No brand is immune from competition. To stay afloat, consumer packaged goods (CPG) brands and wholesale distributors need to view their relationship with retailers as a strategic partnership, trade promos, and employ specific marketing tactics.
One way a B2B business can expand its clientele is to implement marketing strategies for wholesale distributors, foster client loyalty, and boost revenues by promoting trade promotions, which allows both retailers and wholesale distributors or brands to experience success on the shelf.
This article simplifies trade sales promotions, traditional sales promotions and introduces readers to various examples and their advantages. So what are trade promotions? Let’s find out.
What are Trade Promotions?
Trade promotions management is a marketing strategy B2B wholesalers and CPG product brands use to attract more customers. For example, a cosmetics company selling B2B skincare products to distributors, supermarkets, retail stores and beauty salons. They make use of special pricing to generate demand for certain items by making them more attractive to potential retail buyers (including restaurants, convenience stores, bodegas, hotels, cafes, etc.) and to boost sales in the distribution channels.
Managing trade promotions and setting trade promotion strategies best practices are an important piece to a successful relationship between the wholesale distributor and CPG brand and require both to carry out.
This promotional strategy is useful when:
- Introducing new products (i.e new food or beverage / health or beauty products) or
- Seeking to increase awareness about innovative product features (i.e nail polish that changes color in the sun or health drink that includes a unique fruit)
All of which incentivizes resellers to buy more of the product and increase the product’s accessibility to the final customer.
Trade Promotion Effectiveness
Measuring trade promotion effectiveness is a critical aspect of evaluating the impact of trade marketing activities on sales and profits. Here are some common metrics used to measure trade promotion effectiveness:
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Sales lift: Sales lift is a common metric used to measure the impact of a trade promotion on sales. It is the percentage increase in sales during the promotion period compared to the non-promotion period. This metric is a good indicator of whether a trade promotion has been successful or not.
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ROI: Return on investment (ROI) is a financial metric that measures the profitability of a trade promotion. It is calculated by dividing the net profit from the promotion by the cost of the promotion. A positive ROI indicates that the promotion was profitable, while a negative ROI indicates that the promotion was not profitable.
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Incremental volume: Incremental volume is the additional volume of products sold during the promotion period compared to the non-promotion period. This metric can be used to measure the effectiveness of a promotion in driving sales.
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Market share: Market share is the percentage of total sales in a market that a company or brand has. Measuring changes in market share during a promotion can provide insights into the effectiveness of the promotion in attracting customers and gaining market share.
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Customer behavior: Measuring customer behavior during a promotion can provide insights into the effectiveness of the promotion in driving customer engagement and loyalty. For example, tracking the number of new customers acquired during a promotion can help measure the effectiveness of the promotion in attracting new customers.
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Distribution gains: Measuring distribution gains during a promotion can help evaluate the impact of the promotion on the availability of the product in stores. This can help identify opportunities to improve distribution and ensure that the product is available in the right locations.
In summary, measuring trade promotion effectiveness requires a combination of financial and non-financial metrics to provide a comprehensive view of the impact of a trade promotion on sales and profits. This information can be used to improve future trade marketing activities and increase the effectiveness of promotions in the future.
What Is Trade Spend?
Trade spending is a common practice in the consumer-packaged goods (CPG) and retail companies. Trade spending is the amount a company spends to increase demand for its products, including coupons, preferred shelf display locations (slotting), and advertising, to name a few.
What is the difference between Trade Promotion vs Consumer Promotion?
A trade promotion strategy is when you market your products to your business partners so that they buy more products at a wholesale price to sell in their stores at a retail price. Effectively, trade promotion is business to business (B2B) marketing, while consumer promotion is business to consumer (B2C).
Trade marketing activities are strategies and tactics used by manufacturers, wholesalers, and distributors to promote their products and services to retailers and other trade partners. The aim of these activities is to build strong relationships with trade partners, promote product sales in the trade channel, and increase brand awareness. Here are some examples of trade marketing activities:
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In-store marketing: Manufacturers and distributors may create customized in-store displays, signage, and promotional materials to showcase their products and services to customers. These marketing efforts can help increase brand awareness and drive product sales at the point of purchase.
