Targets of Promotions

Three groups are targets of sales promotional efforts:•Manufacturer’s sales force, •Retailers, and •Consumers

Targets of Promotions

Sales Force: •Trade- and consumer-oriented sales promotions - necessary tools for aggressively and enthusiastically selling to wholesale and retail buyers. •Salespeople have an incentive to put special selling emphasis behind promoted brands.

Targets of Promotions

Trade:•Various types of allowances, discounts, contests, and advertising support programs •Used as a forward thrust from manufacturers to trade accounts (also referred to as push strategy) •Provide retailers with reasons for stocking, displaying, advertising, and even placing the promoted brand on a price-discounted deal.

Increase in Role of trade promotions

•Shift in power from manufacturers to retailers•Brands from competitive manufacturers are becoming increasingly indistinct•Retailers have pressured the manufacturers that supply them to provide attractive price discounts and other forms of promotional incentives.

Trade Promotions’ Scope and Objectives

•Trade promotions now make up over half of every rupee invested in promoting new and existing products. •Trade promotions are increasingly directed at:•wholesalers, •retailers, and •other marketing intermediaries (rather than at consumers).

Trade Promotions’ Scope and Objectives

•Trade promotions have to succeed in influencing channel intermediaries to stock adequate quantities. •Businesses hope that special incentives offered to trade will be passed on to consumers - form of price discounts •However, this does not always happen•Even though trade promotions do not always work as intended, businesses have valid objectives for using trade-oriented promotions.

Trade Promotions’ Scope and Objectives

These objectives are:1. Introducing new or revised products2. Increasing distribution of new packages or sizes3. Building retail inventories4. Maintaining or increasing the manufacturer’s share of shelf space5. Obtaining displays outside normal shelf locations6. Reducing excess inventories and increasing turnover7. Achieving product features in retailers’ advertisements8. Countering competitive activity9. Selling as much as possible to final consumers

Requirements for a Successful Trade Promotion Program

Financial IncentiveA manufacturer’s trade promotion must offer retailers:• increased profit margins, •increased sales volume, •or both.

Requirements for a Successful Trade Promotion Program

Correct Timing:

Trade promotions are perfectly timed when they are:(1)tied in with seasonal events during a time of growing sales (such as chocolate sales during Valentine’s Day)(2)paired with a consumer-oriented sales promotion;(3)used strategically to offset competitive promotional activity.

Requirements for a Successful Trade Promotion Program

Minimize the Retailer’s Effort and Cost •The more effort and expense required, the less likely that retailers will cooperate •They will avoid a program they see as benefiting the manufacturer but not themselves.

Requirements for a Successful Trade Promotion Program

Quick Results

•Effective trade promotions generate immediate sales or increases in store traffic. •Instant gratification is an important motivator of consumer responses to consumer-oriented promotions. •This same motive applies to retailers as well.

Requirements for a Successful Trade Promotion Program

Improve Retailer Performance

•Promotions that help the retailer:• do a better selling job or• improve merchandising methods eg: by providing retailers with improved displays.

Trade Allowances or Trade Deals or Trade Schemes

•Trade schemes are used to reward retailers for performing activities in support of the manufacturer’s brand. •The support activities that manufacturers seek are:•Encourage retailers to stock the manufacturer’s brand,•discount the brand’s price to consumers, •feature it in advertising, or •provide special display or other point-of-purchase support.

Trade Allowances or Trade Deals or Trade Schemes

By using trade schemes, manufacturers hope to schieve two interrelated objectives: (1) increase retailers’ purchases of the manufacturer’s brand, (2) augment consumers’ purchases of the manufacturer’s brand from retailers.

•This is based on the assumption that consumers are receptive to price reductions and that •Retailers will actually pass along to consumers the discounts they receive from manufacturers.

Trade Allowances or Trade Deals or Trade Schemes

•These expectations do not always become reality. •Retailers often take advantage of allowances without performing the services for which they receive credit. •A study of trade promotion spending by ACNielsen revealed:•less than one third of surveyed manufacturers rated the value they received from trade promotion as “good” or “excellent.” •most retailers think that trade promotions should increase sales and profits of entire product categories•They have no concern for whether a manufacturer’s specific brand benefits from the trade promotion.

Trade Allowances or Trade Deals or Trade Schemes

•Hence huge gap in perception between manufacturers and retailers over - which party trade promotions should benefit.•Manufacturers like to use trade promotions to advance their brands’ sales and profit performance. •Retailers use trade schemes as an opportunity for increasing their profit margins and thus boosting bottom lines. •Thus the two sides often have conflicting objectives yet depend on each other for success.

Trade Allowances or Trade Deals or Trade Schemes

Major Forms of Trade Schemes: There are three major forms of trade allowances: (1)off-invoice allowances, (2)bill-back allowances, and (3)slotting allowances.

•Manufacturers use off-invoice and bill-back allowances by choice •Retailers impose slotting allowances.

Trade Allowances or Trade Deals or Trade SchemesOff-Invoice Schemes;•This is most frequently used form of trade scheme•It represents a manufacturer’s temporary price reduction to the trade on a particular brand. •Off-invoice schemes are, deals offered periodically to the trade •Deals permit retailers to deduct a fixed amount from the invoice of an order placed during the period which the manufacturer is operating a scheme on a brand. •Eg: The sales person handling a distributor him that a discount of, say, 15 percent can be deducted from the invoice amount for all quantities purchased during the specified period

Trade Allowances or Trade Deals or Trade Schemes

Off-Invoice Schemes;•Most FMCG manufacturers provide off-invoice schemes at regular intervals•Studies suggest that many brands are on scheme for at least one 4-week period during every business quarter. •This means that many brands are on schemes more than 30 percent of the year