Manufacturers use a variety of trade promotion tools as inducements for wholesalers and retailers. Next we examine some of the most often used types of trade promotions and some factors marketers must consider in using them. These promotions include contests and incentives, trade allowances, displays and point-of-purchase materials, sales training programs, trade shows, and co-op advertising.
Contests and Incentives Manufacturers may develop contests or special incentive programs to stimulate greater selling effort and support from reseller management or sales personnel. Contests or incentive programs can be directed toward managers who work for a wholesaler or distributor as well as toward store or department managers at the retail level. Manufacturers often sponsor contests for resellers and use prizes such as trips or valuable merchandise as rewards for meeting sales quotas or other goals. Exhibit 16-27 shows a contest Chicken of the Sea sponsored for food-service distributors who call on restaurants.
Contests or special incentives are often targeted at the sales personnel of the wholesalers, distributors/dealers, or retailers. These salespeople are an important link in the distribution chain because they are likely to be very familiar with the market, more frequently in touch with the customer (whether it be another reseller or the ultimate consumer), and more numerous than the manufacturer's own sales organization. Manufacturers often devise incentives or contests for these sales personnel. These programs may involve cash payments made directly to the retailer's or wholesaler's sales staff to encourage them to promote and sell a manufacturer's product. These payments are known as push money (pm) or spiffs. For example, an appliance manufacturer may pay a $25 spiff to retail sales personnel for selling a certain model or size. In sales contests, salespeople can win trips or valuable merchandise for meeting certain goals established by the manufacturer. As shown in Figure 16-6, these incentives may be tied to product sales, new account placements, or merchandising efforts.
While contests and incentive programs can generate reseller support, they can also be a source of conflict between retail sales personnel and management. Some retailers want to maintain control over the selling activities of their sales staffs. They don't want their salespeople devoting an undue amount of effort to trying to win a con-
• Product or Program Sales
Awards are tied to the selling of a product, for example: Selling a specified number of cases Selling a specified number of units Selling a specified number of promotional programs
• New Account Placements Awards are tied to:
The number of new accounts opened
The number of new accounts ordering a minimum number of cases or units Promotional programs placed in new accounts
• Merchandising Efforts Awards are tied to:
Establishing promotional programs (such as theme programs) Placing display racks, counter displays, and the like
Figure 16-6 Three forms of promotion targeted to reseller salespeople test or receive incentives offered by the manufacturer. Nor do they want their people becoming too aggressive in pushing products that serve their own interests instead of the product or model that is best for the customer.
Many retailers refuse to let their employees participate in manufacturer-sponsored contests or to accept incentive payments. Retailers that do allow them often have strict guidelines and require management approval of the program.
Trade Allowances Probably the most common trade promotion is some form of trade allowance, a discount or deal offered to retailers or wholesalers to encourage them to stock, promote, or display the manufacturer's products. Types of allowances offered to retailers include buying allowances, promotional or display allowances, and slotting allowances.
Buying Allowances A buying allowance is a deal or discount offered to resellers in the form of a price reduction on merchandise ordered during a fixed period. These discounts are often in the form of an off-invoice allowance, which means a certain per-case amount or percentage is deducted from the invoice. A buying allowance can also take the form of free goods; the reseller gets extra cases with the purchase of specific amounts (for example, 1 free case with every 10 cases purchased).
Buying allowances are used for several reasons. They are easy to implement and are well accepted, and sometimes expected, by the trade. They are also an effective way to encourage resellers to buy the manufacturer's product, since they will want to take advantage of the discounts being offered during the allowance period. Manufacturers offer trade discounts expecting wholesalers and retailers to pass the price reduction through to consumers, resulting in greater sales. However, as discussed shortly, this is often not the case.
Promotional Allowances Manufacturers often give retailers allowances or discounts for performing certain promotional or merchandising activities in support of their brands. These merchandising allowances can be given for providing special displays away from the product's regular shelf position, running in-store promotional programs, or including the product in an ad. The manufacturer generally has guidelines or a contract specifying the activity to be performed to qualify for the promotional allowance. The allowance is usually a fixed amount per case or a percentage deduction from the list price for merchandise ordered during the promotional period.
Slotting Allowances In recent years, retailers have been demanding a special allowance for agreeing to handle a new product. Slotting allowances, also called 547
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