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Trade promotions: Trade promotions are short-term incentives offered to retailers and distributors to encourage them to stock and promote a specific product or service. Examples of trade promotions include volume discounts, free merchandise, and exclusive offers.
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Sampling programs: Sampling programs are a great way for manufacturers and distributors to introduce new products to retailers and trade partners. These programs offer retailers the opportunity to try new products and decide whether or not to add them to their inventory.
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Co-marketing: Co-marketing is a partnership between two or more companies that promote each other’s products or services to their respective customer bases. Co-marketing can help increase brand awareness and drive sales for both companies involved.
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Trade shows and events: Trade shows and events are an excellent way for manufacturers and distributors to showcase their products and services to potential trade partners. These events provide an opportunity to connect with other professionals in the industry and to generate leads.
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Merchandising support: Merchandising support includes the development and provision of in-store signage, displays, and promotional materials to help retailers promote products and services. This support helps increase product visibility and can help drive sales.
These are just a few examples of trade marketing activities. The goal of trade marketing is to develop strong relationships with trade partners, promote products and services in the trade channel, and increase brand awareness. Successful trade marketing requires a combination of innovative marketing strategies, effective communication, and strong relationships with trade partners.
The term “consumer unit” is used by the U.S. Bureau of Labor Statistics (BLS) to define the spending patterns of American households. The BLS defines a consumer unit as “a family, an individual living alone or sharing a household with others or a group of unrelated individuals who are financially interdependent and who share a common budget.”
A consumer unit can be made up of one person or several people, but they must live in the same household and share expenses. The BLS uses consumer units to track consumer spending patterns and to calculate the Consumer Price Index (CPI), which is a measure of inflation.
Consumer units are important for businesses and marketers because they are the ultimate target of consumer products and services. Understanding the needs and preferences of consumer units can help companies create products and marketing campaigns that are more effective and better suited to the target audience.
Trade Promotion
Trade promotion activities are marketing strategies used by manufacturers and suppliers to promote their products and services to retailers, wholesalers, and distributors. The objective of trade promotion activities is to drive sales and increase product distribution in the retail trade channel. Here are some common trade promotion activities:
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Discounts and deals: Discounts and deals are one of the most common trade promotion activities. They are used to incentivize retailers to buy products in large quantities or to stock new products. Examples of discounts and deals include buy-one-get-one-free offers, volume discounts, and percentage discounts.
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Coupons and rebates: Coupons and rebates are another popular trade promotion activity. They are used to encourage customers to buy products by offering them discounts or cashback offers. Manufacturers and suppliers often distribute coupons and rebates through retailers.
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Trade shows and events: Trade shows and events are an excellent way for manufacturers and suppliers to showcase their products and services to potential trade partners. These events provide an opportunity to connect with other professionals in the industry and to generate leads.
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Merchandising support: Merchandising support includes the development and provision of in-store signage, displays, and promotional materials to help retailers promote products and services. This support helps increase product visibility and can help drive sales.
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Sampling programs: Sampling programs are a great way for manufacturers and suppliers to introduce new products to retailers and trade partners. These programs offer retailers the opportunity to try new products and decide whether or not to add them to their inventory.
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Loyalty programs: Loyalty programs are designed to incentivize retailers and customers to continue buying from a specific manufacturer or supplier. These programs often offer rewards or incentives for repeat purchases or other actions.
Overall, trade promotion activities play a crucial role in building strong relationships with trade partners and increasing sales and distribution in the retail trade channel. Successful trade promotion requires a combination of innovative marketing strategies, effective communication, and strong relationships with trade partners.
IMPROVE TRADE PROMOTION SALES BY UP TO 15% – GREAT Merchandising Sales Tip! Apply the Billboarding and Front Facing Process (By Mondelez International, Inc.).
Parts of Trade Promotion Management
5 Types of B2B Trade Promotions with Examples
In-store Displays
The first step in making a sale is grabbing the customer’s attention, and cleverly designed in-store displays achieve just that. It’s all about drawing attention to the product inside the store to encourage impulse buying.
