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“Trade promotion and their role in Selling”

Term Paper

Submitted towards Partial

Fulfillment

Of Post Graduate Diploma in Management

(Approved by AICTE, Govt. of India)

Academic session2010-2012

Under the Guidance of:

Prof. Timira Shukla

Submitted By:

Alpana Ganguly BM-010017

Aman Goel BM-010018

Amanpreet Kaur BM-010019

Ambika Saxena BM-010020

Amit Raj BM-010021

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ACKNOWLEDGEMENT

The satisfaction and the happiness that accompanies the successful completion of any

task would be incomplete without expression of appreciation and gratitude to those

people who made it possible.

Indeed, We consider it as a pleasant duty, though equally difficult to acknowledge the

motivating efforts of several people who have helped us in bringing this term paper to

find its delight.

We express our sincere thanks to our faculty guide Prof. Timira Shukla, Without whose

support and co-operation, the completion of this Term paper would have been close to

impossible. We are immensely grateful to her for showing all round guidance and

personal interest in my work.

We are thankful to many others who either directly or indirectly who have helped us in

successful completion of this Term paper.

Finally, We owe our gratitude to our parents and our dear friends who have always

stood by us and had been our moral support with sheer zeal and enthusiasm at the

worry and we dedicate our work to them.

Sincerely

Alpana Ganguly BM-010017

Aman Goel BM-010018

Amanpreet Kaur BM-010019

Ambika Saxena BM-010020

Amit Raj BM-010021

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INDEX

CHAPTE

R NO.

PARTICULAR PAGE NO

1 Meaning of Trade promotions 3-42 Trade promotion Goals 5-7

3 Types of Trade Promotions 8-13

4 Factors to be considered for Increasing trade

promotion Spendings

14-15

5 Effect and Success of Trade promotion 16-18

6 Challenges of Trade Management 19-21

7 Ways of effective Trade Promotion 22-23

8 Case of Hindustan latex ltd ( HLL) 24

9 Limitations 25-2610

CHAPTER-1

MEANING OF TRADE PROMOTION

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In marketing, “the trade” typically refers to the business relationships that exist

between final producers, retailers, and wholesalers. To marketers, trade promotion

refers to promotional activities that occur between these channel members. Because the

prominence of independent wholesaling has dramatically declined over the last several

decades, trade promotion largely consists of promotional activities offered by

manufacturer to retailers. That is the context of the discussion here. In business and

marketing, “trade” refers to the relationship between manufacturers and retailers. Trade

Promotion refers to marketing activities that are executed in retail between these two

partners. Trade Promotion is a marketing technique aimed at increasing demand for

products in retail stores based on special pricing, display fixtures, demonstrations,

value-added bonuses, no-obligation gifts, and more.

Trade Promotions can offer several benefits to businesses. Retail stores can be an

extremely competitive environment; trade promotions can help companies differentiate

their products from the competition. Companies can utilize Trade Promotions to

increase product visibility and brand awareness with consumers. Trade Promotions can

also increase a product’s consumption rate, or the average quantity of a product used by

consumers in a given time period. Furthermore, effective Trade Promotions can enlarge

a product’s market segment penetration, or the product’s total sales in proportion to the

category’s competition. Moreover, companies use Trade Promotions to improve

distribution of their product(s) at retailers and strengthen relationships with retailers.

Lastly, Trade Promotions can be leveraged to introduce new product launches into

retail stores.

Manufacturers of consumer products have always struggled to manage customer

relationships, execute effective promotional activities and measure consumer response

in their distribution channels. Over the past century and a half or so, trade funds, co-

op advertising, market development funds or other “soft dollar” programs designed to

stimulate demand have increased in both complexity and volume. The percentage of

trade funds to gross revenues has risen from just slightly over 3% in 1930 to almost

20% today. Fueled by a nearly 3x increase since the mid 1980’s, trade spending is now

the second largest expense item on most consumer manufacturers’ P&L's.

