In the cold war between manufacturers and retailers, trade promotions are viewed with great suspicion. Regardless of the terms of a given deal, each party believes the other is trying to get the upper hand. The watchword is trust, but verify.
In theory, trade promotions should benefit everyone involved. The manufacturer offers the retailer a product temporarily at a lower price; in return for selling its goods at a lower unit cost, the manufacturer intends to earn new customers and build the loyalty of current ones. Likewise, the retailer, by selling the product at a discount, should enjoy increased sales during the promotion, while bearing little in the way of extra costs. And consumers, of course, should save money on their purchases. In practice, however, manufacturers and retailers often manipulate the system in a zero-sum game, and consumers are sometimes left out altogether.
It need not be that way. Over the past three years, we’ve examined the theoretical and practical problems associated with trade promotions, and we are convinced that it is possible to create the right kind of deal — a transparent system that generates mutual trust and, yes, produces the proverbial win-win outcome for both manufacturers and retailers. The key is proper implementation of what is thus far a little understood tool.
As most marketing managers know, the most common form of trade promotion is... To read the complete article, login or sign-up using the form below.
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