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Consumer Promotions:

Building Manufacturer/Retailer Collaboration


by Adam Wilbur, Jacobs Agency
adamw@jacobsagency.com

May 2008
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otions: Bu
Consumer Prom

INTRODUCTION
Manufacturers have long had a love/hate that can help to drive sales, encourage brand-
relationship with consumer-facing promotions, switching, and positively affect consumers’
because they can be expensive, difficult to perception of the overall brand. Through
track, and effective only for a short term. promotions, manufacturers are able to establish
However, consumer promotions remain a key strong marketing partnerships with retailers.
component of the manufacturer marketing That partnership increases the value of
mix by providing premium in-store placement promotions well beyond the initial jolt to sales.

Key Takeaways

• Manufacturers can drive acceptance of promotional programs by considering


retailers’ needs when they develop their programs’ objectives, tactics, and
communication channels.

• It is vital for manufacturers to utilize tactics which will drive traffic to a


specific retailer.

• Promotional programs should be designed to guarantee that all promotional


activity upholds the brand promise, regardless of which retail chain is
executing the promotion.

A CHANGING PARADIGM
As a general rule of thumb, manufacturers large retailers purchase, manufacturers must
should not expect retailers to line up for a do everything they can to incent the retailer
chance to stock their product simply because to stock their products. For manufacturers
they offer a variety of promotional programs. that enjoy widespread retail distribution,
The days when retailers were quick to offer there is still the issue of product placement.
Market Development Fund (MDF) dollars to Positioning products within eyeshot of
help fund a promotional campaign are long passing consumers on a consistent basis can
past. To put it simply, retailers have more increase both product sales as well as overall
control over the channel than ever before. brand awareness.
The rise of the big box retail chains and their
While manufacturers and retailers both
corresponding private-label brands has led
continue to participate in promotional activities,
to a shift in the overall balance of channel
they do so for entirely different reasons. The
influence. Due to the sheer volume of items
reasons for engaging in consumer promotions
most often cited by manufacturers are:
• Increase sales volume
• Maintain volume/share
• Increase market share

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Not surprisingly, retailer motivations for While a promotional program may be wildly
participating in trade promotions are successful in the eyes of the manufacturer for
quite different. Retailers engage in trade driving product sales, it still could be perceived
promotions to: as disappointing in the eyes of the retailer.
Therefore, in order to drive retailer buy-in of
• Increase store traffic
promotional programs, manufacturers must
• Improve category profitability take an inclusive view of consumer-facing
• Increase customer loyalty promotions when considering objectives,
tactics, and communication channels.

WIIFM?* (*WHAT’S IN IT FOR ME?)


In order to develop promotional campaigns retailer’s perspective, an increase in sales
that are more likely to gain retail buy-in, of brand X during a promotion will inevitably
manufacturers must make a more concerted decrease sales of competitive and private-
effort to see the world through the eyes of label SKUs. Research indicates that a retailer’s
their resellers. Manufacturers pitch promotions revenue gain from promoted items is about the
to retailers, promising an increase in product same or even slightly less than their loss from
sales. Increased product sales are good for non-promoted items. Therefore, manufacturers
the manufacturer and good for the retailer, must do more to offset the net-negative
right? It’s not always that simple. From a impact a promotion has on retail revenue.

TACTICS THAT WORK


The negative impact that promotions have on Manufacturers also need to keep in mind that
category revenue for the retailer can be offset they are not the only channel members who
by an increase in overall store foot-traffic, face vast competition. Retailers feel the
leading to a rise in incremental sales in other pressure as well and are no longer interested
product categories. Therefore, when pitching in cookie-cutter promotional activities offered
a promotional campaign to a retailer, it is vital through the channel to multiple resellers.
for the manufacturer to include tactics in their Manufacturers can take advantage of this
promotional plan which will effectively drive pressure to differentiate by offering up
increased traffic to a given retail location. The promotions that are custom-tailored for
most effective promotional tactics to increase a given retail partner. That is to say, each
foot traffic are: retailer will have the opportunity to opt-in
to a promotion that is available only to that
• Targeted direct mail
retailer should they choose to accept. In
• Co-op radio this way, retailers can actually differentiate
• Loyalty programs themselves by participating in the
manufacturer’s promotional campaign,
• In-Store demos and sampling
even though that manufacturer may be
• Other engagement tactics such as contests running a different version of a similar
and celebrity appearances promotion in competitive stores.

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When developing an account-specific these price manipulations. Marketers need to


promotional strategy for a given retailer, seriously assess their willingness to cut into
manufacturers would be well served to offer their profit margins by offering price-based
creative platforms that support not only their product promotions. There is a vast array
own brand, but that of the retailer as well. of under-utilized promotional tactics and
One way manufacturers can tie into a retail communications channels at product
brand while still upholding their own brand marketers’ disposal, many of which are highly
promise is to develop an over-arching umbrella effective, measurable, and will not degrade
promotional platform or theme that extends the brand’s equity.
across all retailers and all promotions. By
Of course, no single tactic is appropriate for all
doing this, manufacturers can develop specific
consumer-facing promotions. Marketers should
promotional programs for their retail partners,
take into consideration a host of variables that
so long as the messaging of the promotion

