By Larry Kagel, Competitive Promotion Report, special to GMDC
Hundreds of millions of dollars are spent every year by HBC manufacturers to get their products promoted by their retail customers.
Whether it is well spent will always be an issue. It will always be part of the mix and requires evaluation to determine what is most effective for the brand and the retailer. We continue to talk about trade partners, but let's face reality. Manufacturers want to sell more of their own products and retailers want to sell more of any product, preferably the most profitable ones.
This does not mean both groups cannot work together to achieve their separate goals. In fact, they must work together effectively to reach those goals. But it is important for both sides to recognize their different objectives.
In recent years, everyday low pricing (EDLP, EDLC) and contract pricing have grown and developed. Added to this has been an accrual allowance that provides the retailer money to promote with a specific brand or supplier. The accrual methods may vary by manufacturer but there is a formula, either stated or unstated, that allows the money to be earned.
It seems that EDLP may not be the true lowest price if a manufacturer is still required to add more funds for their brands to be promoted. That being said, other determinants of how funds are to be used arise.
Ideally, this should be a joint effort as the manufacturer is better able to articulate its experiences, track record, knowledge of the brand and its target customers. The retailer knows what works for their stores and in their marketplace.
Discussion Questions: Should the manufacturer or the retailer decide how the funds should be spent and choose the brands to be promoted? And who determines how the brand is to be promoted- advertised, prices lowered or displays used? What happens when there is disagreement about how to use these funds? Who has the final say? And does this help both sides achieve their objectives?