For use only with Duncan texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Channel Marketing and Trade Promotion.

For use only with Duncan texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/IrwinFor use only with Duncan texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Channel Marketing and Trade Promotion

For use only with Duncan texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

What is trade promotion and how does it fit into channel marketing?

How do trade promotion’s strategies and practices operate?

What is co-marketing and why is it an “integrating” practice?

Chapter Outline

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Channel marketing is more critical now than ever because of a major power shift from:Channel marketing is more critical now than ever because of a major power shift from:

Chapter Perspective

ManufacturersManufacturers RetailersRetailers

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Opening Case: Finish Line

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A trade-promotion partnership including:• Use of a Nike-recommended agency• Joint Finish Line/Nike in-store fixtures/POP

displays• Joint advertising on TV and in magazines• “Nike Stories” in Finish Line Magazine

A trade-promotion partnership including:• Use of a Nike-recommended agency• Joint Finish Line/Nike in-store fixtures/POP

displays• Joint advertising on TV and in magazines• “Nike Stories” in Finish Line Magazine

Position Finish Line as the Nike destinationPosition Finish Line as the Nike destination

A trade-promotion partnership including:• Use of a Nike-recommended agency• Joint Finish Line/Nike in-store fixtures/POP

displays• Joint advertising on TV and in magazines• “Nike Stories” in Finish Line Magazine

A trade-promotion partnership including:• Use of a Nike-recommended agency• Joint Finish Line/Nike in-store fixtures/POP

displays• Joint advertising on TV and in magazines• “Nike Stories” in Finish Line Magazine

Position Finish Line as the Nike destinationPosition Finish Line as the Nike destination

• 20% increase in Nike sales at Finish Line• “Nike destination” scores rose from 20% to

62%

• 20% increase in Nike sales at Finish Line• “Nike destination” scores rose from 20% to

62%

Opening Case: Finish Line

Challenge:Challenge:

Answer:Answer:

Results:Results:

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Vs.

Traditional conceptTraditional concept

Trade Promotion• Discounts and premiums

offered to retailers in exchange for their promotional support

Trade Promotion• Discounts and premiums

offered to retailers in exchange for their promotional support

Traditional conceptTraditional concept

Trade Promotion• Discounts and premiums

offered to retailers in exchange for their promotional support

Trade Promotion• Discounts and premiums

offered to retailers in exchange for their promotional support

What Does What is Trade Promotion?

New thinkingNew thinking

Channel marketing• An integrated process

that uses personal selling, trade promotions, and co-marketing programs to build relationships with retailers and other channel members

Channel marketing• An integrated process

that uses personal selling, trade promotions, and co-marketing programs to build relationships with retailers and other channel members

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Common Channel Members

Wholesalers: Companies that move goods from manufacturers to retailers

Bottlers: In the soft drink industry, local companies who buy ingredients then mix it, bottle it, and sell it to local stores

Dealers: In the automotive industry, they buy cars from the manufacturer, and display models on their lots/showrooms

Retailers: The stores that sell products and services to consumers

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Think About It

•When a discount store like Target features Tide in its ads, does it make the brand seem ‘cheap?”

•How about Wal-Mart?

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Sampling the Product

Sampling the Product

Stimulate Consumer Demand

Stimulate Consumer Demand

Special OffersSpecial Offers

Research Consumer

Needs

Research Consumer

Needs

Shelf-management

Diagram

Shelf-management

Diagram

Profit Projections

Profit Projections

Slotting Allowances

Slotting Allowances

Shelf-management

Diagram

Shelf-management

Diagram

Profit Projections

Profit Projections

Research Consumer

Needs

Research Consumer

Needs

Sampling the Product

Sampling the Product

Special OffersSpecial OffersStimulate Consumer Demand

Stimulate Consumer Demand

Selling New Products

SellingSelling

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The trend is toward more trade support of existing products at the expense of consumer promotion

The trend is toward more trade support of existing products at the expense of consumer promotion

Promoting Authorized Products

Percent of Marketing Budget 1997 2001

Consumer promotions 24 15

Trade promotions 53 61

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Control Inventory

Levels

Control Inventory

Levels

Respond to Competitive Programs

Respond to Competitive Programs

Increase DistributionIncrease

DistributionBalance DemandBalance Demand

Promotional Support by

Channel Members

Promotional Support by

Channel Members

Respond to Competitive Programs

Respond to Competitive Programs

Control Inventory

Levels

Control Inventory

Levels

Balance DemandBalance Demand

Increase DistributionIncrease

Distribution

Trade Promotion Objectives

ObjectivesObjectives

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In-store Support For the Cheese Industry

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Counter New Competitive Introductions

