Strategies for Consumer Promotion and Trade Promotion18th February 2021
Consumer and trade promotions help drive short-term consumer demand for products by giving customers an incentive to “buy now!” At the same time that promotions tap into consumers’ desire to get a great deal and not miss out on something special they offer trade partners (i.e., store owners) additional incentives to get their help in driving consumer demand. Consumer and trade promotions generally work best to accomplish your short-term marketing objectives when they are aligned and integrated with other marketing activities.
Push Trade Sales Promotion Goals
Different push strategies address different trade promotion objectives, though most push strategies are price-related. Push money, also referred to as a trade allowance, essentially pays trade partners to promote certain products. This money might include such incentives as bonuses for writing more retail orders, extra payments for building in-store displays or additional money for advertising. Ultimately, trade allowances are used to obtain retail distribution for new products, expand distribution, build retail inventories, reduce retail inventories, preserve or expand retail shelf space, secure in-store displays and get additional space in retailer advertising circulars.
Pull Marketing Goals
Pull strategies are designed to drive consumer demand. For example, advertising, a long-term pull strategy, gives consumers an emotional “reason to buy.” Consumer promotions give consumers short-term “incentives to buy,” such as “Buy One, Get One,” or BOGO, offers. Coupons, feature prices and rebate offers communicate significant value to shoppers for a short time period, while free samples encourage consumer trial of new products and brand switching for established brands.
Essentially, all consumer promotions use short-term, incentive-based invitations for consumers to try, buy now, stock up, switch brands or engage with the brand in some way, with the ultimate goal of converting them into loyal customers.
Align Objectives with Strategies
The key to success with consumer and trade promotions is aligning them with brand objectives. Promotional strategies for established categories and brands are different from strategies for new products or when entering new markets. Price-elastic products those have many alternatives and see increases in demand when prices change respond better to price promotions than inelastic products, or those products that don’t have a lot of alternatives, such as table salt.
Moreover, consumers tend to shop products differently based on retail outlets. Price promotions are more effective in food outlets, where shoppers often buy on impulse. They are less effective in mass merchandisers, where shoppers expect everyday low prices, and drug outlets, where purchases are often planned.
Sales Promotion Planning:
A full plan is needed to ensure that each stage of a promotion is reached:
- Analyse the problem task.
- Define objectives.
- Consider and/ or set the budget.
- Examine the types of promotion likely to be of use.
- Define the support activities (e.g. advertising, incentives, auxiliaries)
- Testing (e.g. a limited store or panel test).
- Decide measurements required.
- Plan timetable.
- Present details to sales force, retailers, etc.
- Implement the promotion.
- Evaluate the result.
Typically a sales promotion can be run in several ways:
- Through point-of-sale display materials
- Through innovative packaging
- By obtaining prime positions in retail outlets
- Through in-house merchandising activities, such as free samples
- Special offers and other incentives
- By use of sponsorships
- Through exhibitions
- By use of sales literature and other selling aids
Sales promotion is distinct from advertising or personal selling, but these three forms of promotion are often used together in a coordinated fashion. There are two categories of sales promotion:
- Trade promotion is directed to the members of the distribution channel
- Consumer promotion is aimed towards the consumer.
The factors that contribute to the popularity of sales promotion are:
- Short-term results:
Sales promotion such as couponing and trade allowances produces quicker, more measurable sales results. However, critics of this strategy argue that these immediate benefits come at the expense of building brand equity.
- Competitive pressure:
If competitors are offering the buyers price reductions, contests, or other incentives, a firm may feel forced to retaliate with its own sales promotions.
- Buyers’ expectations:
Once they are offered purchase incentives, consumers and channel members get used to them and soon begin expecting them.
- Low quality of retail selling:
Many retailers use inadequately trained sales clerks or have switched to self-service. For these outlets, sales promotion devices (such as product displays and samples) often are the only effective promotional tools available at the point of purchase.
