Trade Promotions are the life-blood of the retail industry. While any company with an ounce of manufacturing effort can use its logistical arm to barge into a store with their products, what counts is how many of them actually make out of it in shopping carts. And this is precisely what gives ground to the importance of trade promotions.
Consumer product companies spend about $1 Trillion every year in their trade promotion efforts. If that didn’t raise your eyebrows, this will: 67% of these promotions don’t even ‘break even’. In fact, simply eliminating 22% of such promotions would earn companies more money than continuing with them.
Also, while hitting the bullseye is a difficult task in trade promotions, it is also extremely lucrative to do so. The most effective tactics are able to attract as much as 400% ROI for the Brand Owners.
Here is a quick look at the do’s and don’ts of the most popularly used Trade Promotion tactics for the General Trade based Retail Store Owners, aka Kirana Stores and how you can leverage them depending on the industry that you are in and the type of products you are selling:
● % Off: Direct discounts are one way of reaching more Kirana stores right off the bat. But make sure that you experiment/research enough to narrow your choices down to the sweet spot. Anything less than 20% may not be worth it for the Kirana Stores.
● BOGO: While Buy one get one free is a powerful trade promotion tactic, it is also the most abused one. So make sure you differentiate yourself from your competitors before you run it. One way is to give a 30%-50% discount instead.
● Currency Savings: Perfect for companies who can offer limited discounts, anything less than 20% should instead be depicted in currency savings.
● Multiple Purchase Requirements: Generally used to boost short term sales, it can also be a deal-breaker for many retailers since they are forced against their will to buy more products. Hence, tapping into the psychology of your customers is equally important.
● X% + Y%: In terms of long-term trade promotion tactics, it is always better to inform the final takeaway discounts to customers instead of putting them through strategic gimmicks such as this one. Most of them simply add the two numbers resulting in a significant number of bad customer experiences.
While it is important to understand the type of strategies that work for you, many companies cannot accurately distinguish between poorly performing promotions and the more profitable ones. Measuring the impact of the changes in trade promotions effectiveness on the bottom line is one way to do so. Here’s how you can calculate it:
An efficient trade promotion tactic that works is a constant trade-off between an effective understanding of the business strategies, quality sales data, analytical capabilities, and the availability of relevant technologies. By building a reliable foundation that incorporates all of these, companies can constantly realize better profit margins.
We at O4S helps companies deliver the trade promotions directly to Kirana Store owners using a simple to use mobile application. By Uberizing the program, retailers are subscribed to monthly targets. Upon completing the requisite targets, retailers are directly remitted with the trade promotions. Using advanced targeting, you can enhance the shelf space and impact product demand by centrally operating the trade promotions for millions of your Kirana store partners.
