© 2007 for Prentice Hall 9-1 Sealy 700 mattress manufacturers Quality products Brand name -...

© 2007 for Prentice Hall© 2007 for Prentice Hall 9-1

Sealy• 700 mattress manufacturers• Quality products• Brand name - advertising• Strong relationships with channel

members through• First in product and service quality• Best in meeting customer needs• Most in every facet of business

relationships• Improve by continually examining the

company’s operations

Discussion Slide

9


Trade Promotions

Chapter Overview

Discussion Slide

9• Nature of trade promotions• Types of trade promotions• Objectives of trade promotions• Concerns in using trade promotions


Marketing Budgets

Trade Promotions54% ($546.8 Billion)

Consumer Promotions28% ($288.3 Billion)

Consumer Advertising18% ($177.5 Billion)


Trade Promotions• Expenditures or incentives used by

manufacturers and channel members to push goods through the channel

• $16 billion in trade promotions• Percentage of promotional expenditures

• 1980s 38%• Today 54%

• Should be integral part of IMC program


• Trade allowances• Trade contests• Trade incentives• Training programs• Vendor support programs• Trade shows• Specialty advertising• Point-of-purchase displays

F I G U R E 9 . 3

Trade Promotions Tools


Sales by ManufacturersImpact of Promotions

Full Price58%

Trade & ConsumerPromotions

2%

ConsumerPromotions Only

24%

Trade Promotions Only16%

Source: Promotions Decision Study, Santella & Associates (http://www.santella.com/coupon.htm)Source: Promotions Decision Study, Santella & Associates (http://www.santella.com/coupon.htm)


• Off-invoice allowance: a per-case rebate paid to retailers for an order.• 33% of all trade dollars

• Drop-ship allowance: money paid to retailers who bypass wholesalers or brokers for pre-planned orders.

• Slotting fees: money paid to retailers to stock a new product.

• Exit fees: money paid to retailers to remove an item from their SKU inventory.

F I G U R E 9 . 4

Trade Allowances


Slotting FeeControversialControversial

Charged by 82% of retailersCharged by 82% of retailers

$1.5 - $2 million per new product$1.5 - $2 million per new product


Slotting FeesJustification by Retailers

• Cost to add new product to inventories• Deleting or reducing shelf space for

other products• Aids retailers in making decisions about

new products• Add to a retailer’s profit


Slotting FeesManufacturers Opposition

• Viewed as extortion• Impact on small manufacturers• Favors large manufacturers• Favors incumbent suppliers


Exit Fees

Only used by 4% of retailersOnly used by 4% of retailers


Disadvantages ofTrade Allowances

• Failure to pass allowances on to retail customers• Only occurs 52% of the time• Retailers like only one brand on-deal at a time

• Forward buying• Pass savings on or pocket higher margin• Additional carrying costs

• Diversion• Pass savings on or pocket higher margin• Additional shipping costs


Trade Contests• Used to achieve sales targets.• Funds known as “spiff money.”• Rewards can be prizes or cash.• Can be designed for various channel

members.• Some organizations do not allow trade

contests because of possible conflict of interests.


• Cooperative merchandising agreement (CMA) - Calendar promotions

• Corporate sales program (CSP) • Producing plant allowance (PPA) • Back haul allowance (BHA) • Cross-dock or pedal runs• Premium or bonus pack

F I G U R E 9 . 5

Trade Incentives


Training Programs

• Provided by manufacturers• Goal is to bias salespeople• Provide knowledge


Vendor Support Programs

• Billback programs• Co-op advertising programs• $8 million (1/3) unclaimed co-op money.

