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1. How To Guide
Closing the Loop on Trade Promotions
Executive Summary:
This report has been designed to provide practical advice for executing
effective trade promotion campaigns.
Read this brief 7-page report to learn:
 Definition of Trade Promotion
 Types of Trade Promotion
 Trade Promotion Management Lifecycle
 Benefits of Closing the Loop
 Measuring Trade Promotion Effectiveness
Read this report to learn how to implement effective trade promotion
campaigns. Use our tools to evaluate different trade promotion
campaigns and to demonstrate a measurable ROI.
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2. 2
Table of Contents Page
Trade Promotion Defined 3
Types of Trade Promotion 3
Trade Promotion Management Lifecycle 4
Benefits of Closing the Loop 5
Measuring Trade Promotion Effectiveness 6
Conclusion 7
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3. 3
Trade Promotion Defined
Trade promotion is any expenditure paid directly by a manufacturer to
the trade or retail factors in a given industry as a set amount on a per
unit basis or in payment for a merchandising value provided by the
retailer.
- Source: Promotion Marketing Association (PMA)
Trade promotion is a key activity for all consumer marketing plans which
encourages increased short-term sales by effectively decreasing the
cost-per-item to the end consumer.
By measuring the incremental increases in sales volume relative to the
costs of the trade promotion campaign, marketers can identify which
trade campaigns provide the most return on investment and optimize
their trade plan by investing in the most effective trade channels and
promotions.
Types of Trade Promotion Effectiveness
Corporate Promotions
 In-Store Displays: Point-of-Purchase (POP), Floor Stickers,
Feature Display, Carton Display, Special Racks, Banners, Signs,
Mechanical Product Dispensers, Demonstrations, etc.
 Temporary Price Reduction (TPR): Cents off, Price pack,
Bonus pack, Branded pack.
 Coupons: Grant savings on specified products.
 Contests: Generates a high degree of customer involvement and
website traffic.
 Sweepstakes: Participants must submit names to be entered in
a draw. Can use multiple mediums. (i.e. POP display and
website)
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4. 4
 Refunds and Rebates: The offer to return a certain amount of
money to the customer.
 Premiums: A tangible reward for performing a particular act.
(i.e. receive a free bar of soap with purchase of body wash)
 Sampling: Allowing the customer to experience the product or
service by providing free samples.
Discretionary/Account Promotions
 Templates to be used by key account managers when
establishing promotions at their accounts.
Trade Promotion Management Lifecycle
There are 8 major components in the trade promotion management
lifecycle for consumer products.
1. Promotion Planning and Modeling - Selection of the proper
channel, promotional plan, and estimated results.
2. Presentation - Present the campaign to key stakeholders to
achieve buy-in or sponsorship.
3. Sales Agreement - Between Manufacturer and Retailer
4. Supply Chain Planning and Execution - All aspects of the
supply chain must be taken into consideration before moving
forward. Will expediting be necessary? Will inventory levels
change based on the campaign?
5. Retail Execution - Carrying out the sales agreement in the
market place through the entire value chain.
6. Settlement - Reimbursement from manufacturer to the retailer
based on actual sales volumes & promo costs.
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5. 5
7. Monitoring, Reporting and Post Event Analysis - conducting
a Trade Promotion ROI Calculation.
8. Category Optimization - A comprehensive understanding of
trade promotion spend will allow management to recommend
profit maximizing tactics.
Benefits of Closing the Loop
The key benefits of closing the loop on trade promotion by using the
preceding lifecycle framework include:
1. Providing management with greater visibility into market’s price
elasticity of demand for specific products.
2. Increased internal collaboration between functional groups within
an organization to promote alignment.
3. If done properly, will result in fewer stock-outs and cost-savings
from reduced inventory levels.
4. Helps foster relationships and increase collaboration between
retailers and manufacturers.
5. Increase profits for both retailer and manufacturer.
6. Improved management of current promotions based on past
performance and reduced spending on ineffective trade
promotion channels and campaign techniques.
7. Building brand awareness & recognition for product lines
8. Helps close the gaps on analytics and generate predictive insights
for both retailers and manufacturers.
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6. 6
Measuring Trade Promotion Effectiveness
This section will outline the steps required to implement an effective
trade promotion campaign.
1. Learn Trade Promotion Best Practices to get started, read this
whitepaper from DemandTec:
Consumer-Centric Merchandising and Marketing.
2. Achieve Consensus among Stakeholders - have a meeting with
key stakeholders to align campaign objectives. Use our Trade
Promotion Evaluation Matrix to select the best promotion for
your needs.
3. Review Historical Information - Review past sales volumes for the
period, market research data, costs of prior trade promos, and
customer data, to benchmark results from previous trade
promotion campaigns.
4. Gather New Information - if you don’t have historical information,
consider adding a vendor solution that can be easily integrated
into your ERP system.
5. Set Goals, Timeframes, & Objectives - your goals may be to
improve upon an existing campaign, create a new campaign or to
improve relationships with retailers.
6. Define Measures of Success - like all objectives, you need to
determine how success will be measured, BEFORE you kick-off
your initiative. These are the Key Performance Indicators
(KPIs) that will be benchmarked and monitored to demonstrate
return on investment.
7. Follow the Trade Promotion Framework - Use this preceding
lifecycle to execute your campaigns.
8. Monitor, Report, and Analyze - Monitor the campaign closely and
use our Trade Promotion ROI Calculator determine the return
on your investment.
9. Category Optimization - Continue to test & monitor campaigns
and implement profit maximizing tactics.
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7. 7
Conclusion
Manufacturers and retailers are becoming increasingly interdependent
and trade promotion is a key collaboration touch point. Currently there
are significant gaps between manufacturers and retailers around
analytics and insight.
Closing the loop with trade promotion campaigns can significantly
increase ROI by providing insight into the key drivers of sales volumes
and trade promotion costs. Be sure to meticulously measure the
incremental impacts of your trade promotion campaigns to optimize
spending for this channel.
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(866) 947-7744