Trade Promotion Strategy and Key Performance Indicators. Instore Branding

Trade Promotion Strategy

A key component of the promotion strategy is the role of trade promotions by brand.

Drive incremental sales

Increase market share and brand loyalty

Buy-down everyday retail price


Bottom up vs. Top down Budgeting

Top down Budgeting:

Spending budgets by account can be allocated by sales management to
each sales representative or account as described in the above process step.

The advantages of
this method are:
Ensures budgets are allocated based on overall corporate Promotional Strategy for the
Ensures that account level budgets will meet overall spending budget.

Bottom up Budgeting:

Each sales representative can determine the promotion dollars needed to
meet their sales targets during the Create Promotion Plan process step. In this case, a bottom
up approach is used where each individual account budget is rolled up to an overall spending
level. The overall spending is compared to the total available dollars prior to approval. In this
scenario, the Allocate Budget to Accounts process step is not performed. The advantages of this
method are:
? Budgets can be generated based on needs at the account.
? Account opportunities rather than just historical sales can be included in the budgeting

Promotion Plan by Account/Product: The promotion plan for the account will list all of the
events that are planned during the planning period. Information about each event will include:
? Event start and end dates as well as order and shipment dates for the promotion
? Products included in the event
? Expected base and incremental sales for each product (lift)
? Event tactics (end-aisle display, temporary price reduction, ad feature, etc.)
? Event costs (per case shipped to retailer, per case sold by retailer (scanned), lump sums)
? Payment methods (off-invoice, bill back, separate check)
? Expected profitability for the event (incremental Return on Investment (OI))

Key Process Measurements

Trade Promotion Spending as a Percent of Sales: A common goal of initiating effective
Trade promotiontrade promotion practices and analysis is to be able to more efficiently spend trade promotion
dollars – getting more revenue gains for fewer dollars. Measuring trade fund spending as a
percent of sales will help to determine if we are meeting that goal.
Return on Investment for Promotion Dollars: Currently many manufacturers look at
revenue and case volumes rather than ROI. Implementation of effective trade promotion
processes will enable us to capture ROI and to see it increasing.
Accuracy of promotion plan – revenue and spending projections: Compare actuals to
plan and document where differences occur. Over time we should see greater accuracy of the
plans – eventually leading to better production scheduling and reductions in the number of outof-
Number of outstanding deductions: The overall deduction balance should decrease over
Time to resolve deductions: The amount of time needed to resolve and clear a deduction
should decrease.
• Additional distribution for a product
Adding more facings for an established brand: Gaining facings for a new product
Consistency of product demand: While promotions are being run, we will often see huge
increases in shipments of the promoted products followed by little or no demand for the
product. This indicates that retailers are forward buying the product at the lower promotion
price and storing it for future sales. The overall promotion strategy and plan should look to
reduce the amount of forward buying and diverting by retailers and even out the demand.

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In-store Ad Space and Trade Promotion Management Best Practices, Space Management, Space Planning

Trade promotion management is defined as the process of planning, budgeting, presenting and executing incentive programs that occur between the manufacturer and the retailer to enhance sales of specific products. For example, a manufacturer paying a retailer to feature their product in the retailer’s weekly newspaper advertising or paying a retailer to build a special promotional display in their store are both considered trade promotions.

Trade Promotion ManagementHow do you evaluate trade/In-store promotion to help retailers?
1. Can you easily identify profitable promotions, and do you have a clear understanding of their true economic and strategic contributions?
2. How well do you understand the underlying strategic considerations that are influencing your customers to  help better define and implement promotions, including retailers’ brand-label promotions?
3. Do you understand what you need to do to help  increase the overall performance of your trade
promotion programs?
4. Do you know how your performance compares to that of your competitors?
5. How do your accounts perceive your responsiveness and understanding of their needs related to promotion?
6. Do you have a clear picture of all the various ways in which your organization interacts with your customers during a promotion?
7. Have you aligned your measurement and reward  systems with how well your trade funds are allocated?
8. How do your accounts perceive the value of the  relationship that they have with you?
9. Have you established mechanisms for jointly establishing trade programs with your customers, and do you regularly measure performance relative to these targets?
10. Have you taken advantage of best-in-class programs developed outside your geography or region?
Trade Promotion ManagementFailure to have the right product on the shelf at the right time can result in missed opportunities. In many cases, this is due to a lack of consumer insights. An understanding of seasonality  and cannibalization can help you plan for optimal timing and sequencing of promotions.
Asset utilization:
Many companies feel that they get little to no incremental value from trade promotio
Trade Promotion Management

ns. What you need is more predictive forecasting of volumes and trade promotion spend. Linking this information to key performance indicators (KPIs) can help you plan the right promotions to realize a better return on space

Manual data analysis processes:
As data complexity increases, using manual processes can cause you to waste time and miss opportunities. Reducing administrative time can, in turn, reduce your operational costs and also allow for a more nimble organization. You can understand and modify plans and promotions to help improve results.