Trade Promotions

Chapter 13 Overview

The Critical Components The Robison-Pattman Act

Marketing Development Funds

Display / Feature Activity

Slotting Allowances

Account Specific Promotions

Third-Party Promotions

Robison - PattmanMust treat all retailers on an “equal basis” in terms of your product marketing.

OK to scale in proportion to volume.

Smith’s vs. Dan’s

Marketing Development Funds (MDF)

Money accrued on a per-case basis to fund marketing activity for that particular brand within that particular store chain.

May be used to fund displays, feature activity, price reductions. Usually NOT allowed to be given to the store and dropped to their bottom line.

MDFJust about ALL grocery chains deal in MDF.

Walmart the exception. They require the brand to roll all MDF monies into lowering the cost price to Walmart for the product. Walmart does not play the game.

The DifferenceTypical Grocer

Cost Per Case: $14.00

Accrues $2.00 per case MDF

Walmart

Cost Per Case: $12.00

Store-Level Marketing Activities

Shelf (price reduction, instant coupons)

Off-shelf display (in-aisle stack or shipper display case).

End-aisle display

Display with Feature Pricing

The Volume EffectStore Shelf 1 x

Off-Shelf Display Only 2.5 x

End Aisle Display Only 4 x

Feature Price Only 7 x

Off-Shelf Display + Feature Price 10 x

End Aisle Display + Feature Price 13 x

The Economics (Net Brand Profit)

Store Shelf $2,436

End Aisle Display Only $2,744

Feature Price Only $7,152

End Aisle Display + Feature Price$10,568

The Economics(Net Chain Profit)

Store Shelf $2,016 (30.37%)

End Aisle Display Only $15,604 (44.90%)

Feature Price Only $12,252 (27.97%)

End Aisle Display + Feature Price $25,468 (29.77%)

Coupon OpportunitiesCatalina “Checkout” Coupons

Direct Mail “Smart” Coupons

In-store “Instant” Coupons

National FSI’s

Which One?Depends on your objectives.

It hurts to give coupons to your loyal customers who will pay full price.

Instant-Coupons highest redeeming, but only make sense if you are a small brand fighting for sales. It’ll kill you if you’re a category leader.

Coupon EconomicsLot’s of hands in the food chain:

Distributor (Catalina, In-store, Vlassis)

Redemption ($$ per coupon)

Redemption House Processor

Who Pay’sCoupon costs are ALL payable out of the brand’s national marketing budget.

In-store features, displays are paid out of the MDF monies accrued by the store and managed by the sales force, not the brand team.

Account-Specific Promotions

The preferred method by retailers.

They want promotions that set them apart as different, better & special, not the same promotion the store down the street has on your brand.

The promotion reflects on the STORE, not the BRAND. Consumers don’t know where it’s coming from, and assume it’s the store doing it.

Account-Specific Methods Proprietary programs (Disney Video Cart at Target)

Tagged Media

Point-of-Sale Materials

Display cases (especially refrigerated)

Third-Party Promotions

Slotting AllowancesRequired for getting placement on any new product (usually).

The economics are simple….eight out of ten new products fail. The stores need to protect their profitability, and want the companies to put their money where their mouth is to get it into the store.

New Product ProliferationOver 25,000 new products presented each year to the grocer.

That’s about 100 per business day over the course of the year.

They want to see your marketing plan, advertising plan, and your agreement to pay the slotting allowance as price of admission.

Product has 45 days to prove itself or it’s gone.

Unique PromotionsA really great and unique promotion can get the chains to waive slotting fees, but it’s gotta be GREAT!

Olympic Torchbearer (Coke) Catamarans (Hawaiian Punch) Autographed Stuff

Trade Before ConsumerYou have to figure out how you are going to market your product successfully at the trade level BEFORE you can market successfully to consumers.

The TRADE is the GATEKEEPER.