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http://en.wikipedia.org/wiki/Marketing

http://en.wikipedia.org/wiki/Manufacturer

http://en.wikipedia.org/wiki/Retailer

http://en.wikipedia.org/wiki/Retail


http://en.wikipedia.org/wiki/Retail_store


http://en.wikipedia.org/wiki/Brand_awareness

http://en.wikipedia.org/wiki/Consumer

http://en.wikipedia.org/wiki/Market_penetration


http://en.wikipedia.org/wiki/Competition_(economics)


http://en.wikipedia.org/wiki/Marketing

http://en.wikipedia.org/wiki/Manufacturer

http://en.wikipedia.org/wiki/Retailer



http://en.wikipedia.org/wiki/Brand_awareness

http://en.wikipedia.org/wiki/Consumer



http://en.wikipedia.org/wiki/Business

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CHAPTER-2

TRADE PROMOTION GOALS

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1. Timeframe of trade promotion goals- In contrast to trade promotion, promotion

managers typically set either brand building or transaction building goals for consumer

promotion. Goals for trade promotion differ from those set for consumer promotionlargely because the criteria for evaluating purchases differ between consumers and

organizational buyers.

Consumers, who buy for their own personal or household uses, often develop

attachments to brands because those brands satisfy psychological needs. In consumers,

brands can evoke feelings of warmth, self-confidence, security, and a host of other

emotions. Although the source of these emotions may be very functional benefits

provided by the brands, the emotional attachment consumers feel toward their favorite

brands is an increasingly important part of consumer promotion. Recall that brand

building consumer-oriented sales promotion attempts to cultivate consumers’ emotional

brand attachments.

Organization buyers, on the other hand, make purchases to meet the objectives of their

organizations, which are rarely emotional. Businesses, as you would expect, focus

heavily on achieving financial performance superior to that of their competitors.

Therefore, attractive brands will be those that assist in the pursuit of these goals. This

should not imply that businesses focus exclusively on short-term financial

performance; relationship building among buyers and sellers in distribution channels is

becoming increasingly common. However, where trade promotion is concerned, short

term goals usually dominate decision making. Manufacturers design individual trade

promotions with short term financial goals in mind; retailers encourage, suggest or

participate in individual trade promotions with short term financial goals in mind.

Long-term goals apply more to the general philosophy a firm has toward offering or

participating in trade promotions. Some manufacturers, for example, use trade

promotions aggressively making frequent and varied offers to retailers. Retailers whose

purchasing philosophies match those of the manufacturer may be well-suited to carry

the manufacturers’ brands, feature them frequently in their own promotional activities,

and perhaps provide them with favorable shelf-space in their stores. Thus, while both

sides of the buyer-seller dyad view single trade promotion offers in the short term, the

totality of trade promotions offered by sellers to buyers play an important role in

building buyer- seller relationships.

Typical goals of trade promotion

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Manufacturers offer trade promotions to retailers with any or all of three goals in mind.

As you consider each of these reasons, think about how the promotional goals

emphasize the short term, although each can be part of a long-term strategy to build a

relationship with the retailer.

A. Expanding distribution- Manufacturers use trade promotion to expand distribution

of their products, which can occur within stores or to new stores. Within stores,

manufacturers use trade promotion to obtain more or better shelf space. Depending on

the type of product being sold, manufacturers may also seek to expand the number of

retailers carrying the product by offering retailers inducement to do so. Newer

products, regional products being rolled out nationally, or products being targeted to

new markets all may need retail outlets to carry the product. Unless the manufacturer

can make doing so worthwhile for the retailer, the retailer will likely remain reluctant to

provide even marginal shelf space. Various trade promotion tools assist the

manufacturer in convincing the retailer that carrying the product will prove profitable.

B. Inventory control- Manufacturers use trade promotion to control their inventories,

particularly by encouraging the retailer to keep more of the manufacturer’s product on

hand. This can be important to the manufacturer for several reasons. For one thing,

manufacturers may wish to transfer some of the product storage costs to the retailer.

For another, manufacturers may want retailers to “stock up” on a particular product in

advance of a consumer promotion, thereby avoiding stockouts. Finally, manufacturers

may wish for retailers to build product inventories to reduce their ability to stock a

competitor’s product, particularly if the competitor is about to offer a special

promotional deal.

