According to Nielsen, trade promotions represent 60% of the marketing budget and account for more than $100 billion per year, the “800-pound gorilla of marketing spending.” HBR adds that it’s “often the single biggest line item in a manufacturer’s P&L.”
In other words, too substantial to tackle without a game plan. But what exactly is trade promotion?
In a nutshell, trade promotion is a marketing tactic aimed at retailers by manufacturers, with the goal of increasing the demand for their products. A few examples are the deals, “buy one, get one” promos, and product demos consumers come across at grocery stores.
Trade promotion strategies that increase sales
There are different trade promotion types that manufacturers and retailers employ to put the spotlight on a promoted product. The following are some of the most commonly used:
1. In-store displays
Product displays in retail outlets aren’t created equal. On shelves, the “bull’s eye zone” - the second and third shelves from the top - carry hot-selling items and top brands. Bottom shelves are where bulk items and store brands are located.
Items are placed at end caps to stand out, which comes at an additional cost for the manufacturer, and point-of-purchase (POP) placements offer merchandise that shoppers buy on impulse while waiting for their turn at the cash register. POP items include candies, chocolates, batteries, playing cards, magazines, and toothbrushes.
Other in-store display tactics you can tap to promote your retailer products include:
- Floor stickers
- Special racks
- Signs, banners, and posters
- Lifesize display stands
2. Deals and discounts
Price is a major influencing factor in your target market’s purchasing decisions, even with B2B sales, alongside product value and quality. Not everyone is willing (or has the means) to buy expensive items, hence, the popularity of deals or sales.
The aim of temporary price reductions is two-fold: get new people to try your product and entice existing customers to buy more of your product. Hubba, a Canada-based online retail platform offers some suggestions when implementing deals and discounts:
- While practically just about anything can be offered on sale, product category plays an important role in the frequency and timing of your sales promotion. For example, many items in the food category are sold as six- or five-packs or in bulk.
- Seasons aren’t just about the changing weather and fashion cycles. The back-to-school season is another trade promotion timing to think about.
- Discounting may become a necessity if you carry too much inventory, or to encourage customers to load up on items similar to the new product a competitor is launching.
Coupons as a trade promotion tactic are desirable to shoppers because they immediately reduce the prices of selected items. A recent intelligence report by Valassis found that 90% of consumers use coupons “from a variety of online and offline resources.”
A big list of coupon statistics has been compiled by Access Development, if you need a peek into how pervasive coupon use is among retail shoppers.
A rebate offers
For a successful rebate marketing program, Chexx Inc. offers five tips:
- Know your rebate laws.
- Keep a centralized database to more effectively track your offers.
- Your redemption rules must be clearly understood.
- Keep your forms accessible and easy to fill out.
- Use social media to promote your campaigns.
5. Product sampling
This trade promotion strategy lets customers experience your product via free samples, potentially alleviating any apprehension about buying your product. It also allows you to introduce your product to shoppers who may not have heard of it yet.
A Time article reporting on the power of free samples for companies such as General Mills, Kraft, Unilever, and Procter & Gamble found that “free samples are often much more powerful and much cheaper than traditional advertising,” especially if you consider that the goal of both traditional and digital advertising is to get people who haven’t yet used your product to give it a try.
Promotion efficiency in the U.S., according to Nielsen, is trending down. And this is because companies simply increase promotion frequency, offer deeply discounted items more frequently, and cut their prices lower - without knowing what works and what doesn’t.
Bottom line, trade promotion tactics can contribute to a sales lift, but only if you have a clear line of sight into the data-driven strategies that can turn things around.