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Trade Promotion

THE SITUATION: Total trade promotion spending is huge – over $170B across the consumer packaged goods industry. For most brands, trade spend is the biggest line on the P&L and accounts for 50-70% of the marketing budget. Investment in these initiatives is substantial, and rightfully so, given their influence at the point of purchase. Despite the increasing amount of traditional and digital touchpoints, shoppers are making more of their final purchase decisions at-shelf than ever before. This further emphasizes the heightened importance of the in-store experience.

Despite millions of dollars spent and collaborative efforts across research, sales and marketing functions, overall trade promotion effectiveness is on the decline for many center store categories and historically low ROIs are slipping further. Retailers expect investment from manufacturers to help promote the business and differentiate their shopping experience from that of competitors (even if that comes in the form of offering the lowest possible price). Given the importance of trade funding, changes to trade strategy can be met with resistance, but when implemented correctly unlock significant value.

OUR SOLUTION: For many manufacturers, a large trade promotion investment is best managed by an interconnected, closed loop system of activities:

Within this system are multiple ways to drive trade promotion effectiveness, increase ROI and improve strategic alignment internally and externally with retail partners:

  • Category Planning: Develop deep insight into the true profit generated by each trade event and identify the coefficients to optimize the plan at the point of purchase (retailer level)
  • Shopper Role of Promotion: Identify the impact of trade promotion on shopper behavior and utilize all drivers of demand (trade + shopper marketing) to achieve marketing goals (e.g. increase penetration, trade up)
  • Customer Execution: Follow a proactive approach to joint business planning that engages trading partners early and showcases the positive category impact of manufacturer trade programs
  • Systems and Controls: Utilize an integrated system for trade program planning and execution that reinforces good data practices and provides a platform for ongoing improvement through post-event evaluation
  • Evaluation and Deployment: Follow a disciplined approach to post-event evaluation and deploy trade funds in a manner that aligns incentives across trading partners

The trade promotion system will only be as strong as its weakest part, making it imperative to continuously evaluate ways to improve each component.

END BENEFIT: By optimizing and elevating the performance of each part of the trade system, manufacturers can lead retailers with a trade program that delivers profitable growth for all involved - driving incremental sales through penetration gains, expandable consumption and increased purchase frequency.

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