Sales promotion is aimed for 3 types of consumers. To understand this, suppose one Airlines Company is organising sales promotions for Kolkata-New Delhi air route. Let us find out who could be the target customers.
- Users of another brand in the same category:
These include the passengers who normally travel in other company like Indian Airlines or Jet Airways
- Users in other categories:
These include the passengers who use other transportation medium like railways to travel in the same route.
- Frequent brand switchers:
These are the people who are least loyal to the brands they use and always look out for experimenting with new brands.
Consumer-oriented Promotion Tools:
The consumer-oriented promotion tools are aimed at increasing the sales to existing consumers, and to attract new customers to the firms. It is also called pull strategy. The consumer can take the benefit of promotion tools either from the manufactures or from the dealer, or from both.
In general, some of the commonly used consumer-oriented promotion tools are as follows:
- Free samples:
In this case, small units of free samples are delivered door to door, sent through direct mail, attached to another product, or given along with the purchase of some other product (e.g., soaps, soft drinks, detergents or other items). Free samples are normally provided during the introductory stage of the product.
This involves offering price reduction or saving to customers on the purchase of a specific product. The coupons may be mailed or enclosed along with other products, or inserted in a magazine or newspaper advertisement.
- Exchange scheme:
In this case, the customer exchanges the old product for a new one. The old product’s exchange value is deducted from the price of the new product. This sales promotion tool is used by several companies for consumer durables. For instance. Philips came up with five-in-one offer. The offer consisted of Philips TV, two-in-one, iron, mixer-grinder, and rice cooker at an attractive price.
It refers to reduction in price on a particular item during a particular period. It is common during festival season or during off-season period. It is very stimulating short-term sales, especially when the discount provided is genuine one. For instance, the Hawkins pressure cooker manufacturer announced an attractive price reduction, up to Rs.150 off, on a new Hawkins in exchange for any old pressure cooker. The advertisement specified that the offer was open only up to a particular date.
- Premium offers:
These can be extra quantities of the same product at the regular price. Premium offers are used by several firms selling FMCG goods such as detergents, soaps and food items. For instance, Colgate offered 125 g in a tube for the price of 100 g.
- Personality promotions:
This type of promotion is used to attract the greater number of customers in a store and to promote sale of a particular item. For instance, a famous sports personality may be hired to provide autographs to customers visiting a sports shop.
- Installment sales:
In this case, consumers initially pay smaller amount of the price and the balance amount in monthly installments over a period of time. Many consumer durables such as refrigerators and cars are sold on installment basis. For example, Washotex came up with a scheme to pay 20 per cent now and take home Washotex washing machine. The consumers were offered the facility of paying the balance in 24 equal monthly installments.
Trade-oriented Sales Promotion:
Trade-oriented sales promotion programmes are directed at the dealer network of the company to motivate them to the sell more of the company’s brand than other brands. It is also known as push strategy, which is directed at the dealer network so that they push the brand to the consumers by giving priority over other competitor brands.
Some of the important trade-oriented promotion tools are as follows:
- Cash bonuses:
It can be in the form of one extra case for every five cases ordered, cash discounts or straight cash payments to encourage volume sales, product display, or in support of a price reduction to customers.
- Stock return:
Some firms take back partly or wholly the unsold stocks lying with the retailers, and distribute it to other dealers, where there is a demand for such stocks.
- Credit terms:
Special credit terms may provide to encourage bulk orders from retailers or dealers.
- Dealer conferences:
A firm may organize dealer conferences. The dealers may be given information of the company’s performance, future plans, and so on. The dealers can also provide valuable suggestions to the company at such conferences.
- Dealer trophies:
Some firms may institute a special trophy to the highest-performing dealer in a particular period of time. Along with the trophy, the dealer may get a special gift such as a sponsored tour within or outside the country.
- Push incentives:
It is a special incentive given to the dealer in the form of cash or in kind to push and promote the sale of a product, especially a newly launched product.