A recent study by Nielsen claims that less than half of all trade promotions fail to increase brand or category growth. This is unfortunate, because the main goal of trade marketing is to do just that: grow one's brand by increasing the demand at the retailer/distributor level.
Trade marketing is typically the largest line item on a company balance sheet, but is your trade marketing effective? Here are seven areas to focus on for sustainable brand development.
1. Promotion schedule
Some companies have very predictable promotion schedules that train customers to buy items only when on sale. While it's nice to reward consumers for being loyal, the goal of a promotion is to increase your loyal consumer base by inviting new customers to try your brand.
Learn your competitors' strategies and the effectiveness of their promotions. Build your strategy around theirs to maximize opportunities to convert their customer to your brand.
Most companies repeat promotions and copy competitive promotions. But companies that have creative strategies typically have greater success growing sustained volume.
Promotions encourage impulse purchases and brand substituting. Co-promote within the brand and with complimentary items (such as chips and dip) when possible. The ultimate goal is to increase consumer takeaway after the promotion ends. This occurs when new customers become committed loyal shoppers.
Every promotion should have a well-defined and understood purpose. Design promotions around opportunities to build your brand such as product demos and important causes (Earth Day, back-to-school, etc).
Don't promote just to give your product away. My favorite example is a large potato chip manufacturer that continually has BOGO's (buy one get one free) on holidays and during the major sporting events—the occasion consumers would probably pay extra for their product. They should instead schedule deep promotions when category buying is low.
4. Consistent brand messaging
Most promotions fail to connect with the end consumer. Build a strategy around your consumer's specific wants and needs. Communicate a consistent message across all marketing vehicles by integrating sales strategies through different mediums including, and especially, social media.
5. Plan ahead
Be prepared to support the promotion by having additional product on hand. Use category management principals to accurately predict consumer takeaway and to identify the ultimate promoted price point. A few cents off in either direction can dramatically affect consumer take away.
6. Strong brand building strategy
Promotions that don’t grow brand and category sales are a huge waste of money. Set goals and objectives for each promotion, then evaluate afterward to determine its successes and/or missed opportunities.
Account for all costs including deductions, missed sales due to out-of-stocks, retailer fees, scan down rate, bill back, off-invoice rebates, menu fees, fixed costs, forward buys and miscellaneous costs when evaluating promotion effectiveness. Include retail, distributer, broker and supplier execution in your evaluation.
7. Efficient trade fund management
This can be one of the most difficult areas to effectively manage due to the complexity of differing retailer systems and programs. Identify and adopt systems that allow you to effectively manage trade spending, cash flow across simultaneous promotions at multiple retailers, deductions, promotion reconciliation, and promotion analysis and inventory movement throughout the supply chain. Integrate your system with retailer and market data to maximize your results.
How do you maximize your trade marketing? Share in the comments.
Daniel Lohman is the owner of Category Management Solutions (CMS) which provides innovative strategic solutions for natural and organic CPG companies interested in gaining a significant competitive advantage.