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Chapter 10 trade-promotions
This document discusses trade promotions, which include incentives used by manufacturers and retailers to push goods through distribution channels. Approximately 50% of total promotional spending is on trade promotions. The document outlines different types of trade promotions like trade allowances, incentives, and shows. It also discusses objectives of trade promotions like obtaining distribution and inventory levels. Potential concerns with overreliance on trade promotions are also noted.
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More from Prof.(Dr.) Hong K. D.Litt, D.Sc., PhD.ក្រោយបណ្ឌិត
Chapter 10 trade-promotions
- 1. 10-1 Trade Promotions Chapter Overview DiscussionSlide 10 • Nature of trade promotions • Types of trade promotions • Objectives of trade promotions • Concerns in using trade promotions Prof. ( Dr.) Kao Kveng Hong, PhD., D.LittProf. ( Dr.) Kao Kveng Hong, PhD., D.Litt
- 2. 10-2 Trade Promotions • Expendituresor 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. 10-3 Marketing Budgets Trade Promotions 50% ConsumerPromotions 24% Advertising 26%
- 4. 10-4 • 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 10 . 2 Trade Promotional Tools
- 5. 10-5 • 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. F I G U R E 1 0 . 3 Trade Allowances
- 6. 10-6 Disadvantages of TradeAllowances • Failure to pass allowances on to retail customers. • Forward buying. • Diversion.
- 7. 10-7 Trade Contests • Usedto 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.
- 8. 10-8 • Cooperative merchandisingagreement (CMA) • 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 1 0 . 4 Trade Incentives
- 9. 10-9 Training Programs • Manufacturerprovides training to wholesalers’ or retailers’ salespeople.
- 10. 10-10 Vendor Support Programs •Billback programs • Co-op advertising programs
- 11. 10-11 • Dairy Queenand 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 F I G U R E 1 0 . 5 Cooperative Advertising
- 12. 10-12 Trade Shows • Ranks3rd 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
- 13. 10-13 Trade Shows byIndustry 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,”Source: Danica Vasos, “Industry Profile,” ExpoExpo, January 2000, pp. 52-55, January 2000, pp. 52-55
- 14. 10-14 Source: Alf Nucifora,"Simple Coffee Cups Packs Advertising Punch," Long Island Business News, (Jan. 22, 1999), Vol. 46, No. 4, p. 7C. 26 13 10 10 10 A p p a re l W ritin g in stru m e n ts G la ssw a re R e co g n itio n a w a rd s D e sk/o ffice a cce sso rie s 0 5 10 15 20 25 30 F I G U R E 1 0 . 7 Top Categories in Advertising SpecialtiesTop Categories in Advertising Specialties
- 15. 10-15 • Integrate thebrand’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 1 0 . 9 Effective POP Displays
- 16. 10-16 Source: "Pop Peeves,"Marketing Tools, (June 1997), p. 10. 3 6 11 17 19 24 Inappropriate for productN o custom er response T oo seasonal P oorly built W rong size Inappropriate for channel 0 5 10 15 20 25 30 F I G U R E 1 0 . 2 Top Weaknesses of Manufacturer-Supplied POP Displays
- 17. 10-17 INTEGRATED LEARNING EXPERIENCESTOP •Access the following firms that produce POP displays. • Melrose Displays: Http://www.melrosedisplays.com • Visy Displays: Http://www.visydisplays.com • Display Design & Sales: Http://www.displays4pop.com • Acrylic Designs: Http://www.acrylicdesigns.com • 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?
- 18. 10-18 • Obtain initialdistribution. • 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. F I G U R E 1 0 . 1 0 Objectives of Trade Promotions
- 19. 10-19 INTEGRATED LEARNING EXPERIENCESTOP •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? Co-op Communications: Http://www.coopcom.com TradeOne Marketing: Http://www.tradeonemktg.com Sable Advertising: Http://www.sableadvertising.com
- 20. 10-20 Concerns about TradePromotions • 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
- 21. 10-21 • Decide onthe 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. Building Your IMC Campaign
Editor's Notes
- #5 These are covered in the following OHs
- #6 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 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
- #9 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.
- #11 Billback – manuf repays retailer for special product displays, ads or price cuts
- #13 Finding prospects – but buying is generally done in international trade shows
- #15 Ad specialties – impress customers; constant reminder; should fit
- #16 About 50% of purchases at supermarkets and mass merchandisers in unplanned – thus POP can really draw attention and prompt impulse buys.
- #21 Brand image – taking away money from advertising