C. Encourage retail promotion- Manufacturers use trade promotion to encourage

retailers to promote the manufacturer’s brands. If the manufacturer plans on a

manufacturer promotion, then trade promotion could help ensure broad retailer

participation. Or, the manufacturer might wish to offer savings that the retailer can pass

on to their customers, perhaps in the form of a temporary price break. Also, large

powerful retailers can pressure manufacturers into offering special promotions,

sometimes custom made for the retailer. Under these circumstances, manufacturers may

appreciate the extra attention and exposure, but financially retailers can drive a hard

bargain.

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CHAPTER-3

TYPES OF TRADE PROMOTIONS

1. Price-based trade promotions-

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It refers to the several types of temporary reductions in the manufacturer’s price to

retailers as price-based trade promotions. These different types of price reductions vary

by their length of time, the basis on which the price reduction is granted, the size of the

reduction, and how the price reduction is paid. Although the following discussion

references manufacturer-retailer relationships, price- based trade promotions occur

anywhere in the channel. However, in industrial channels, sellers care nothing about

pass through; trade promotion in industrial channels primarily reflects responses to

seller competition or adjustment of seller inventories.

A- Off-invoice discounts- Also known simply as price offs, off-invoice discounts

provide a simple and straightforward trade promotion tool. When offering off-

invoice discounts, manufacturers simply deduct some percentage from the invoice

price for purchases made during the deal period, which may last.

The off invoice discount may be offered in a couple of variations. One is the

quantity discount, which offers greater percentage discounts for larger

purchases. Quantity discounts may actually be used to discourage stockpiling

and encourage pass through of at least some of the discount. To get higher

discounts, retailers buy more of the product, which may exceed that which

they’re able to store economically. In turn, retailers must reduce their prices to

reduce their inventories. Another variation is the merchandise allowance in

which the manufacturer offers the price reduction in the form of additional

merchandise. For example, a manufacturer may offer ten units for the price of

nine.

Manufacturers like to use off-invoice and quantity discounts because retailers

appreciate them most; manufacturers looking to please their good customers

frequently turn to this trade promotional tool. Retailers appreciate them because

the discounts are in cash, and therefore permit the greatest flexibility in terms of

how to take advantage of the discount. Of course, if manufacturers want the

discount to be passed through to consumers, they might consider a less flexible

trade promotional tool. Chances are that if they offer a simple off-invoice

discount, retailer will keep most or the entire discount.

B- Performance incentives- In order to limit retailers’ ability to pocket trade

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discounts, manufacturers may offer performance incentives, in which the

manufacturers discounts only that merchandise that the retailer sells at a discount to

their consumers. In other words, the manufacturer stipulates “no pass through, no

trade deal.” Retailers dislike performance incentives because they must pass

through the discount. As such, their effective long-term use may be dictated by the

relative power of the retailers and manufacturers involved.

Performance incentives require more detailed bookkeeping than simple off-

invoice discounts because retailer sales during the deal period must be verified.

Manufacturers use any of several verification methods. Perhaps the most

common is the “bill back.” With bill-backs, the retailer pays the manufacturer

full price for the merchandise being discounted, and then after the deal expires,

the retailer sends the manufacturer verification of the number of units sold and

their retail price during the deal period. The manufacturer then sends the retailer

payment equal to the trade discount.

For example - Suppose a retailer normally pays a manufacturer Rs 2.00 per unit

for its merchandise and sells the merchandise to consumers for Rs 3.00.

Suppose also that the manufacturer tells the retailer that if the retailer discounts

the retail price to Rs 2.50 for one week, then the manufacturer will reduce its

price to the retailer by Rs .50 per unit. By the end of the week, the retailer sells

100 units. To receive the discount from the manufacturer, the retailer sends the

manufacturer verification that it sold 100 units at Rs 2.50. The manufacturer

would then send the retailer a check for Rs 50.00.

C- Sales quotas- Just as sales managers may set quotas for their sales forces,

manufacturers can set sales quotas for retailers. Generally speaking, however,

manufacturers only use sales quotas with retailers that are exclusive dealers of

manufacturers’ products. For example, automobile dealerships may receive sales

quotas from carmakers. The sales quotas provide for percentage increases over

previous years’ sales. The quotas work by simply offering discounts or rebate

payments to retailers who meet the manufacturers’ sales quotas.

