 for Prentice Hall
9-20
Trade Shows
• National and International Shows
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•
•
Higher cost
Enhance brand or corporate name
Expand market beyond region
Reach international markets
• Regional or Niche Shows
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•
•
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Create a client base quickly
Establish a new brand
Promote a new product
Lower cost
• Match attendees <---> target market
© 2007 for Prentice Hall
9-21
FIGURE
9.8
Top Categories in Specialties Advertising
26
30
25
20
13
10
15
10
10
10
5
s
/o
f
es
k
D
R
ec
o
fic
e
gn
iti
on
ac
ce
ss
or
aw
ar
ie
e
la
ss
ru
st
in
in
g
rit
W
G
m
en
w
ar
ts
l
ar
e
A
pp
ds
0
Source: Alf Nucif ora, "Simple Cof f ee Cups Packs Advertising Punch,"
Long Island Business New s, (Jan. 22, 1999), Vol. 46, No. 4, p. 7C.
© 2007 for Prentice Hall
9-22
Point-of-Purchase
• Location key
• Last chance to reach buyer
• 50% of money spent at retailer is
unplanned
• 70% of brand choices are in store
• Average increase in sales is 9.2%
• Half of POP displays not effective
© 2007 for Prentice Hall
9-23
Where POP Displays Are Used
in Australia
Liquor (7.2%)
General Stores (10.4%)
Convenience Stores (20.8%)
Pharmacy (5.6%)
Automotive (3.2%)
Hardware (13.6%)
Supermarkets (16.8%)
Source: “A Profile of the POP Advertising Market in Australia,”
POPAI Australia & New Zealand.
Department
Stores (16.8%)
Dealerships (5.6%)
© 2007 for Prentice Hall
9-24
FIGURE
9.9
Top Weaknesses of Manufacturer-Supplied POP Displays
24
30
19
25
17
20
11
15
6
10
3
5
fo
rc
ha
nn
el
e
si
z
ro
ng
ia
t
e
W
oo
rly
In
P
To
o
se
as
on
al
bu
ilt
ap
pr
op
r
cu
st
o
o
N
In
ap
pr
op
r
ia
te
m
er
fo
rp
ro
du
c
re
sp
on
se
t
0
Source: "Pop Peeves,"Marketing Tools, (June 1997), p. 10.
© 2007 for Prentice Hall
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F I G U R E 9 . 10
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.
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9-26
POP Trends
• Integration with Web sites
• Displays that routinely change
messages
• Better tracking of POP results
• Use of POS data
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9-27
FIGURE
9.11
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 manufacturer inventories
Enhance channel relationships
Enhance the IMC program
© 2007 for Prentice Hall
9-28
Concerns
Trade Promotions
• High cost.
• Tend to be use 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
© 2007 for Prentice Hall
9-29
FIGURE
9.12
Retailers with Small Vendor Programs
Retailers with small vendor programs Retailers with no small vendor programs
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Wal-Mart
Kmart
Sears
Sam’s Warehouse
Price Costco
Target
Home Depot
Toys ‘R’ Us
•
•
•
•
•
Circuit City
Consumer-Electronic
Office Depot
Service/Merchandise
Wal-Mart Supercenter
Source: Susan Greco, “Selling the Superstores,” Inc. (July 1995), Vol. 17, No. 10, pp. 54-60.
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9-30