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Transcript of Trade Promotions
Trade PromotionsChapter 13 Overview
The Critical Components The Robison-Pattman Act
Marketing Development Funds
Display / Feature Activity
Account Specific Promotions
Robison - PattmanMust treat all retailers on an equal basis in terms of your product marketing.
OK to scale in proportion to volume.
Smiths vs. Dans
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 MDFWalmart
Cost Per Case:$12.00
Store-Level Marketing ActivitiesShelf (price reduction, instant coupons)
Off-shelf display (in-aisle stack or shipper display case).
Display with Feature Pricing
The Volume EffectStore Shelf1 x
Off-Shelf Display Only2.5 x
End Aisle Display Only 4 x
Feature Price Only7 x
Off-Shelf Display + Feature Price10 x
End Aisle Display + Feature Price13 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
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. Itll kill you if youre a category leader.
Coupon EconomicsLots of hands in the food chain:
Distributor (Catalina, In-store, Vlassis)
Redemption ($$ per coupon)
Redemption House Processor
Who PaysCoupon costs are ALL payable out of the brands 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 PromotionsThe 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 dont know where its coming from, and assume its the store doing it.
Account-Specific Methods Proprietary programs (Disney Video Cart at Target)
Display cases (especially refrigerated)
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.
Thats 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 its gone.
Unique PromotionsA really great and unique promotion can get the chains to waive slotting fees, but its 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.