2. Nonprice-based trade promotions-

Beyond discounts in price, manufacturers can offer an almost infinite number of other

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inducements to carry or feature the manufacturers’ products. Many of these trade

promotional tools reflect retailers’ rise in power within distribution channels and the

deference manufacturers may show as a result.

A. Slotting allowances- For a time, slotting allowances were controversial –

considered a kind of “blackmail” by retailers. The controversy has largely faded,

though, and slotting allowances remain an accepted part of the retailing landscape.

Simply put, slotting allowances are the price retailers charge manufacturers for shelf

space, or “slots.” Generally speaking, slotting allowances are paid for new and

speculative products, which have no history of successful retail sales.

Retailers defend the practice of charging slotting allowances by pointing out that shelf

space is their “product,” which is limited within each store. By granting shelf space to a

losing product, retailers forego the opportunity to stock a successful product in that

shelf space. Retailers also argue that slotting allowances reimburse them for the costs

of carrying a product. Shelving products incurs storage, transportation, and labor costs

that are borne by the retailer. Slotting allowances help them recoup those expenses. In

truth, however, the costs of stocking and shelving products is part of a retailer’s normal

operating expense; slotting allowances really represent retailers’ recognition that their

shelf space is a valuable economic asset that they can force manufacturers to pay for.

B. In-store displays- In-store displays are promotional fixtures in retail stores.

Variations of in-store displays include Point-of-Sale Displays, which are located near

cash registers to encourage impulse buying; Floor Stickers, or advertisements for

products on the aisle of a store; Feature Displays, which can be located at the end of an

aisle to draw attention to a product; and Special Racks, or manipulation of a store shelf

to make more space available for a product or bring attention to the promoted product.

In-store Displays can be perceived as more visually appealing to consumers than

product alone on a retail shelf.

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http://en.wikipedia.org/wiki/Cash_register

http://en.wikipedia.org/wiki/Impulse_buying

http://en.wikipedia.org/wiki/Advertisement


http://en.wikipedia.org/wiki/Point_of_sale_display

http://en.wikipedia.org/wiki/Cash_register

http://en.wikipedia.org/wiki/Impulse_buying


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C. Promotional allowances- Promotional allowance is a broad term that covers simple

cash payments by manufacturers to retailers intended to encourage retailers to promote

the manufacturers’ brands. These payments are often called “push money.” A

manufacturer may pay push money in hopes that the retailer will use at least some of it

to promote the manufacturer’s products in some way, usually at the complete discretion

of the retailer.

Promotional allowances work much the sale as slotting allowances, but with three

important differences. First, manufacturers pay promotional allowances on products

already carried by the retailer, so the product has a purchase history and the retailer has

already agreed to stock it. Second, because the product is already on the shelf, push

money is intended to encourage promotion of the product beyond simply putting it in

stores. And third, retailers require slotting allowances for new products; push money is

used by manufacturers to generate goodwill with powerful retailers.

D. Spiffs- Manufacturers need not direct trade promotion dollars to retail management

or ownership. Spiffs are directed to retail salesforces. Manufacturers may set sales

goals for the salespeople of the retailers carrying the product and then pay salespeople

directly for achieving those goals. Retailers at first resisted spiff payments to their

salesforces because they felt the payments undercut their ability to direct salesforce

efforts as they saw fit. Moreover, manufacturers could not offer or administer the

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payments without cooperation from retailers. Retailers have largely dropped their

resistance to the practice because refusing to allow them to be paid actually produced

great animosity by salespeople toward the retailers they worked for. Indeed, in many

product categories, spiff payments have become so common that “spiff checks” are a

normal part of salesperson compensation and are actually used by retailers as a

recruiting tool.

E. Trade contests- Trade contests are a variation of spiffs in the sense that they

represent manufacturer compensation directly to retail salesforces. Manufacturers set

sales goals for several retail salesforces, either within a single chain or perhaps between

salesforces of competing chains. The winners receive a substantial usually noncash

prize such as a trip to an exotic location.

F. Cooperative advertising- Manufacturers establish cooperative (or just coop)

advertising programs to encourage retailers to feature the manufacturer’s products

prominently in retail advertising. Under these programs, manufacturers agree to pay a

portion of a retailer’s advertising expenses if the retailer’s advertising meets certain

requirements for showcasing the manufacturer’s brands. Although most frequently

applied to media expenses, retailers can receive coop-advertising support for

advertising production costs too.

