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Avoid These 5 Costly Trade Promotion Mistakes

Avoid These 5 Costly Trade Promotion Mistakes

Are you making trade promotion mistakes that are hurting your bottom line? Trade promotions should increase the sales of the promoted products by making them stand out from others, thereby bringing them to the attention of those customers who might otherwise be indifferent to them or even unaware of their existence, particularly if they are new products. When promotions are conducted in an effective way, the promotions themselves should result in strong sales that prompt future sales.

You may be making trade promotion mistakes without realizing it

Promotions are not necessarily always effective. So much so that some can lead to significant losses. The reasons for failure can vary widely. Pricing products incorrectly will fail to attract enough attention, or they result in too few sales for other reasons.
Behind these failures lie errors that can make the difference between success and failure. Here’s a look at the top five mistakes that you should avoid when running your next trade promotion.

1) Presuming that national strategies will be effective locally

When it comes to developing trade promotions across multiple outlets, it is important to realize that one size does not fit all. To assume that all outlets are similar is one of the major trade promotion mistakes that manufacturers often make.

A special offer, cash discount or similar incentive might work in several areas, but not necessarily in all of them that are served by the promotion. A trend that is clear on, say, the West and East coasts of the country might not necessarily apply in the Midwest or other areas.

Tastes can differ widely even within a region. The bulk of customers at a number of outlets, for example, might consist primarily of millennials who are looking for foods that they consider more healthy than others. At another, most customers might be baby boomers or retired people, many of whom might look for “comfort food.”

In addition, the tastes for a particular product of those who live in a highly diversified inner city might be significantly different from those who live in suburbia, who differ again from those who live in rural areas.

Income also can play a significant role in customers’ choices. Simply to assume that a special promotional strategy will be effective everywhere might produce spotty results.

2) Setting prices at the brand level

Some manufacturers will be tempted to price their promoted products on the basis of their brand. They believe that by doing so, they will present a consistent image of quality.

Doing so can be useful in the case of powerful brands. But customers do not necessarily see it that way. If a customer sees a brand in a good light and it is available at a lower than usual price, customers will see that as a bargain. They are unlikely to see it as being of lower quality.

It becomes necessary, therefore, that manufacturers should set promotional prices at levels at which they believe those items are likely to sell, rather than at any preconceived idea of the brand’s inherent value.

3) Disregarding price thresholds

Each product has a price beyond which most customers are not prepared to go. To be perceived as a bargain, therefore, the price should be set lower than a customer’s expectations of what constitutes a fair price for the product. Seeing the promotional price as close to — or even higher than — the maximum customer-imposed threshold, it is unlikely to be seen as a good deal.

It is important that a threshold should be determined by the pricing on each item on a trade promotion. Without doing so, the trade promotion could fall flat.

In some cases, the threshold might be small, and it might be psychological. For example, a product that retails at $3.99 might suffer from poor sales should it be raised to $4.

At times, foodservice manufacturers are not aware of the price threshold that might exist on certain products. Or, if they are, they ignore it.

competitive analysis4) Ignoring your competition

Failure to take a competitor into account is among the most common trade promotion mistakes. If you offer promotions at the same time and for similar products as those being offered by your competitors, you can potentially lose out if the competition is offering a greater discount, better placement or more significant overall deal.

The impacts of ignoring the competition can be long lasting, particularly if it continues over time. By creating an impression that you are not competitive, you stand the risk of being ignored when it comes to future promotions.

5) Not having the right tools

When launching trade promotions, it becomes essential to have the right software to measure, analyze and assess your performance. Today’s advanced technology enables you to price more accurately, to assess your performance more effectively, and to reduce human error.

Not only that, but it cuts down on time it can take to conduct analysis, meaning that your data is much more up to date than using old manual systems.

Using practical tools, you can order, track and handle a trade deal more efficiently. You can even assess the degree to which even slight changes in promotional pricing affect your sales. And you can review how effectively a trade promotion is working often enough to decide whether to continue it or to prevent further suffering losses.

Another benefit of automated software is not directly related to the promotion, yet can be of great advantage. It comes when you have the right tools to become more efficient over the trade spend cycle, thereby lowering overall costs. Those efficiencies can provide you with the ability to lower your prices even more in a trade promotion and still receive the same benefits from them.

Avoid these mistakes and prosper

By avoiding these mistakes and focusing on the right strategies, enhances the chances of a successful trade promotion. Also, the use of advanced technology can boost your potential to beat the competition by enabling you to promote, place, and price your products more effectively.

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Brian Maloney

Brian Maloney

Co-Founder & COO at GoSimple
Brian Maloney is the Co-Founder & COO at GoSimple. He has been in the foodservice industry for 20+ years.He has extensive knowledge in claim acquisition, contract management, and trade spend analytics. Connect with Brian on LinkedIn.
Brian Maloney

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