Counter New Competitive Introductions

Counter New Competitive Introductions

Counter New Competitive Introductions

Complement Consumer Promotions

Complement Consumer Promotions

Motivate Trade Support With Allowances

Motivate Trade Support With Allowances

Complement Consumer Promotions

Complement Consumer Promotions

Trade Promotion Strategies

StrategiesStrategies

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Dealer ContestsDealer

Contests

Dealer LoaderDealer Loader

Volume DiscountsVolume

Discounts AllowancesAllowances

Sales TrainingSales

Training

Point of Purchase

(PoP)

Point of Purchase

(PoP)

Sales TrainingSales

TrainingDealer LoaderDealer Loader

Dealer ContestsDealer

Contests

AllowancesAllowancesVolume DiscountsVolume

Discounts

Trade Promotion Tools

ToolsTools

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A Special Advertising Allowance For Running this Ad

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Insight: Trade Promotion Agencies

Developing and managing trade promotion programs requires a unique combination of brand marketing and retail understanding. Most advertising agencies and general marketing communications agencies do not have the channel understanding.

However, there are a handful of agencies that specialize in trade promotion, and due to the demand, more agencies are starting to offer their clients trade promotion services at some level.

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An Example of Dealer Loader Rack

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Tales From the Real World

Sometimes in the real world, good channel marketing comes down to sharing some simple information and advice.

For example, Oscar Mayer helped encourage the adoption of its new “Breakfast Ham” product by working closely with retailers to make sure that it was displayed next to bacon and sausage (in the breakfast meats section) rather than with traditional ham products (in the refrigerated meats section).

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An Example of POP Clutter

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IMC In Action: Kendall-Jackson

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Creation of a channel marketing team that:• Helped train staff at Red Lobster, Olive

Garden and Hyatt Hotels• Advertised in trade journals to build

relationships with retailers• Worked with retailers to increase aisle space• Created a cross promotion with Hormel

promoting wine and meat

Creation of a channel marketing team that:• Helped train staff at Red Lobster, Olive

Garden and Hyatt Hotels• Advertised in trade journals to build

relationships with retailers• Worked with retailers to increase aisle space• Created a cross promotion with Hormel

promoting wine and meat

To increase sales without huge ad expensesTo increase sales without huge ad expenses

• Sales volume increased 24% versus 2% for the industry

• Sales volume increased 24% versus 2% for the industry

IMC In Action: Kendall-Jackson

Challenge:Challenge:

Answer:Answer:

Results:Results:

Creation of a channel marketing team that:• Helped train staff at Red Lobster, Olive

Garden, and Hyatt Hotels• Advertised in trade journals to build

relationships with retailers• Worked with retailers to increase aisle space• Created a cross promotion with Hormel

promoting wine and meat

Creation of a channel marketing team that:• Helped train staff at Red Lobster, Olive

Garden, and Hyatt Hotels• Advertised in trade journals to build

relationships with retailers• Worked with retailers to increase aisle space• Created a cross promotion with Hormel

promoting wine and meat

To increase sales without huge ad expensesTo increase sales without huge ad expenses

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What is Co-Marketing?

Co-marketing: A customized manufacturer-retailer joint effort designed to have a better price/image balance in local retail advertising of manufacturers’ brands

• Increasingly important for brands because:•Competition for shelf space is intense•Need to accommodate the growing power of retailers

•5 chains control 50% of all U.S. grocery sales

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Build TrafficBuild Traffic

Maintain Brand ConsistencyMaintain Brand Consistency

Encourage IntegrationEncourage Integration

Maintain Brand ConsistencyMaintain Brand Consistency

Build TrafficBuild Traffic

Three Co-Marketing Objectives

ObjectivesObjectives

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IMC In Action: P&G

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Development of Organization 2005 that:

• Conducted research to better understand consumer needs

• Shifted money from coupons to channel marketing efforts

• Allocated $100 million annually for retailer-specific trade promotions

Development of Organization 2005 that:

• Conducted research to better understand consumer needs

• Shifted money from coupons to channel marketing efforts

• Allocated $100 million annually for retailer-specific trade promotions

To be smarter about promoting its brandsTo be smarter about promoting its brandsTo be smarter about promoting its brandsTo be smarter about promoting its brands

P & G is now a leader in its co-marketing efforts with major retailers including Wal-MartP & G is now a leader in its co-marketing efforts with major retailers including Wal-Mart

IMC In Action: P&G

Challenge:Challenge:

Answer:Answer:

Results:Results:

Development of Organization 2005 that:

• Conducted research to better understand consumer needs

• Shifted money from coupons to channel marketing efforts

• Allocated $100 million annually for retailer-specific trade promotions

Development of Organization 2005 that:

• Conducted research to better understand consumer needs

• Shifted money from coupons to channel marketing efforts

• Allocated $100 million annually for retailer-specific trade promotions

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Final Note:

Push and pull strategies are both important to get retailers to sell brandsHere is an analogy:

“We can’t hire you until you

have experience”

“We can’t hire you until you

have experience”

EmployersEmployersto college grads:to college grads:

“We can’t carry your product until

our customers ask for it”

“We can’t carry your product until

our customers ask for it”

RetailersRetailersto brands:to brands: