Targets of Promotions

Three groups are targets of sales promotional efforts:

Manufacturers sales force,
Retailers, and
Consumers
Targets of Promotions
Sales Force:
Trade- and consumer-oriented sales promotions - necessary
tools for aggressively and enthusiastically selling to wholesale and
retail buyers.
Salespeople have an incentive to put special selling emphasis
behind promoted brands.

Targets of Promotions
Trade:
Various types of allowances, discounts, contests, and advertising
support programs
Used as a forward thrust from manufacturers to trade accounts
(also referred to as push strategy)
Provide retailers with reasons for stocking, displaying, advertising,
and even placing the promoted brand on a price-discounted deal.
Increase in Role of trade promotions
Shift in power from manufacturers to retailers
Brands from competitive manufacturers are becoming
increasingly indistinct
Retailers have pressured the manufacturers that supply them
to provide attractive price discounts and other forms of
promotional incentives.

Trade Promotions Scope and Objectives
Trade promotions now make up over half of every rupee
invested in promoting new and existing products.
Trade promotions are increasingly directed at:
wholesalers,
retailers, and
other marketing intermediaries (rather than at
consumers).
Trade Promotions Scope and Objectives
Trade promotions have to succeed in influencing channel
intermediaries to stock adequate quantities.
Businesses hope that special incentives offered to trade will
be passed on to consumers - form of price discounts
However, this does not always happen
Even though trade promotions do not always work as
intended, businesses have valid objectives for using trade-
oriented promotions.
Trade Promotions Scope and Objectives
These objectives are:
1. Introducing new or revised products
2. Increasing distribution of new packages or sizes
3. Building retail inventories
4. Maintaining or increasing the manufacturers share of
shelf space
5. Obtaining displays outside normal shelf locations
6. Reducing excess inventories and increasing turnover
7. Achieving product features in retailers advertisements
8. Countering competitive activity
9. Selling as much as possible to final consumers
Requirements for a
Successful Trade Promotion Program
Financial Incentive
A manufacturers trade promotion must offer retailers:
increased profit margins,
increased sales volume,
or both.
Requirements for a
Successful Trade Promotion Program
Correct Timing:

Trade promotions are perfectly timed when they are:
(1) tied in with seasonal events during a time of growing
sales (such as chocolate sales during Valentines Day)
(2) paired with a consumer-oriented sales promotion;
(3) used strategically to offset competitive promotional
activity.


Requirements for a
Successful Trade Promotion Program
Minimize the Retailers Effort and Cost
The more effort and expense required, the less likely that
retailers will cooperate
They will avoid a program they see as benefiting the
manufacturer but not themselves.

Requirements for a
Successful Trade Promotion Program
Quick Results

Effective trade promotions generate immediate sales or
increases in store traffic.
Instant gratification is an important motivator of consumer
responses to consumer-oriented promotions.
This same motive applies to retailers as well.
Requirements for a
Successful Trade Promotion Program
Improve Retailer Performance

Promotions that help the retailer:
do a better selling job or
improve merchandising methods eg: by providing
retailers with improved displays.
Trade Allowances or Trade Deals or Trade Schemes
Trade schemes are used to reward retailers for performing
activities in support of the manufacturers brand.
The support activities that manufacturers seek are:
Encourage retailers to stock the manufacturers brand,
discount the brands price to consumers,
feature it in advertising, or
provide special display or other point-of-purchase
support.
Trade Allowances or Trade Deals or Trade Schemes
By using trade schemes, manufacturers hope to schieve two
interrelated objectives:
(1) increase retailers purchases of the manufacturers brand,
(2) augment consumers purchases of the manufacturers
brand from retailers.

This is based on the assumption that consumers are
receptive to price reductions and that
Retailers will actually pass along to consumers the discounts
they receive from manufacturers.
Trade Allowances or Trade Deals or Trade Schemes
These expectations do not always become reality.
Retailers often take advantage of allowances without
performing the services for which they receive credit.
A study of trade promotion spending by ACNielsen
revealed:
less than one third of surveyed manufacturers rated the
value they received from trade promotion as good or
excellent.
most retailers think that trade promotions should
increase sales and profits of entire product categories
They have no concern for whether a manufacturers
specific brand benefits from the trade promotion.
Trade Allowances or Trade Deals or Trade Schemes
Hence huge gap in perception between manufacturers and
retailers over - which party trade promotions should benefit.
Manufacturers like to use trade promotions to advance
their brands sales and profit performance.
Retailers use trade schemes as an opportunity for increasing
their profit margins and thus boosting bottom lines.
Thus the two sides often have conflicting objectives yet
depend on each other for success.


Trade Allowances or Trade Deals or Trade Schemes
Major Forms of Trade Schemes:
There are three major forms of trade allowances:
(1) off-invoice allowances,
(2) bill-back allowances, and
(3) slotting allowances.

Manufacturers use off-invoice and bill-back allowances by
choice
Retailers impose slotting allowances.
Trade Allowances or Trade Deals or Trade Schemes
Off-Invoice Schemes;
This is most frequently used form of trade scheme
It represents a manufacturers temporary price reduction to
the trade on a particular brand.
Off-invoice schemes are, deals offered periodically to the
trade
Deals permit retailers to deduct a fixed amount from the
invoice of an order placed during the period which the
manufacturer is operating a scheme on a brand.
Eg: The sales person handling a distributor him that a
discount of, say, 15 percent can be deducted from the
invoice amount for all quantities purchased during the
specified period
Trade Allowances or Trade Deals or Trade Schemes
Off-Invoice Schemes;
Most FMCG manufacturers provide off-invoice schemes at
regular intervals
Studies suggest that many brands are on scheme for at least
one 4-week period during every business quarter.
This means that many brands are on schemes more than 30
percent of the year