QUIZZ – 16

February 14, 2005

Mark true or false

1: Retailers are more interested in brand switching than stor

switching.

2: Consumers prefer promotion where discount is offered thr

coupons.

3: Sometimes promotion is a premium to compensate the

consumer for risking trial of the new product.

4: Purchase of a brand on promotion and then forming a hab

to use the same is known as Purchase Effect.

5: Promotion usage effect may not be strong if the consumer

evaluate a product while using the same and is satisfied
with the performance.
 TRADE DEALING

February 14, 2005

 TRADE : Members of channels of distribution

TRADE DEALS : “Push Money” intended to push the product

thru the channels of distribution

Promotion directed to the members of the

channels

PROMOTION : An element of marketing mix used to inform

and persuade the market regarding product
or services.

Trade promotions are directed to the trade, a catalyst to pass

on promotions to the ultimate consumer thru advertisements
and displays thus increasing the secondary sale.
 OBJECTIVES OF TRADE DEALS

1: Induce retailers to offer a price discount

2: Induce retailers to display the brand
3: Induce retailers to advertise the brand
4: Offer incentives for the retailer’s/dealer’s sales team to
push the brand to the ultimate customers.

5: Gain or maintain distribution for a model or an item within

a product line.
6: Gain or maintain distribution for the brand
7: Load the retailer, dealer or distributor with inventory to
avoid out-of-stocks

8: Shift inventory from the manufacturer to the channels of

distribution and the consumer.

9: Avoid price reductions

 9: Defend the brand against competitors

10: Induce priced fluctuations in the market, and many more…

All the above can be summarized in (1) RETAILER MERCHANDISIN

ACTIVITIES (2) RETAIL FORCE INCENTIVES (3) LOADING THE
RETAILER (4) GAINING AND MAINTAING DISTRIBUTION (5) AVOID
PRICE REDUCTIONS and (6) COMPETITIVE TOOL

*
 TYPES OF TRADE DEALS

Objectives : (1) For durables : build and finance the dealers’

inventory as well as gain pass through…

(2) For non-durables : focused on gaining advertis

display and price discounts.

TYPES OF TRADE DEALS FOR CONSUMER DURABLE GOODS

1: Off invoice – for limited period - any number of purchases

2: Cumulative Volume Rebate : for limited period, %age varies

with volume
3: Floor Planning or Inventory Financing : Credit, say for 90 da
Dealer will push the product to arrange payment.

4: Free Goods : Toaster with the purchase of refrigerator

 5: Cooperative Advertising : Sharing advert. expenses

6: SPIFFS – incentive amount to dealer’s sales force - to push a

specific model or item

7: Contests: Growth over last year’s sale, trip to Dubai

And many more methods of trade deals for consumer durable

goods ….…….

TYPES OF TRADE DEALS FOR CONSUMER NONDURABLE GOODS

Almost same as for durables but main focus of trade

deals for nondurables is on PRICE INCENTIVE.

1: Off invoice - rebate on whatever quantity retailer buys

during a specified period.

*
 2: Bill Back : Retailer claims discount at the end of promotion
for discount and cost of any promotional activities.

3: Free Goods : 12 + 1 etc. in the form of same product (not

other items as are in case of durable goods)

4: Cooperative Advertising Allowance

5: Display allowance - fixed amount per case etc.

6: Sales Drive – incentives to wholesalers, brokers and mobilers

to push the product.

7: Inventory Financing

8: Count – recount : payment to retailer on “actual sales” to

ultimate consumer

*
 9: Slotting Allowance : Charges to retailers for space for new
products. For test marketing or launchin
Usually a fixed amount.

10: Street Money : Fixed/lump sums amount to retailers to ru

the promotion.

To the retailer and not to wholesaler – this i

how the promotion got its name.
MEASUREMENT OF TRADE DEAL EFFECTIVENESS
Before-after analysis

Volume of sales (1) before (2) during and (3) after the
promotion.

“Before” - baseline – what sales would have been if there was

promotion

“During” – sales increase during promotion

“After” – sales dip after the sales promotion is completed.

 Off price promotion – for two months
Regular price Rs. 950/case

Off invoice Rs. 50.oo

Ad allowance Rs.10.oo
Total Rs. 60.00 Rs. 60

Gross margin for manufacturer Rs. 450/= per case

Average/baseline sale prior to promotion 10,000 cas

Sales during trade deal 30,000 cases
Sales after the trade deal 2,000 cas

Incremental sale
Sale during and after the promotion 30,000 x 2 + 2,000 x 2 = 64,000 cas

Sales for 4 months had there been no sales 40,000 cas

Incremental sale 24,000 cases

*
 Incremental Profit
Normal sale for 4 months 40,000 cases
Normal margin (40,000 x 450) Rs. 18,000,000

Promotion sale:
2 months 60,000 cases x Rs. 450 Rs. 27,000,000
2 months 4,000 cases x Rs. 900 Rs. 360,000

60,000 cases (Rs. 450 – Rs. 60) Rs. 23,400,000

4,000 cases (Rs. 450/case) Rs. 1,800,000
TOTAL Rs. 25,200,000

Incremental profit:

Rs. 25,200,000 minus Rs. 18,000,000 = Rs. 7,200,00

or Rs. 112.50 per case

There are certain advance statistical models like Blattberg-Lev

Model.
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