trade-oriented sales promotion chapter seventeen
TRANSCRIPT
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Trade-Oriented Sales Trade-Oriented Sales PromotionPromotion
Chapter Seventeen
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Chapter Seventeen ObjectivesChapter Seventeen Objectives
• Discuss the objectives of trade-oriented promotions and the factors critical to building a successful trade promotion program
• Explain the various forms of trade allowances and the reasons for their usage
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Chapter Seventeen ObjectivesChapter Seventeen Objectives
• Understand forward buying and diverting and how they are created by manufacturers’ use of off-invoice allowances
• Explain the role of everyday low pricing (EDLP) and pay-for-performance programs in overcoming forward buying and diverting
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Chapter Seventeen ObjectivesChapter Seventeen Objectives
• Describe the concept and practice known as efficient consumer response (ECR)
• Understand the practice of category management
• Describe the role of cooperative advertising and vendor support programs
• Discuss the nature and role of trade shows
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Objectives of Trade PromotionObjectives of Trade Promotion
• Introduce new or revised products• Increase distribution of new packages or sizes• Build retail inventories• Maintain/Increase manufacturer’s shelf space• Obtain displays outside shelf locations• Reduce excess inventory• Achieve product features in retailer’s ads• Counter competitive activity• Sell as much as possible to final consumers
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Trade PromotionTrade Promotion
Key Ingredients to Success
• Financial incentive
• Correct timing
• Minimize retailer’s effort/cost
• Quick results
• Improve retailer performance
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Types of Trade PromotionsTypes of Trade Promotions
• Trade allowances
• Cooperative advertising and vendor support programs
• Trade contests and incentives
• Trade shows
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Trade AllowancesTrade Allowances
Trade Allowances
Used by manufacturers to reward
wholesalers and retailers for
performing activities in support of the
manufacturer’s brand
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Major Forms of Trade AllowancesMajor Forms of Trade Allowances
• The fees manufacturers pay retailers for access to the slot, or location,
• Typically when a manufacturer to get its new brand accepted by retailers
• A form of bribery? or Legitimate cost of doing business?
Slotting allowances
Bill-back allowances
Off-invoice allowances
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Major Forms of Trade AllowancesMajor Forms of Trade Allowances
• Retailers receive allowances for featuring the manufacturer’s brand in advertisements or for providing special displays
Slotting allowances
Bill-back allowances
Off-invoice allowances
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Major Forms of Trade AllowancesMajor Forms of Trade Allowances
• Most frequently used form• Deals offered periodically to trade that
permit wholesalers and retailers to deduct a fixed amount from the invoice
• Retailers do not necessarily pass along to consumers the discounts
Slotting allowances
Bill-back allowances
Off-invoice allowances
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Forward Buying and DivertingForward Buying and Diverting
• Retailers purchase enough products on deal to carry them over until the manufacturer’s next regularly scheduled deal
• Retailers’ savings from forward buying often are not passed on to consumers
• Leads to increased distribution costs• Manufacturers experience reduced margins
due to price discounts
Forward Buying Diverting
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Forward Buying and DivertingForward Buying and Diverting
• Occurs when a manufacturer restricts a deal to a limited geographical area
• Retailers buy large quantities at the deal price and then resell the excess quantities in other geographical areas
• Product quality potentially suffers due to delays and serious problem could result from product tampering
Forward Buying Diverting
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Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
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Efficient Consumer Response Efficient Consumer Response
Efficient Consumer Response (ECP)
A broad-based concept of business
management that is oriented toward
enhancing efficiencies and reducing
costs in the grocery industry
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Efficient Consumer Response Efficient Consumer Response
1. Improved product-replenishmentpractices
- move product more efficiently- Electronic Data Interchange(EDI)
2. Reduced tradepromotions
- minimize inventory costs andreduce forward buying anddiverting- EDLP,Pay-for-Performance programs
3. Improved productintroductions
- respond to consumers’ needsfor new product- avoid simply introducing me-too products
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Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
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Category ManagementCategory Management
Category Management
Retailers and manufacturers must work together, share market
intelligence, and develop strategies that are mutually beneficial
