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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

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

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

FIGURE

10.5

Cooperative Advertising

Dairy Queen and Oreo cookies


Ace Hardware and Tru-Test Products
Intel and IBM
Toshiba and HP
Motorola and Skytel
J.C. Penney and Reebok
Sprint and Radio Shack
Radisson Hotels and TGI Fridays
10-11

Trade Shows

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:

International CES
The Super Show
Miami International Boat Show & Strictly Sail
International Housewares Show
Mid-America Trucking Show

10-12

Trade Shows by Industry


General Business (8.3%)

Manufacturing (18.6%)

Medical (10.3%)

Engineering (7.7%)

Food (7.0%)

Retail/Distributors (15.8%)

Computer (4.6%)

Consumer (11.0%)

Education (4.6%)
Communications (5.3%)

Source: Danica Vasos, Industry Profile, Expo, January 2000, pp. 52-55
10-13

FIGURE

10.7

Top Categories in Advertising Specialties


26
30
25
20
15

13
10

10

10

10
5
0

Source: Alf Nucifora, "Simple Coffee Cups Packs Advertising Punch,"


Long Island Business News, (Jan. 22, 1999), Vol. 46, No. 4, p. 7C.

10-14

FIGURE

10.9

Effective POP Displays


Integrate the brands 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 retailers store.
10-15

FIGURE

10.2

Top Weaknesses of Manufacturer-Supplied POP Displays

24

30
25

17

19

20
11
15
6
10

5
0

Source: "Pop Peeves," Marketing Tools, (June 1997), p. 10.

10-16

FIGURE

10.10

Objectives of Trade Promotions

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.

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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
10-18

Building Your IMC Campaign


Decide on the objectives of the trade promotions.
Develop trade promotions for
Wholesalers or distributors
Retailers
Decide on which trade shows to attend.
What type of POP display is necessary and how will
retailers be encouraged to use it?
Decide on a co-op advertising program.

10-19

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