Let’s start from the very beginning – what are trade promotions?

Trade Promotions refer to an agreement made between a vendor and its retailer. This technique can include anything from in store purchase displays, a temporary price reduction tactic, sweepstake campaigns, or premiums and gifts. You can see trade promotions everywhere: people giving out free coffee while you shop, a special light bulb display at your hardware store, buy one get one deals, specific gifts if you purchase an item, and the list goes on an on.

Not to get confused with consumer promotions, trade promotions is a strategy used to push products out to retail stores, while the former is mainly used to encourage shoppers to purchase. While they may employ the same tactics, trade promotions help vendors put product on shelves while consumer promotions encourage sales.

Here are some of the  many reasons why trade promotions are effective:

  • Encouraging retailers to sell more of your product
  • Encouraging your retailer to carry an item
  • Allowing you to differentiate their products from the competition
  • Increasing product visibility
  • Enabling a test or launch of a new product
  • Better control over inventory levels
  • Developing a better relationship with your retailers

Over the period of 2012 – 2014, a trend has shown that manufacturers are promoting more but just haven’t been able to attract consumers. In fact, a Nielsen Study conducted in 2014 showed results that 59% of trade promotions globally didn’t even break even.

How can we change this?


Know Your Customers

It sounds simple, but, unfortunately businesses don’t always act on it. Sure, you have a target market but what do you know about the consumers that are actively buying your product?

Often, data is too high-level, meaning it lacks details such as SKU level and store at a weekly increment – which is the best way to receive actionable insights about your customers. By gathering information such as your top 5 products and where they sell best, you are able to take better calculated risks when conducting a trade promotion. Answering questions like “What store should we set up outposts at?” and “Which product should we demonstrate?” become more structured.

Other important aspects to know about your customers include their average basket size or traffic patterns in certain retail stores.  Client files, quite popular in the fashion and beauty world, determine the shopping habits of your customers. Some prefer to stock up during a large discount, while others shop when there are gift deals. Some are more inclined to buy during event promotions while others are attracted to unique in-store displays. Knowing this can help you target a specific type of shopper, leading you in the right direction to conduct a successful trade promotion.

Don’t forget the Execution

After you know your customers, the next crucial step is to execute. Lots of vendors fail to optimize their execution because they don’t invest money or time in communication. If there is no marketing and you are not talking to the sales associates that are selling your product, how can you expect a good result?

Communicating with your retailer, store manager, and sales associates come with a whole bunch of benefits in itself, but in regards to trade promotions, it helps the entire campaign run more smoothly. Taking the time to talk to your store manager not only benefits your retailer-vendor relationship, but also can give you insider details, for example, if there is another promotion scheduled for the same time. Giving an in-depth lesson to sales associates about your promotional product can help them sell more for you because they know how to appeal to their customers. They can also provide insights to what customers are constantly looking for, and what trends they are seeing on the floor today as they are the ones communicating with them daily. Taking it one step further, offering incentives to sales associates can be greatly beneficial as they are more encouraged to promote and suggest your product over a competitor’s.

Monitor Expenses and Track Sales

It is also important to monitor expenses and track sales in order to improve for the next trade promotion. Rather than focusing just on the volume sold, and measuring success that way, it is important to include both direct and indirect costs in running your promotions such as marketing campaigns, constructing displays, increasing inventory and knowing your return on investment can help you prepare and plan your next promotion smarter.

Tracking which set-up or display attracted the most people, which store performed better, and how the trade promotion affected sales are key aspects in improving. This type of information is also important when convincing store managers to conduct another trade promotion. Sales managers will be more inclined to hold another event if you have the data to prove that it has been successfully conducted and it will drive sales which is beneficial to both parties.

As always, the more you know, the better. By knowing your audience specifically in terms of their shopping habits and how to appeal to them, the better your chances are to have an exceptional trade promotion. Use all your resources, including your knowledge and time, in order to ensure that the promotion will run smoothly. After receiving the opportunity to conduct a promotion, make sure you invest into it. Talking to the store manager and associates can give insider knowledge as well as strengthen the vendor-retailer relationship. Lastly, don’t forget to monitor the expenses related as well as measuring success in order to reflect and improve for the next one. By continuing to collect this type of information, each trade promotion should be smarter and more effective. Good luck!