For example - Many manufacturers provide professionally prepared print advertising

art to retailers at no charge. This may be particularly useful to small retailers who could

not afford the services of a high-quality professional graphic artist.

Many coop-advertising programs require retailers to earn coop dollars under some

formula that combines retail advertising spending with sales of the manufacturer’s

products by the retailer. Additionally, to qualify for coop advertising dollars,

advertising copy must meet certain requirements for how often the manufacturer’s

brand is mentioned or how prominently the brand appears visually.

G. Sampling- Sampling allows consumers to try the product either in-store or via free

samples before buying it. This can reduce consumers’ apprehension about buying a

new product or introduce them to a product they were unfamiliar with before.

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H. Other trade promotional tools- As noted earlier, manufacturers dream up newtypes of trade promotions or variations on existing ones all the time. The ones

described above generally receive the lion’s share of trade promotion expenditures,

however, other effective techniques are available as well. One familiar trade

promotional tool is “display assistance.” Many manufacturers provide elaborate

product displays – either temporary for special events, or permanent installations that

help consumers more easily select products. Manufacturers frequently offer these

displays to retailers at no charge.

Manufacturers promote their products to retailers through special training programs for

retail salespeople. If a manufacturer’s product requires special training to sell or operate

effectively, the manufacturer may offer special training, which may be conducted in

exotic locations so that retail sales forces may mix business with pleasure. Many

manufacturers attempt to reach retailers through trade shows and industry conventions.

The tradeshow industry itself has grown to multi-billion dollar proportions, in part

because tradeshows may put manufacturers in contact with hundreds if not thousands

of retailers.

CHAPTER- 4

FACTORS TO BE CONSIDERED FOR INCREASING TRADE

PROMOTION SPENDING

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The two real drivers of trade spending growth are

1) Increasingly sophisticated consumers and

2) The massive, but resource-strapped retailers who must cater to them in

an ever-increasing number of formats and channels.

The Changing Consumer

Consumers are switching brands, retailers and channels more than ever

before.

• 68% are brand switchers. Only 5% are loyal to one brand.

• 73% shop in five or more channels. Only 26% are loyal to a

particular retailer.

A new “thrifty” behavior is emerging with the economic downturn, so that

consumer perceptions of value often trump loyalty. Social networks are

emerging as a “source of truth” about brands3, fueling even more brand

switching.

In essence, the consumer has matured; and with that maturity comes a

more daunting task for both manufacturers and resellers alike – doing more

than ever to attract, deliver and maintain a loyal consuming public.

According to a February 2009 paper, AMR Research pointed out that in

the beginning of 2008, 40% of the decisions the shopper made took place

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at the shelf.

The Changing Retailer

The Changing Retailer Retailers continue to consolidate and increase their

leverage. Meanwhile, company failures are becoming more commonplace

against the perfect storm of both the competition and the economy. Many

consumers serve only a handful of major retail channel partners – reducing

their clout in the relationship.

Sensing their increasing presence in the consumer’s shopping experience,

many retailers have invested in their own brand image, expanded store

brands, and implemented shopper marketing strategies, all of which affect

the role of consumer brands.

CHAPTER-5

EFFECT AND SUCCESS FROM TRADE PROMOTION

As with consumer-oriented sales promotion, evaluating the success of

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trade promotion relies on estimating whether the additional profits

garnered by the promotion exceed the opportunity costs of selling at

discount to those who would have purchased at the regular price. In the

case of trade promotion, we can examine the sources of additional profits

more closely because tracking these sources presents less of a problem in a

trade environment than it does in a consumer environment. This is because

there are fewer retailers and other trade customers than there are

consumers.

Moreover, producers carefully track the trade deals offered to and

purchases made by retailers. This kind of individual customer trackingoccurs less frequently in consumer markets given the millions of small

individual purchases consumers make daily. Still, evaluating the

profitability of trade promotion follows similar logic to evaluating

consumer-oriented sales promotion.