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Category ManagementCategory Management
Reviewing the product category
Targeting consumers
Planning merchandising
Implementing strategy
Evaluating results
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Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
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Everyday Low Pricing (EDLP)Everyday Low Pricing (EDLP)
EDLP
A manufacturer charges the same
price for a particular brand
day in and day out
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Why Some Retailers Resist Why Some Retailers Resist
• Many retailers have established distribution infrastructures to avail themselves of high-low prices
• EDLP pricing benefits the manufacturers
• EDLP pricing takes some of the excitement out of retailing
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Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
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Pay-for-Performance ProgramsPay-for-Performance Programs
Pay-for- Performance Programs
Designed to reward retailers for
selling the brands supported with
trade allowances rather than merely
buying these brands
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Pay-for-Performance ProgramsPay-for-Performance Programs
• Provide incentive to the retailer only for the items that are sold to consumers during the agreed-upon time period
• Benefit all parties: consumers, retailers, and manufacturers
• A natural correlate for the efficient consumer response (ECR)
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Efforts to Rectify Trade Promotion Efforts to Rectify Trade Promotion ProblemsProblems
Efficient Consumer Response (ECR)
Category Management
Everyday Low Pricing (EDLP)
Pay-for-Performance Programs
Account-Specific Marketing
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Account Specific MarketingAccount Specific Marketing
Account Specific Marketing
Also called co-marketing,
characterizes promotional and
advertising activity that a manufacturer customizes to specific retail accounts
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Account Specific MarketingAccount Specific Marketing
• Relatively recent innovation
• e.g., Local radio tie-in advertising, loyalty programs
• Requires a lot of effort and can be costly
• The future of this practice is uncertain yet
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Cooperative AdvertisingCooperative Advertising
Cooperative (co-op) advertising
An arrangement between a manufacturer
and reseller whereby the manufacturer
pays for all or some of the advertising
costs undertaken by the reseller
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Cooperative AdvertisingCooperative Advertising
Five Common Elements
• Specified time period
• Accrual
• Payment share
• Performance guidelines
• Billing for reimbursement
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Why is Co-op Advertising Used?Why is Co-op Advertising Used?
• Manufacturers can achieve advertising support on a local-market basis
• Provide them with a way to associate their products in the consumer’s mind with specific retail outlets
• Stimulates greater retailer buying and merchandising support
• Enables manufacturers to have access to local media with lower rates
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Open-Ended Co-op AdvertisingOpen-Ended Co-op Advertising
Open-ended Co-op Advertising
Involves paying for part of the
retailer’s advertising cost without
relating the reimbursement to the
amount of products purchased from
the manufacturer
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Why is Open-Ended Co-opWhy is Open-Ended Co-op Advertising Used? Advertising Used?
• Wants to encourage the use of funds by smaller retailers
• Manufacturer sells through intermediaries and does not have access to retailers’ purchase figures
• It simplifies the record-keeping task
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Vendor Support Programs Vendor Support Programs
Vendor support programs (VSPs)
A retailers develops an advertising program in
consultation with local advertising media and
then invites its vendors to pay for a specific
percentage of the media cost for the
proposed campaign
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Vendor Support Programs Vendor Support Programs
• Retailer benefits
• Often a manufacturer pays a large sum but receives very little actual promotion
• The less powerful a manufacturer, the more susceptible to retailers’ demands
• The more the manufacturer invests in the retailer’s advertising, the less funds available to it own brands
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Trade Contests and IncentivesTrade Contests and Incentives
Trade contest generally based onmanagers meeting a salesgoal
Tradeincentives
given to retail managers andsalespeople for performingcertain tasks
Push money provide financial incentivesto retail salespeople toaggressively sell toconsumers a selected item
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Trade ShowsTrade Shows
Trade show
A temporary forum for sellers of a
product category to exhibit and
demonstrate their wares to present
and prospective buyers
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Functions of Trade ShowsFunctions of Trade Shows
• Servicing present customers
• Identifying prospects
• Introducing new or modified products
• Gathering information about competitors’ new products
• Taking product orders
• Enhancing the company’s image