It is in the manufacturers’ best interest


to weigh the effects that promotions
can have on their brand.
will determine the most appropriate set
is consistent with the overall promotional
of tactics against a given objective. Before
theme. In this instance, the manufacturer’s
brainstorming promotional tactics, marketers
overall promotional theme guarantees that
must make sure they fully understand the
all promotional activity upholds the brand
business issue that the promotion seeks to
promise, regardless of which retail chain is
address, the objectives of the promotion, and
executing the promotion.
the metrics that will be used to evaluate its
It is always in the manufacturers’ best interest success. Once promotional messages are
to weigh the effects that promotions can have created, they may choose to spread the
on their overall brand. While traditional pull- word through a variety of integrated media,
advertising tends to focus on product features including: in-store, print, online, catalog/direct
and benefits, promotions have a tendency to mail, and email. If the brand or program lends
focus on price. Because of this focus on price itself to more creative ways of distributing the
over product features and benefits, poorly promotional message, guerilla tactics, event/
planned promotions can degrade overall experiential marketing, and package insert
brand equity. This is a challenge for marketers programs may be appropriate. Marketers
and brand managers who often fall prey to the should never forget that at the end of the
need for short-term price drops and rebates to day, the focus should remain on engaging the
help spur product trial and increased sales. consumer. When running a promotion in-store,
There can be long-term negative effects from companies may want to utilize online media
to drive traffic to retail locations. Just because
a customer chooses to shop online, they
shouldn’t be left out of the fun.

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otio
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A WIN-WIN COLLABORATION
Marketers often look to promotions as the without alienating the retailer and most
“magic bullet” for increasing awareness, sales importantly, while keeping the focus on the
and market share for their products. However, consumer. It’s a complex situation with multiple
much care must be taken to ensure that variables, some being well outside of marketer
promotional dollars are spent in an effective control. But if manufacturers and retailers
manner—encouraging retailer collaboration collaborate to provide the consumer with
and increasing sales volume without negatively exciting promotional offers through a variety
impacting the equity of the brand. It is a delicate of integrated messaging channels, everybody
balancing act to embrace manufacturer goals can win.

About Jacobs Agency


Jacobs Agency is a full-service marketing communications agency
solving business problems for consumer and business-to-business
clients since 1997. Clients are from financial services, packaged
goods, retail, office products, technology and utility industries. With
Dimensional Marketing™, a proprietary communications development
process, the agency helps clients “enjoy their job” by implementing
smarter strategic solutions, relevant creative and a synchronized
delivery of measured media. For more information on Jacobs Agency,
visit www.jacobsagency.com.

Jacobs Agency 430 W. Erie St., Suite 403 Chicago, IL 60610


312.664.5000 newbusiness@jacobsagency.com

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FURTHER READING
Brickin, Shari. “Stupid vs. Strategic Sweeps.” Promo Magazine. July 1, 2007. http://promomagazine.com/
sampling/marketing_stupid_vs_strategic/.

Cecere, Lora, and Fenella Sirkisoon. “What Is an Effective Trade Promotion?” AMR Research. November 9, 2007.

Dekimpe, Marnik, Dominique Hanssens, Koen Pauwels, and Shuba Srinivasan. Do Promotions Benefit Manufacturers,
Retailers or Both? Rotterdam: ERIM, 2002.

Del Franco, Mark, and Sherry Chiger. “Multiple Views of Multichannel Promos.” Multichannel Merchant. December 1,
2002. http://www.multichannelmerchant.com/news/marketing_multiple¬views¬multichannel/index.html.

Dhar, Sanjay K., and Peter E. Rossi. “Why Responsiveness to Retail Promotions Varies Across Retailers: New Research
Looks Beyond Price Cuts.” http://www.chicagoexec.net/chicago.nsf/SBH (accessed October 23, 2007).

Karolefski, John. “Pushing Product: Is In-store Promotion Effective?” July 8, 2002.


http://brandchannel.com/featrures/effect.asp?id=106.

Klein, Howard. “Top of Mind: Science Meets Art In Account-Specific Realm.” Brandweek. November 15, 2004.
http://allbusiness.com/marketing-advertising/branding-brand-development/.

Liss, Boni. “Brand Marketing: Inside Information (The In-Store Juggernaut).” January 1999.
http://www.pmalink.org/resources/default.asp?p=whitepaper10.

MacInnis, Debbie, and C.W. Park. “Branding and Brand Equity: Clarifications on a Confusing Topic.” Branding
and Brand Equity. Marketing Profs LLC, 2006.

Marketing Profs. “Advertising vs. Promotion Decisions.” January 28, 2000. http://www.marketingprofs.com/
Tutorials/AdvsPromo.asp.

Park, John L., and Gene A. German. The Promotion World According to Retail. Ithaca: Cornell University.
January 1999.

Sales Promotion Services Inc., “Tips on Achieving More Effective Consumer Promotions.”
http://www.salespromo.com/buildingmoreeffectivepromotions.htm (accessed April 18, 2008).

Vurva, Rich. “Developing Killer Sales Promotions.” Progressive Distributor. January/February 2004.
http://www.progressivedistributor.com/progressive/archives/Marketing/KillerPromos.htm.

Wortsman, Marc, and Jonathan Ehpraim. “Summary of results: PMA 2004 Sweepstakes Response Rate Study.”
March 28, 2005. http://www.pmalink.org/resources/default.asp?p=res_2004ssrrs.

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