1. 10 Trade Promotions Chapter Overview Nature of trade promotions
Types of trade promotions
Objectives of trade promotions
Concerns in using trade promotions
Discussion Slide

2. 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.

3. Marketing Budgets Advertising 26% Consumer Promotions 24%
Trade Promotions
50%

4. F I G U R E 1 0 . 1 0 Obtain initial distribution.
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.

5. Vendor support programs Trade shows Specialty advertising
F I G U R E
Trade Promotional Tools
Trade allowances
Trade contests
Trade incentives
Training programs
Vendor support programs
Trade shows
Specialty advertising
Point-of-purchase displays
These are covered in the following OHs

6. Slotting fees: money paid to retailers to stock a new product.
F I G U R E
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.
Slotting fees – Can be $25,000 per item to millions of dollars for a chain store
Exit fees – introducing a new version of an existing brand

7. Disadvantages of Trade Allowances
Failure to pass allowances on to retail customers.
Forward buying.
Diversion.
Forward – retailer purchases excess inventory of product when it’s on deal (but retailer has carrying costs)
Diversion – retailer purchases product on deal in one location and diverts inventory to another location

8. 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.

9. Trade Incentives Cooperative merchandising agreement (CMA)
F I G U R E
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
Retailer gets something for performing a function.
CMA – set up displays; cooperative advertising; etc.
CSP – manuf ships products in ready to display pallets
PPA – retailer purchases full or half truckload to get an allowance
BHA – retailer pays cost of shipping
Cross dock or pedal run – allowance for buying full truckload to be split amongst one’s regional stores
Premium – retailer gets free merchandise; e.g., one carton for every 20 purchased over next 60 days.

10. Training Programs
Manufacturer provides training to wholesalers’ or retailers’ salespeople.

11. Vendor Support Programs
Billback programs
Co-op advertising programs
Billback – manuf repays retailer for special product displays, ads or price cuts

12. Dairy Queen and Oreo cookies Ace Hardware and Tru-Test Products
F I G U R E
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

13. 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
Finding prospects – but buying is generally done in international trade shows

14. Trade Shows by Industry
General Business (8.3%)
Manufacturing (18.6%)
Medical (10.3%)
Computer (4.6%)
Engineering (7.7%)
Consumer (11.0%)
Food (7.0%)
Education (4.6%)
Retail/Distributors (15.8%)
Communications (5.3%)
Source: Danica Vasos, “Industry Profile,” Expo, January 2000, pp

15. F I G U R E
Top Categories in Advertising Specialties
Ad specialties – impress customers; constant reminder; should fit

16. F I G U R E
Top Weaknesses of Manufacturer-Supplied POP Displays

17. F I G U R E 1 0 . 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.
About 50% of purchases at supermarkets and mass merchandisers in unplanned – thus POP can really draw attention and prompt impulse buys.

18. INTEGRATED LEARNING EXPERIENCE
STOP
INTEGRATED LEARNING EXPERIENCE
Access the following firms that produce POP displays.
Melrose Displays:
Visy Displays:
Display Design & Sales:
Acrylic Designs:
Which firm’s Web site is the most attractive?
Which site is the most informative?
Which firm would be the best from the standpoint of the:
Manufacturer?
Retailer?

19. INTEGRATED LEARNING EXPERIENCE
STOP
INTEGRATED LEARNING EXPERIENCE
Co-op Communications:
TradeOne Marketing:
Sable Advertising:
What appears to be each agency’s strengths? Weaknesses?
Examine the trade promotion objectives presented in the chapter. Which agency would be the best for each objective?

20. 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
Brand image – taking away money from advertising

21. 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.