One of the most common ways to push a product to a customer is through sales promotions and using the various types of sales promotions. However, if the product is being sold through a channel of dealers and retailers, then the company needs to empower this channel. Companies can use Trade promotions so that the distribution channel itself tries to push the product to the end customer.
What are trade promotions?
Offering various incentives to your distribution channel in the form of discounts, arranging exhibitions, offering demonstrators or other such methods is known as Trade promotions. In essence, you are motivating your channel dealers to promote your products over that of the competition. In such cases, the channel dealer is the face of the company for the customer. Trade promotions ensure that channel dealers give an excellent experience to the customer.
This “Channel” we are talking of is the distribution network which exists in a company. Typically, product companies involve a C&F agent who carries the inventory in bulk and distributes it forward to local distributors. These distributors then sell to retailers who in turn sell it to customer. Companies can decide their trade promotions on basis of Distribution strategies.
In such a scenario, the contact with the end customer is that of the distributor or the retailer and the company is not even in the picture. At such times, motivating the channel dealer to sell YOUR products instead of someone else’s is of utmost importance.
Here is a video on Sales promotion and Trade promotion examples
Here are 8 Types of Trade promotions that can be run by a company.
1) Discounts / Increased margin of sale
The number 1 type of trade promotions run by any company is offering discounts or increasing the margin offered to the channel dealer. This is especially useful for small business owners who do not have the time or the manpower to run company operated trade promotions at dealer end.
By this method, the dealer himself is motivated to run ideas so that he can promote the product in his locality. Each locality and region is different. Hence, by using this method, each dealer will run a different style of trade promotion to achieve his targets. There can be a criteria attached to this type of trade promotions. It can be offered if the dealer does 150% of his targets. Or even if he achieves 100%.
The problem with this type of trade promotions is that there is no guarantee of the effort that the retailer or dealer has put in selling your product.
Scenario 1 : If after announcing this incentive, the dealer actively promoted your product but was unable to achieve the target, then he will be demotivated in selling your products because he might think the product does not sell.
Scenario 2 : Alternatively, another dealer could have achieved the target easily, and he immediately stopped pushing your products as soon as the targets were achieved. Thus, tracking the actually implementation on ground levels is difficult.
2) Incentives to Sales staff / Gifting
Another excellent type of trade promotion is to give incentive to sales staff. Ultimately, the sales staff is the one which is going to be in touch with the customer. The sales staff also get very happy whenever monetary awards are announced and the aggressive ones will go all out to achieve the targets.
Care should be taken that the figures are properly tracked at all times and there is no unfair treatment given to a particular sales staff which can demotivate him in the long term. The objective of trade promotions is clearly to motivate your sales dealer and their staff to sell the product better. However, unethical means should not be used to achieve sales targets.
It is upto the company to decide whether the incentive should be in the type of a monetary reward or it should be gifts given to executive. Gifts have a unique value and they are more like a recognition and respect for the sales executive. However, monetary value might be more of a reward for him because he might need the money or might buy whatever he wishes from that money. It can also be left upto each executive whether he wants monetary reward or wants to choose gifts.
3) Coupons / rebates
Coupons are always attractive to end customers because they ensure a guaranteed discount at the retailer or the dealers outlet. This is also a method to drive traffic to the retailer’s store and can be especially used when the retail outlet is brand new or when it is losing out to a competition.
Coupons are types of sales promotions in itself. However, it can be used at the trade promotions level and the dealer can run Scratch cards or other such coupon based promotions so that customers get “Assured gifts”. when the company backs the dealer in running such coupon or rebate based promotions, then the dealer is extra motivated to sell your items. At the same time, this ensures liquidation of stock and refilling at dealer end.
4) Dealer competition
A fantastic way to motivate your dealers to perform better is to keep dealer competitions. These dealer competitions can be short term or long term. Short term ones can actually be regional, for example, the best sales dealer in territory X gets a free print ad in newspaper from the company or he gets free incentives for all his sales people.
Another, long term format of dealer competition is to keep awards every year or to have dealer leagues within the company. Example would be a Platinum league of dealers who get additional 2% discount on all products they sell. Gold league which gets 1% discount, so on and so forth.
What this does is, it motivates the dealers in 2 ways. a) to get the additional discount being offered to league members. b) To gain respect in the company. Thus, Dealer competitions can be an excellent type of trade promotions if used judiciously.
You can also Free holidays in the form of conferences or product launches to a group of dealers who have outperformed in sales and revenue generation.
5) Exhibitions / Trade shows
In one of the companies i worked for, we used to have regional meetings between the distributors and his dealers. These meetings used to showcase all the products we had in our company. And we used to keep lunch for all the retailers who report to distributors. During such sessions, we came across many questions for products. Some questions were very positive feedbacks where the product could be improved. Other questions were immediately answered and led to further learning for the dealers.
Just like the above meeting between distributors and retailers, similar trade promotion techniques can be used by arranging trade shows and exhibitions where the dealers get to meet their top customers and answer the queries by these top customers. At the same time, such exhibitions also help in acquiring new channel members as well.
6) Co operative advertising
If you look at newspaper ads done by some popular consumer durable companies like LG, Sony and others, you will see that they always highlight regional dealers in their ads. Companies like Apple, which are selective in their dealer selection and have premium outlets only, directly sponsor their channel dealers to give ads in newspapers.
The co operative advertising actually helps the awareness of the channel dealer in that region. This in turn helps the overall sales of the products and the brand. Co operative advertising should be done when the dealer has launched or prior to seasonal sales. This increases the recall of the brand in the mind of the consumers.
7) Providing demonstrators
When a customer enters a multi brand showroom, then he himself is confused with regards to which brand to purchase. At such times, in-shop demonstrators, who are sponsored by the company can help a lot in convincing the customer and converting them. These in shop demonstrators are trained to have the complete knowledge of the product at their fingertips.
Naturally, the brands which provide in-shop demonstrators to retailers and dealers have the upper hand as compared to brands which cannot sponsor such demonstrators. While buying a television, if a demonstrator tells me 10 reasons of superiority of the product against competitors , then i will buy the television just because i was given the knowledge. Such informational sales talk can go a long way in acquiring more customers.
8) POP material or Sampling of product
If your type of products cannot have in shop demonstrators and if they are too low in value, then there are other types of trade promotions you should use. One is to use an excellent point of purchase branding exercise. Using various POP material such as danglers in showroom, on product display, pillar branding etc can help the brand retention in the mind of the customers.
Similarly, FMCG products should target impulse buying and should also conduct time to time sampling of the products. Nowadays, much of the sampling is done by offering product bundling (1+1 free). Nonetheless, products like perfumes, eatables etc can be offered as samples.
Above were the 8 main types of trade promotions which you can use in your company. Some of them are very effective and are applicable to all industries. Others are selective and require a good amount of expenditure from the company. But based on your company’s sales strategy, you can choose the right type of trade promotions.