1. © 2007 for Prentice Hall 9-1 Sealy 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 9

2. © 2007 for Prentice Hall 9-2 Trade Promotions Chapter Overview Discussion Slide 9 Nature of trade promotions Types of trade promotions Objectives of trade promotions Concerns in using trade promotions

3. © 2007 for Prentice Hall 9-3 Marketing Budgets Trade Promotions 54% ($546.8 Billion) Consumer Promotions 28% ($288.3 Billion) Consumer Advertising 18% ($177.5 Billion)

4. © 2007 for Prentice Hall 9-4 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

5. © 2007 for Prentice Hall 9-5 Trade allowances Trade contests Trade incentives Training programs Vendor support programs Trade shows Specialty advertising Point-of-purchase displays F I G U R E 9. 3 Trade Promotions Tools

6. © 2007 for Prentice Hall 9-6 Sales by Manufacturers Impact of Promotions Full Price 58% Trade & Consumer Promotions 2% Consumer Promotions Only 24% Trade Promotions Only 16% Source: Promotions Decision Study, Santella & Associates (http://www.santella.com/coupon.htm)

7. © 2007 for Prentice Hall 9-7 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. F I G U R E 9. 4 Trade Allowances

8. © 2007 for Prentice Hall 9-8 Slotting Fee Controversial Charged by 82% of retailers $1.5 - $2 million per new product

9. © 2007 for Prentice Hall 9-9 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

10. © 2007 for Prentice Hall 9-10 Slotting Fees Manufacturers Opposition Viewed as extortion Impact on small manufacturers Favors large manufacturers Favors incumbent suppliers

11. © 2007 for Prentice Hall 9-11 Exit Fees Only used by 4% of retailers

12. © 2007 for Prentice Hall 9-12 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

13. © 2007 for Prentice Hall 9-13 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.

14. © 2007 for Prentice Hall 9-14 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 F I G U R E 9. 5 Trade Incentives

15. © 2007 for Prentice Hall 9-15 Training Programs Provided by manufacturers Goal is to bias salespeople Provide knowledge

16. © 2007 for Prentice Hall 9-16 Vendor Support Programs Billback programs Co-op advertising programs $8 million (1/3) unclaimed co-op money. Errors in filing Purchase accruals traced inaccurately Retailers unaware of co-op monies Restrictions not followed accurately

17. © 2007 for Prentice Hall 9-17 Trade Shows 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: International CES The Super Show Miami International Boat Show & Strictly Sail International Housewares Show Mid-America Trucking Show

18. © 2007 for Prentice Hall 9-18 Trade Shows by Industry Manufacturing (18.6%) Computer (4.6%) Consumer (11.0%) Education (4.6%) Communications (5.3%) Retail/Distributors (15.8%) Food (7.0%) Engineering (7.7%) General Business (8.3%) Medical (10.3%) Source: Danica Vasos, “Industry Profile,” Expo, January 2000, pp. 52-55

19. © 2007 for Prentice Hall 9-19 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. F I G U R E 9. 7 Five Categories of Buyers Attending Trade Shows

20. © 2007 for Prentice Hall 9-20 Making the Most of Trade Shows 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

21. © 2007 for Prentice Hall 9-21 Trade Shows National and International Shows Higher cost Enhance brand or corporate name Expand market beyond region Reach international markets Regional or Niche Shows Create a client base quickly Establish a new brand Promote a new product Lower cost Match attendees target market

22. © 2007 for Prentice Hall 9-22 F I G U R E 9. 8 Top Categories in Specialties Advertising

23. © 2007 for Prentice Hall 9-23 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

24. © 2007 for Prentice Hall 9-24 Where POP Displays Are Used in Australia Convenience Stores (20.8%) Source: “A Profile of the POP Advertising Market in Australia,” POPAI Australia & New Zealand. Department Stores (16.8%) Supermarkets (16.8%) Hardware (13.6%) Automotive (3.2%) Dealerships (5.6%) Pharmacy (5.6%) General Stores (10.4%) Liquor (7.2%)

25. © 2007 for Prentice Hall 9-25 F I G U R E 9. 9 Top Weaknesses of Manufacturer-Supplied POP Displays

26. © 2007 for Prentice Hall 9-26 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. F I G U R E 9. 10 Effective POP Displays

27. © 2007 for Prentice Hall 9-27 POP Trends Integration with Web sites Displays that routinely change messages Better tracking of POP results Use of POS data

28. © 2007 for Prentice Hall 9-28 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 F I G U R E 9. 1 1 Objectives of Trade Promotions

29. © 2007 for Prentice Hall 9-29 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

30. © 2007 for Prentice Hall 9-30 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 Retailers with small vendor programsRetailers with no small vendor programs. Source: Susan Greco, “Selling the Superstores,” Inc. (July 1995), Vol. 17, No. 10, pp. 54-60. F I G U R E 9. 1 2 Retailers with Small Vendor Programs