In fact, research shows that 16% of impulse purchases were made in response to in-store displays, like:
- Floor stickers
- Posters
- Banners
- Life-size display stands
- In-person product demonstrations
- Promotional fixtures
Each one strategically placed in retail stores that aim to catch customers’ attention and make products stand out. See example picture below:
Essentia Water Summer In-store Display
Deals and Discounts
The main influencing factor in purchasing decisions is price, with 89% of customers naming this variable as determinant in their purchases (source) . Manufacturers and wholesalers apply sales and discounts to encourage repeat business from current retail customers and to draw in new ones.
Trade Promotion Campaigns, Deals and discounts can take many different forms, such as:
- Price cut
- Percentage off
- Tiers of discounts (the more you buy, the more you save)
- Unique deals (buy X, get Y at a lower price/percent discount/free, etc.)
It’s noteworthy to mention that the mobile sales app a wholesale distributor or CPG brand uses should feature custom promotions during the order taking process based on retail customer and good reporting to measure success and to track and gain insightful metrics on a trade promotion effectiveness.
Let’s check out an example of a deal:
Black Friday Deal by Oliver’s & Co.
Bundles
Who doesn’t want customers buying 3 or 4 products instead of one? An excellent strategy to boost sales is to bundle and sell multiple products as single offers. For example, pairing and selling slow-moving products with the most popular ones. This encourages customers to purchase a variety bundle rather than each item separately for a greater price, increasing sales. Product bundles improve value for money from both the retailer’s and the consumer’s perspectives, below is an example:
Dove Bundle
Sales Contests
People love winning prizes, which is why sales contests are such a great incentive for retailers. Contests create friendly competition and gets people interested in winning. Usually, the goal of sales contests is to encourage retailers to sell more of a specific product in their stores. In return, the retailer that sells the most is compensated with a monetary bonus or exciting gift. Possible prize ideas include, money, vacation trips, products, or other managed trade promotions services.
Read a great article about the success of S. Abraham & Sons (SAS) Inc. who reportedly grew candy sales by more than 30%, with contests and promotions. They pushed certain candies during #nationalcandymonth in June. See the example below:
Candy Contest & Promotions
Rebates
In contrast to discounts or coupons, which are deducted at the time of purchase, rebates are provided after payment. According to Incentive Insights rebates make consumers 75.4% more likely to make a purchase. Making rebates a successful promotional strategy because they appeal to both impulsive and cautious buyers. The only thing is, people will buy a product, love the thought of saving, even if they never cash the rebate.
As a result, rebates offer retailers the benefit of giving customers a temporary discount on a product, to stimulate sales, while allowing it to maintain its current price point. CPG brands benefit because of a demand increase, but since not everyone cashes the rebates, there is no significant impact on profit margin. Making it a win-win for everyone (as long as you cash your rebate).
See the example below of a rebate offer:
Coors Light Beer Pure Rebate
What are the Benefits of Trade Promotions?
Trade sales promotions and online sales promotions can benefit B2B consumer goods companies in a variety of ways. Here are some reasons a company might offer a trade sales promotion method to the consumer goods industry:
Increased Order Size
If done properly, trade promotions can increase your bottom line by 10 to 15 percent, according to a study done by PwC. Trade promotions expose new products to your customers and may influence them to buy ones they ordinarily wouldn’t. Additionally, it makes upselling and cross-selling products simpler.
Faster Order-to-Cash Cycle
Every business must operate swiftly, and wholesale distributors and CPG brands are no exception. B2Bs must take advantage of trade promotions to create a sense of urgency or FOMO (fear of missing out) as a motivator to accelerate sales while minimizing costs on supply chain resources.
Increased Profitability
Trade promotions can boost revenue for B2Bs in a number of ways. By growing their customer base, generating revenue from current retail customers who want to take advantage of various promotions, and, of course, by making the product more appealing to the end user. For example, providing free samples can encourage a retailer’s customers to try a new product.
Improved Customer Loyalty Programs and Nurturing Relationships
Trade promotions are a great way to build and maintain loyal B2B relationships between wholesale distributors, CPG brands and retailers. Providing indoor displays ,discounts, rebates and bundles to resellers promotes a mutually beneficial relationship for financial gain and growth as partners in the supply chain. Other forms of trade promotions, such as sales contests, can draw new clients and reward existing customers, increasing customer satisfaction and keeping loyal customers.
