Brands rely heavily on promotions to generate excitement for their products and to encourage shoppers to purchase them. The objective of every promotion is to increase the number of shoppers using their products. The focus is primarily on gaining new loyal shoppers. Promotions that don’t achieve this result are a waste of resources and money.
The money used to fund these events and activities is called trade spending. Trade spending is typically the largest line-item on a manufacturer’s income statement. It is imperative that it is maximized by eliminating inefficiencies like poor execution, ineffective merchandising, and out-of-stocks. The challenge is that most trade spending is wasted and is ineffective for these reasons. The goal of a promotion is not to reward a shopper, the goal is to gain new shoppers. There are more effective ways to reward shoppers which will be addressed in another article.
The health of a brand is measured by the number of locations where it is available and its sales volume when the product is not being promoted. Brands want to attract loyal repeat shoppers who know, love and trust their products, even when they are not on sale. Any brand can “buy” shoppers with promotions if their “pockets are deep enough”. The reality is that this strategy is very expensive and it is not sustainable long term.
Tips for effective trade marketing support
Trade marketing’s focus is on inviting new customers to shop your brand, raise brand awareness, encourage consumers to choose your brand over the competition, support your retail partners, and to grow sales sustainably. It includes everything from grass roots initiatives to full blown ad campaigns.
The analysis of past events as well as projections for future sales trends is the key to designing a well-executed promotion. A deep dive into your competitor’s strategies is also an excellent way to maximize your trade marketing ROI. Learn the best practice strategies for your category and retailer and tweak them to make them work well for you.
True category management can help you get a higher ROI for your trade marketing budget and effectively reach your target consumer. This is because it integrates brand strategies, retailer category strategies, trade marketing strategies, and most importantly the shopper.
The primary driver for trade marketing is the promotion. Promotions include advertising, merchandising, and pricing strategies that encourage new customer trials. They should be designed around the goal of increasing shopper traffic in the category. More consumers shopping the category is how you increase sales and profits. Loyal shoppers help the retailer and the brand compete effectively in any economy and in any channel.
True category management will help identify key opportunities to promote, the optimal price point, the best promotion vehicles (in store coupons, displays, retail features like temporary price reductions (TPR), etc.), and the ideal consumer to target. Remember, that the goal of a quality promotion is to boost everyday sales after the promotion has expired.
For example, if your everyday price is $1.99, what should your sale price be? Is it better to promote at $1.39 with a TPR where your sales increase 21% (your “lift”), or is it better to promote at $1.69 with a feature and display? The feature and display might result in a lift of 67% and the additional volume increase would more than cover the additional cost of the display (feature and display events typically require brands to purchase incremental display space like end caps). The feature and display could encourage repeat purchases long after the promotion ends.
The first option might give you a one-time sales spike, while the second option might result in new loyal consumers and sustainable growth. As a result, the second option might generate a higher ROI compared to the first option while doing far more to grow sustainable sales.
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