• Errors in filing• Purchase accruals traced inaccurately• Retailers unaware of co-op monies• Restrictions not followed accurately


Trade Shows• Ranks third in B-to-B marketing expenditures.• Manufacturers spend $70,000-$100,000 per show.• Retailers spend $600 per attendee.• Average trade show had 701 exhibiting firms and

13,431 attendees.• Average ratio of attendees to exhibitors was 19 to 1.• Largest trade shows are:

• International CES• The Super Show• Miami International Boat Show & Strictly Sail• International Housewares Show• Mid-America Trucking Show


Trade Shows by Industry

Manufacturing (18.6%)

Computer (4.6%)

Consumer (11.0%)

Education (4.6%)

Communications (5.3%)Retail/Distributors (15.8%)

Food (7.0%)

Engineering (7.7%)

General Business (8.3%)

Medical (10.3%)

Source: Danica Vasos, “Industry Profile,” Source: Danica Vasos, “Industry Profile,” ExpoExpo, January 2000, pp. 52-55, January 2000, pp. 52-55


• Education seekers• Reinforcement seekers• Solution seekers• Buying teams• Power buyers

Source: English, “On Displays,” Source: English, “On Displays,” Business First - Western New YorkBusiness First - Western New York, (Nov. 29, 1999),, (Nov. 29, 1999),Vol. 16, No. 31, pp. 31-32.Vol. 16, No. 31, pp. 31-32.

F I G U R E 9 . 7Five Categories of Buyers Attending Trade Shows


Making the Most of Trade Shows

• Ask right questions.• Spend time with right attendees – MAN.• Listen.• Use customer service personnel.• Do not bombard attendees with literature• Avoid overcrowding booth.• Watch booth etiquette and body language.• Follow up leads PROMPTLY.

• Only 30% followed up


Trade Shows• National and International Shows

• Higher cost• Enhance brand or corporate name• Expand market beyond region• Reach international markets

• Regional or Niche Shows• Create a client base quickly• Establish a new brand• Promote a new product• Lower cost

• Match attendees <---> target market


Source: Alf Nucifora, "Simple Coffee Cups Packs Advertising Punch," Long Island Business News, (Jan. 22, 1999), Vol. 46, No. 4, p. 7C.

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F I G U R E 9 . 8Top Categories in Specialties AdvertisingTop Categories in Specialties Advertising


Point-of-Purchase

• Location key• Last chance to reach buyer• 50% of money spent at retailer is

unplanned• 70% of brand choices are in store• Average increase in sales is 9.2%• Half of POP displays not effective


Where POP Displays Are Usedin Australia

Convenience Stores (20.8%)

Source: “A Profile of the POP Advertising Market in Australia,” POPAI Australia & New Zealand.

Department Stores (16.8%)

Supermarkets (16.8%)

Hardware (13.6%)

Automotive (3.2%)

Dealerships (5.6%)

Pharmacy (5.6%)

General Stores (10.4%)

Liquor (7.2%)


Source: "Pop Peeves," Marketing Tools, (June 1997), p. 10.

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F I G U R E 9 . 9Top Weaknesses of Manufacturer-Supplied POP Displays


• Integrate the brand’s image into the display.• Integrate the display with current advertising and

promotions.• Make the display dramatic to get attention.• Keep the color of the display down so the product

and signage stand out.• Make the display versatile so it can be easily adapted

by retailers.• Make the display re-usable and easy to assemble.• Make the display easy to stock.• Customize the display to fit the retailer’s store.

F I G U R E 9 . 10

Effective POP Displays


POP Trends• Integration with Web sites• Displays that routinely change

messages• Better tracking of POP results

• Use of POS data


• Obtain initial distribution• Obtain prime retail location or shelf space• Maintain support for established brands• Counter competitive activities• Increase order size• Build retail inventories• Reduce excess manufacturer inventories• Enhance channel relationships• Enhance the IMC program

F I G U R E 9 . 1 1

Objectives of Trade Promotions


ConcernsTrade Promotions

• High cost.• Tend to be use outside of IMC Plan.• Over-reliance on trade promotions to

push merchandise.• Often used for short-term sales goals.• Potential erosion of brand image.• Impact on small manufacturers


• Wal-Mart• Kmart• Sears• Sam’s Warehouse• Price Costco• Target• Home Depot• Toys ‘R’ Us

• Circuit City• Consumer-Electronic• Office Depot• Service/Merchandise• Wal-Mart Supercenter

Retailers with small vendor programs Retailers with no small vendor programs

Source: Susan Greco, “Selling the Superstores,” Inc. (July 1995), Vol. 17, No. 10, pp. 54-60 ..

F I G U R E 9 . 1 2Retailers with Small Vendor Programs

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