By the above graph it shows the sources of the sales increases to retailers

brought on by a trade deal. Several features of this graph merit mentioning

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relative to the similar graph given in the Web Notes on consumer-oriented

sales promotion. First, the sales line does not stay level in the period prior

to the trade deal; instead it dips slightly in anticipation of it. This is

because the manufacturer’s sales force likely makes many customers

aware of the pending promotion and advises customers to delay their

purchases until the promotion begins. Second, the sales curve during the

promotional period assumes something of a V-shape at the top.

This shape results from retailers purchasing on deal twice during the

promotional period. Many make an initial purchase, determine how much

to pass through, divert, or stockpile, then purchase additional amountstoward the end of the promotional period if necessary. Third, the sales line

dips below its average baseline level following the promotion. This feature

shows the effects of stockpiling and forward buying. Finally note that in

this example, the promotional offer lasts for two periods. While trade

promotion offers vary in duration, they typically last somewhat longer than

many consumer-oriented sales promotions.

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CHAPTER- 6

CHALLENGES OF TRADE MANAGEMENT

There are six key challenges that manufacturers must confront to enhance

their trade management effectiveness:

1. Establish an effective trade management process

The specific pillars that are related to trade management include:

• Advanced Trade Planning – The processes of account planning

that include forecasting, sales volume planning, predictive modeling

and fund allocation.

• Trade Promotion Management – The processes surrounding fund

management and accounting, claim audit and deduction

management, and settlement.

• Retail Coverage Planning and Execution – The processes of trade

and brand coverage planning, objectives planning, route scheduling,

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visit planning, and on-site execution functions of performance

compliance, store audit, cash and order management. The latter is

generally performed on a disconnected mobile handheld device.

• Demand Signal Management – Using retail point of sale data as

the primary source of intelligence, this process combines elements

of category and brand management, price management, competitive

tracking and retailer performance score carding to guide account

teams toward more effective analysis of business operations and

financial ROI.

2.Invest in technology to automate the process

Most IT organizations have so far focused on improving the transactional

technology that accounts for trade fund spending, emerging from three

decades of manual procedures, spreadsheets and cumbersome internallydeveloped solutions.

Setting IT budget priority that matches the level of corporate spending and

opportunity

Evolving from desktop tools and homegrown legacy solutions to

enterprise-class technology

3. Capture and harmonize disparate demand signals

Consumer goods companies are swamped with data - both internal as well

as external. Manufacturers must deal with an ever increasing number of

sources, from outbound shipments to syndicated market data to store level

consumption data.

The first step is to bring all of that data into one single source of

intelligence. Multiple data sources, which are not aligned, synchronized,

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integrated or timely, hinder trade planning and management. Diverse data

sources also create conflicting reports, putting data quality (accuracy and

breadth) in question.

4. Improve account planning and retail execution

The ability to transmit marketing and promotion campaigns to actionable

in-store performance continues to be a challenge in developed markets and

almost an impossible task in developing geographies.

Today, most manufacturers today rely upon a combination of spreadsheets

and one or more data warehouses to plan and analyze their trade coverageresulting in:

• Difficulty aggregating account plans or creating rolling estimates

• Limited scenario modeling capabilities

• Lack of tools and software conducive for mobile use, joint retailer

planning, or sales productivity

5. Transition promotion planning from an art to a science

Promotion plans are still too often the result of guesswork or inertia (minor

revisions to last year’s plan). 74% of planned trade expenditures are based

on history, perpetuating poor historical performance.11 Data driven

analytical models are already more reliable than traditional methods of

estimating performance under most conditions, and more importantly, theymake it possible to plan hundreds of localized promotions that would be

beyond the capacity of manual approaches.

6. Get real-time visibility to trade plans and promotion results

Companies generally lack the end-to-end view of financial, marketing and

sales resulting from effective promotions. This partial visibility of market

conditions results in multiple forecasts for revenue, volume, and trade

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spend. Differences in understanding among functional teams limit

collaboration both internally and externally.

CHAPTER-7

WAYS OF EFFECTIVE TRADE PROMOTION

Displays and DealsAll promotions are not created equal. Nor do they have

equal impact and except the dealers some of the points, which may give

another way to implement the trade promotion, accept the dealer method.

1. Characteristics of Categories with High Display Response

• 14 of top 15 display categories are either “Must Have” products or

“Easy to Eat” meals

• Most are stockable

• Tend to have above average sensitivity to promoted price changes.

