Trade spending is one of the most important line items in a manufacturer’s financial statements, and after Cost of Goods Sold (COGS) it is the single largest expense that a company will have to manage. Without strong trade promotion analysis, this spend can eventually lead to the temporarily renting market share, while on promotion, rather than truly growing and capturing it from the competition.
Many smaller manufacturers merely look at the number of units they sold on a year over year basis and assume that all trade promotions are created equally. This cycle of constantly running more promotions or funding more rebate programs, to keep units selling, targets being met, and factories being kept busy can create a downward spiral in both profitability and brand perception that will hinder the ability to grow. The challenge is that how do you accurately and adequately support your categories and products, but maintain a profitable business model that can withstand the myriad of other land mines.
There are many different levers within trade promotion that can be used to push the business forward. They range from product promotion, slotting or space payments, coupons, back end rebates, gated rebates, free fills, merchandising fees, and many more. Retailers are constantly in search of their own ways to drive profitability up, for their own organizations – so there is no shortage of ways that they will try and convince those manufacturers to spend more money. Most times this money will never create a mutually beneficial relationship and is single sided, eventually creating poor negotiating positions and forcing manufacturers into situations where profitability continues to erode.
At L&M Mass Solutions, we can help you sort through trade promotion and helping to analyze what works for your business goals, your category dynamics, your retailer demands, and the consumer interactions you are looking to curate. Trade promotion can be very confusing, causing more questions from the entire organization over the value and ROI of your trade programs. However, with pointed questions, in-depth analysis, and over 30 years of combined experience in managing promotions for companies, as large as $500MM in annual trade spending we can help you develop a program that will elevate your organization, drive mutually beneficial growth, and gain market share over your competitors.