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Retailers have two ways of earning profit from selling a product from a brand:
1. The Margin on products (Selling Price - Buying Price)
2. Trade Marketing Schemes
(In case this is your first sales article, then it is advisable to check 18 most important sales concept overview here)
As a consumer buying TV, Soap or Hair-oil, sometimes the shopkeepers recommend certain brands to us. Often I wondered, "Why is the shopkeeper pushing me to buy a particular brand?."
I even hypothesize about the shopkeeper's ulterior motives (more profits) in pushing a particular product.
When you become a sales manager, tables have turned and now you want that shopkeeper to push your product to every customer even if they keep hypothesizing about the motives.
Now that I am are a sales manager, the tables have turned. I have to make sure the retailer pushes my product to the customer. There are 2 ways in which a retailer makes profits off selling a product - Trade Margins and Trade Marketing Schemes.
But, how do you make shopkeepers push your products?
The answer is “Trade Marketing”, it is just like promotions but instead of you getting a discount or point or gift, it is the shopkeeper who gets incentivized.
Trade marketing are incentives for shopkeepers to pursue them to promote the brand to the end customers. As shopkeepers (especially in tier 3, 4cities) are often opinion influencers.
Trade Marketing makes the product lucrative for the retailers (or Wholesalers) and it increases their willingness to prioritize sales of your company’s product compared to the competition.
Apart from this, Trade Schemes improve companies' ability to have dynamic pricing control in the market. It also helps them to fend off any competition and maintain market share.
NOTE: We will use Trade Marketing and Trade Schemes interchangeably
Below are the types of Trade Marketing:
1. Below the line activity
2. In-bill Schemes
3. Loyalty plans
4. POS Branding
5. Gift Articles
6. Sales Support
Let us talk about each category in detail:
1. Below the line (BTL) activity:
BTL marketing is the kind of marketing that targets specific groups of people with focus.
BTL activities such as a demonstration at a mall or busy street using canopy or gazebo (a makeshift structure) to advertise your product. Check the below image of L’Oréal’s canopy in a mall and Vodafone's Tent.
Retailer driven BTL activity provide extra incentive to retailer & provide brand activation. Companies can also take part in Trade fairs, conclaves, and fests.
2. In-bill or Billing discounts:
These schemes promote higher purchases from the retailers by giving strategic discounts such as Quantity discounts, Value discounts, Extra product schemes, etc.
Quantity Scheme: It is a type of secondary scheme which is divided into various windows of discounts with respect to the quantity sold. Read Economic Order Quantity (EOQ) model (Read more on Investopedia Here) to understand the technical side of discounting.
50 Piece – 1%
200 Piece – 2%
500 Piece – 3%
Value Scheme: It is like a Quantity scheme but is pegged to a certain monetary value.
Rs. 5000 – 1%
Rs. 20000 – 2%
Rs. 100000 – 3%