2. Characteristics of Categories with High Feature Response

• Many utility products that are frequently purchased in Mass channel

•

Consumed on a frequent basis, often for lunch or quick dinner • Tend to be higher price

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• Have above average response to promoted price and displays

Another factor influencing the ability of displays to drive sales is unit

price. Consumer shopping patterns expose the fact that shoppers are less

likely to purchase expensive items on display or with a temporary price

reduction (TPR).

3. Proper Ways to Promote Expensive Item

• Shift display space from high to low price items unless they are

impulse driven or have reasonable discount

Large discounts needed to drive volume with TPRs

4. What Works When Pricing Multiples

• Expandable consumption

• Easily stored

• Heavily promoted categories

• Logical multiples

• Total price at or below $10

• Price per unit of $1.00, such as 10 for $10.

5. Price Responsiveness Varies by Channel

• Food – highly responsive to regular and promoted price changes

• Drug – people look for convenience before price

• Mass – lower regular prices means consumers value TPRs

less than in Food

On the display front, food shoppers prove to be high impulse/unplanned

utility item buyers. Drug channel consumers plan their purchases and look

for features, but are less responsive to displays, and mass merchandiser

patrons exhibit an average response to displays, seeking overall value from

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the channel on the regular price.

6. Promotion Responsiveness Varies by Channel

• Food – High impulse and unplanned utility item purchases drive

display lifts

• Drug – Planned purchases make features impactful and displays less

relevant

• Mass – Average response to promotions, shoppers looking for

overall value with regular price

So these are the ways in which we can do our trade promotion with best

effective manner.

CHAPTER-8

CASE OF HINDUSTAN LATEX LIMITED (HLL)

Hindustan latex limited (HLL) has efficiently used sales promotion toexpand the sales of contraceptives in the rural marketing project

undertaken by the company in Uttar Pradesh, a state (province) in

northern India.

In order to achieve Market penetration and Sales target for contraceptives,

the company has designed and implemented several trade and consumer

promotion schemes. The trade promotion consists of scratch card schemesand frequent buyer schemes, and was targeted at dealers, stockiest and

retailers to increase stock pressure at retail points in the rural areas. The

company became the pioneer in introducing consumer promotion schemes

in contraceptives in rural areas when, for Rakshak brand, it came out with

the Rakshak Love in Singapore offer which promised to send couples on

private holiday in Places such as Singapore, Manali and khajuraho and

Rakshak Mahasuraksha offer where it offered two blades free with each

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wallet of Rakshak. The objectives of these offers were to increase the off-

take from the retail counters, and to provide strong point-of-sale support.

Through a mix of sales promotion schemes and the contraceptive rural

marketing efforts, this promotion by the company emerged to be one of the

largest social marketing projects in the world in terms of the number of

units of Rakshak sold.

CHAPTER-9

LIMITATION

Lack of accurate and timely informationTrade promotion decisions are often rushed and based on sub-par data.

While Sales and Marketing managers are surrounded by promotion

information, questions on retail commitment and product forecast accuracy

can hinder the process. Multiple data sources and conflicting needs from

various departments further complicate the issue.

Inability to plan promotions based on analytics

Historical trade promotion data should be analyzed in order to continually

improve trade promotions. If a company does not utilize processes and

systems that measure trade promotion performance, future trade promotion

executions could be less effective than if they’d been planned using past

analytical information.

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Ineffective organization and partner integration

Lack of integration both internally and with external partners can hinder

trade promotion success. Key elements of organizational integration

include standardized metrics, regular information sharing, cross-functional

department collaboration, and collaborative processes4. Integration with

retail partners is important to executing promotions successfully, as well as

maintains strong relationships with retailers over time.

Lack of appropriate Key Performance Indicators (KPI)

KPIs tell manufacturers and retailers how trade promotions performed

relative to their pre-determined objectives. A lack of understanding on

what trade promotion data to measure and how to measure performance

can hinder the overall process. Manufacturers and retailers will not knowwhat made a promotion effective or ineffective unless they have

predetermined data points to measure and analyze.

http://en.wikipedia.org/wiki/Key_performance_indicators

http://en.wikipedia.org/wiki/Key_performance_indicators

sdm report

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