Important Disclaimer: All the definitions given below are collection of knowledge from sites mentioned in the sources at the end of this Page. These are not personal views of any one individual or group of individuals.
Name of any company or product used are for example purpose and not for any harm to the brand equity. Please drop a mail on connect@marketingweekly.in or ping on 8804900400 for any objection/removal of name. We have used name in good-faith.
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.
E.g.
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.
E.g.
Rs. 5000 – 1%
Rs. 20000 – 2%
Rs. 100000 – 3%
Extra product scheme: It is a secondary scheme where retailers get one or more extra products on buying a particular quantity.
E.g.
Buy 11 Piece – Get 1 Piece Free
Buy 9 Piece – Get 1 Piece Free
3. Loyalty Program:
Companies desire long-term engagement with retailers and to ensure that, they use loyalty programs.
Usually, companies have Quarterly, Half-yearly, and Yearly programs with retailers. These programs have certain conditions for qualification such as the value of purchase, range of purchase, expected activity, etc.
Conditions vary from industry to industry. Long-term programs provide rewards such as Vacation trips and credit notes.
It also helps in decrease undercutting hence maintaining a healthy market operating price of the product.
4. POS Branding support:
As a shopkeeper, you want attractive branding in your shop and companies do spend big bucks on their big retailers.
They provide attractive self-units for stock keeping, point of sale merchandize, T-shirts, caps, water jugs, umbrellas, etc.
This merch may look trivial, but it is very crucial in maintaining an amicable relationship with the retail community.
5. Gift articles:
This concept is like an in-bill discount but instead of monetary discounts, companies provide gifts.
E.g.
Buy Rs. 5000 – Free duffle bag
Buy Rs. 10000 – Free Feature phone
Buy Rs. 50000 – Free VIP trolly bag
Buy Rs. 100000 – Free Android Smartphone
6. Sales Support:
Many companies such as Smartphone brands, Telecom, Beauty, etc. provide promotors with sales support which helps in upselling brand’s portfolio in the shop. They also help in improving dealer’s revenue on condition of providing a fine display of the brand.
Companies such as Jio, Vodafone, airtel, etc. provide sales support at a busy markets or in-shop on behalf of the retailers.
Concludingly, I want you to understand something more fundamental about Trade Marketing:
Trade marketing is ripe for innovation & it covers anything and everything which makes the retailers favor you instead of a competition brand. So, never stop innovating!
Comment for any query, we will get back to you!
Sources:
