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Group2 submission1
1. Changing the Channel:
A better way to do Trade Promotions
Presented by : Group 2
Akshat| Piyush| Rohit| Susmita
2. What is Trade Promotions ?
Trade Promotions are marketing activities executed between
manufacturers and retailers aimed at increasing demand for
products in retail stores.
⢠Special Pricing ⢠In store Displays ⢠Coupons
3. ⢠Trade
promotions are
viewed with
great suspicion.
⢠Each party
believes that the
other party in
trying to get an
upper hand.
4. ⢠Trade promotions
should be based
on a transparent
system that
generates
mutual trust.
⢠There should be
Win-Win for
both retailers &
manufacturers.
5. ⢠Retailers abuse
trade promotions
by purchasing
more at discounted
price and sell even
after the discount
period or sell at
regular prices.
⢠They also engage in
âDivertingâ by
selling it to other
retailers
6. ⢠To counter
retailers, tactics,
manufacturers
use âPay for
Performanceâ
trade promotion
â to reward on
the basis of how
much they sell
rather than how
much they buy.
7. ⢠Pay for Performance
benefits all
⢠Manufacturers â
Boost Bottom line
⢠Retailers â Increased
concentration on
marketing than
buying
⢠Consumers â Lower
prices of Trusted
brands
10. ⢠Scan Back
⢠Identical Deals
⢠The Mimic Scan Back
⢠Scan-Back variations
11. Scan Back, a.k.a Pay-for-
Performance
⢠Eliminates Forward-
buying
⢠Eliminates diverting
⢠Limit the duration of
promotion
⢠Helps predict real
consumer demand
⢠Retailers are reluctant
due to the low pay-off
12. Mimic- scan back
⢠Average cost of promoted
and non-promoted goods
are identical to off-
invoice trade deal
⢠Retailer makes profits
similar to off-invoice
deal
⢠Avoids forward buying and
diverting
⢠3 main variables: the
regular wholesale price,
length of deal and depth
of the discount
13. Slide-Back Variations
⢠Retailer revenue and
profit is as high as off-
invoice deal
⢠Manufacturer numbers
improve as well
⢠The manufacturer can
tweak any of the 3
variables
⢠the regular wholesale price
⢠length of deal and
⢠depth of the discount
14. Does Scan-Back really work?
⢠Statistical Analysis
demonstrates efficacy of
scan back
⢠Greater pass on of deals to
customers (75% v/s 20-30% in
off-invoice deals)
⢠Higher sales generated in an
experiment with beverage
company
⢠Simplified judgement of pay-
for0performance
⢠Eliminates purchase
distortions inherent in off-
invoice deals
15. Implementation Challenges
⢠Higher retailer
allegiance to off-invoice
method
⢠Distrust between
retailers and
manufacturers
⢠Prima facie higher
incentive to retailer in
this setup
16. Can an auditor help?
⢠High instances of
retailer manipulation
⢠Scam Down
⢠Auditor can verify sales
with stocks to bring down
âscam downâ
⢠Well established auditors
can pay retailers for
discount and collect from
manufacturer later
⢠Over see implementation
of scan backs
17. Manufacturer Problems
â˘Tied up in Admin tasks
â˘Complicated negotiations
â˘Prisonerâs dilemma
â˘Uncertainty over pass
through rates
18. Changing Organizational Culture
⢠Performance metrics based
on product movement &
profitability
⢠Collaborative partnerships
⢠Experimentation
⢠Targets/ goals of each party
to be established
⢠Cooperate to analyze the
results
19. Seeking Peace & Profits
⢠Changes In culture to be
supported by tangible
marketing initiatives
⢠Software solutions are
important for merchandising
response analysis ď
attitudinal & organizational
changes are even more
important
⢠Manufacturer & retailer
should develop close relations
to better understand the roles
in channel
20. Seeking Peace & Profits
⢠Pay for performance
⢠Assurance that dollars reach customers
⢠Cut costs for retailers
⢠Experiment, Collect Data, Cooperate