Trade Promotion Tools: A Key Component of Trade Marketing
Trade promotion tools are an essential aspect of trade marketing, helping businesses to promote their products and increase sales. These tools are designed to incentivize retailers to stock and promote a particular product, often through the use of discounts, rebates, and other promotional offers. Some of the most commonly used trade promotion tools include trade allowances, price discounts, and promotional allowances.
Price Promotion Efficiency
Price promotion efficiency refers to the ability of a business to achieve the desired results from their promotional activities at a minimal cost. Efficient price promotions can help businesses increase sales, generate revenue, and gain market share. To achieve price promotion efficiency, businesses need to conduct thorough research, set clear objectives, and design effective promotions that align with business goals. Additionally, businesses need to measure the effectiveness of their promotions to make data-driven decisions for future promotion planning.
Measure Trade Promotion Effectiveness
Measuring the effectiveness of trade promotion can be challenging, as there are a variety of factors that can influence sales and market performance. Here are some ways to measure trade promotion effectiveness:
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Sales lift: One of the most commonly used methods to measure the effectiveness of trade promotions is to measure the sales lift or the difference in sales during the promotion period compared to a period with no promotion. This can be done for a particular product or for the entire category.
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Incremental volume: Another measure of trade promotion effectiveness is incremental volume, which measures the additional volume of products sold during the promotion period that would not have been sold otherwise.
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ROI (Return on Investment): ROI is a measure of the profit earned on an investment. To measure the ROI of a trade promotion, you can calculate the total cost of the promotion and compare it to the sales lift or incremental volume generated by the promotion.
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Market share: Another way to measure the effectiveness of a trade promotion is to look at changes in market share during the promotion period. If the promotion is successful, you should see an increase in market share for the promoted product or brand.
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Customer behavior: Measuring customer behavior can also help assess the effectiveness of trade promotions. For example, you can look at how many new customers were acquired during the promotion period, the frequency of repeat purchases, and changes in the average order value.
It is important to establish clear objectives and key performance indicators (KPIs) for trade promotions to effectively measure their effectiveness. It’s also important to conduct pre- and post-promotion analysis to get a complete understanding of the impact of the promotion.
Strategies of Trade Promotion
Trade promotion strategies are designed to help businesses achieve their sales and marketing objectives. These strategies involve several tactics such as discounts, rebates, contests, and giveaways. The main goal of these strategies is to increase product visibility, generate demand, and build customer loyalty. To develop effective trade promotion strategies, businesses need to identify their target audience, understand their buying behavior, and analyze their competitors. By doing so, businesses can create promotions that resonate with their target audience and achieve their sales objectives.
Managing Trade Promotions: Tips for Success
Effective management of trade promotions is critical to the success of any trade marketing strategy. One key aspect of trade promotion management is demand planning, which involves forecasting demand for a particular product and aligning promotional activities with that demand. Another important factor is sales planning, which involves setting targets and objectives for trade promotions and tracking progress towards those goals. Ultimately, successful trade promotion management requires a data-driven approach, with regular analysis and evaluation of trade promotion decisions to identify areas for improvement and optimize promotional spend.
Incremental Sales
Incremental sales refer to the additional sales generated by a product or service as a result of a marketing or promotional activity. In other words, incremental sales are the additional revenue earned above and beyond the baseline sales that a product or service would have generated in the absence of the marketing or promotional activity.
For example, if a company runs a promotion for a particular product and sells 1,000 units during the promotion period, but would have only sold 500 units without the promotion, the incremental sales would be 500 units. Incremental sales are an important metric for evaluating the effectiveness of marketing and promotional activities, as they indicate the impact of the activity on overall sales revenue.
Final Thoughts
Trade promotions are a key part of any brand-retailer and wholesaler-retailer relationship. By keeping an eye out for mutually beneficial trade promotion techniques and ideas, it’s possible to strengthen your B2B partnerships, enhance your brand and increase sales. Keep these trade promotion examples in mind when building your next sales strategy and watch products fly off the shelves. Schedule a Call for a trade promotion optimization session to talk to one of our experts to learn more about how a trade promotion management software can help you.