This document discusses trade promotions and their costs. It notes that trade promotions have shifted power from manufacturers to traders. Trade promotions can lead manufacturers to engage in forward buying from distributors to secure shelf space or trial for new products, but this comes with costs like increased inventory holding costs. The document also discusses problems like deterioration of in-store service quality from a focus on promotions. It proposes that an everyday low purchase price (EDLPP) model could help address issues by reducing fluctuations in demand and involving lower fixed costs compared to trade promotions. However, EDLPP may not solve all problems. The document concludes by recommending trade promotions only be used as a last resort and to focus them on distributor needs if used.

1. Promotional Strategy: Group 8
ABHISHEK (PGP30122) | BHANU (PGP30306) | NIKHIL (PGP30323) |NISHANT (PGP30155)
THE COSTLY
BARGAIN OF TRADE
PROMOTION
November 6, 2015
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2. SHIFT IN POWER
Manufacturer to Trader

3. Rise of trade promotions
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6. Problems of trade promotions:
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8. FORWARD BUYING
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Preserve self space against competitors Secure Trial for new product

9. PROBLEMS IN FORWARD
BUYING
PILING UP OF INVENTORY
STORAGE COSTS
INTEREST EXPENSES
INSUARANCE COSTS
TRANSPORTATION COST
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12. NO-TRADE-DEAL DISTRIBUTOR INVENTORY
SAVINGS
COST OF
BUYING
COST OF
STOCKING
COST OF
DOUBLE
HANDLING
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13. FRACTION OF
FORWARD BUYING OF
TOTAL SALES
INTERVAL BETWEEN
PROMOTIONS
NUMBER OF SKUs
RISE IN UNCERTAINITY
COST TO MANUFACTURERS
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14. GM CLOSES GUJARAT PLANT

15. NO FORWARD PURCHASES IN SHORT LIFE PRODUCTS

16. COST TO THE SYSTEM
A PART OF THE COST OF TRADE
PROMOTION WHICH CAN BE
QUANTIFIED
A PART OF THE COST OF TRADE
PROMOTION WHICH CANNOT BE
QUANTIFIED
Transportation & Handling cost Selling, General & Administrative expenses 16

17. SOME LIKE IT ! SOME DONT !
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18. SOME LIKE IT ! SOME DONT !
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19. DETERIORATION OF IN-STORE SERVICE

20. Living with Promotions
Trade Promotions
( Forward Buying, Coupons, Contests)
High Cost
Manufacturer Retailer
How to Tackle?
EDLPP
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Everyday Low Purchase Price Example - India

22. What is EDLPP?
Followed By Walmart Inc., Leads to
better relations among channel partners
Results in Low Fixed Cost
(Less advertising, less labour, simple inventory management)
Involves low cost price strategy, Low
SG&A expense
Less fluctuations in demand
Is EDLPP the solution to all the woes?
Definitely NOT
BUT
Right
Direction
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How to go about trade promotions?
 They should be the last resort of any company – should be tried only after advertising and
packaging changes lead to minimal result.
 If the company is going for promotions take the following steps
 Focus on particular need of distributors
 Look for ways to reduce administrative burden
 Spread trade promotion funds fairly among distributors

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THANK YOU