CLOSING THE

LOOP ON TRADE
PROMOTIONS

HOW-TO GUIDE
 Closing the Loop on Trade Promotions
HOW-TO GUIDE

This report has been designed to provide practical advice for executing effective trade promotion
campaigns.

Read this brief report to learn:

Definition of Trade Promotion

Types of Trade Promotion
Trade Promotion Management Lifecycle
Benefits of Closing the Loop
Measuring Trade Promotion Effectiveness

Read this report to learn how to implement effective trade promotion campaigns. Use our tools to
evaluate different trade promotion campaigns and to demonstrate a measurable ROI.

Trade Promotion Defined

Trade promotion is any expenditure paid directly by a manufacturer to the trade or retail factors
in a given industry as a set amount on a per unit basis or in payment for a merchandising value
provided by the retailer.
- Source: Promotion Marketing Association (PMA)

Trade promotion is a key activity for all consumer marketing plans which encourages increased
short-term sales by effectively decreasing the cost-per-item to the end consumer.

By measuring the incremental increases in sales volume relative to the costs of the trade promotion
campaign, marketers can identify which trade campaigns provide the most return on investment
and optimize their trade plan by investing in the most effective trade channels and promotions.

2 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

Types of Trade Promotion Effectiveness
Corporate Promotions

In-Store Displays: point-of-Purchase (POP), Floor Stickers, Feature Display, Carton Display,
Special Racks, Banners, Signs, Mechanical Product Dispensers, Demonstrations, etc.

Temporary Price Reduction (TPR): cents off, Price pack, Bonus pack, Branded pack.

Coupons: grant savings on specified products.

Contests: generates a high degree of customer involvement and website traffic.

Sweepstakes: participants must submit names to be entered in a draw. Can use multiple
mediums. (i.e. POP display and website)

Refunds and Rebates: the offer to return a certain amount of money to the customer.

Premiums: a tangible reward for performing a particular act. (i.e. receive a free bar of soap with
purchase of body wash)

Sampling: allowing the customer to experience the product or service by providing free
samples.

Discretionary/Account Promotions
Templates to be used by key account managers when establishing promotions at their accounts.

Trade Promotion Management Lifecycle

There are 8 major components in the trade promotion management lifecycle for consumer products.

1. Promotion Planning and Modeling - selection of the proper channel, promotional plan, and
estimated results.
2. Presentation - present the campaign to key stakeholders to achieve buy-in or sponsorship.
3. Sales Agreement - between Manufacturer and Retailer
4. Supply Chain Planning and Execution - all aspects of the supply chain must be taken into
consideration before moving forward. Will expediting be necessary? Will inventory levels
change based on the campaign?
5. Retail Execution - carrying out the sales agreement in the market place through the entire
value chain.
6. Settlement - reimbursement from manufacturer to the retailer based on actual sales volumes
& promo costs.

3 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

7. Monitoring, Reporting and Post Event Analysis - conducting a Trade Promotion ROI Calcula-
tion.
8. Category Optimization - a comprehensive understanding of trade promotion spend will allow
management to recommend profit maximizing tactics.

Benefits of Closing the Loop

The key benefits of closing the loop on trade promotion by using the preceding lifecycle frame-
work include:

1. Providing management with greater visibility into market’s price elasticity of demand for
specific products.
2. Increased internal collaboration between functional groups within an organization to promote
alignment.
3. If done properly, will result in fewer stock-outs and cost-savings from reduced inventory levels.
4. Helps foster relationships and increase collaboration between retailers and manufacturers.
5. Increase profits for both retailer and manufacturer.
6. Improved management of current promotions based on past performance and reduced
spending on ineffective trade promotion channels and campaign techniques.
7. Building brand awareness & recognition for product lines
8. Helps close the gaps on analytics and generate predictive insights for both retailers and
manufacturers.

Bottom Line

Manufacturers and retailers are becoming increasingly interdependent and trade promotion is a
key collaboration touch point. Currently there are significant gaps between manufacturers and
retailers around analytics and insight.

Closing the loop with trade promotion campaigns can significantly increase ROI by providing
insight into the key drivers of sales volumes and trade promotion costs. Be sure to meticulously
measure the incremental impacts of your trade promotion campaigns to optimize spending for
this channel.

4 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 1 - Learn Best Practices

1 Learn Best
Practices Learn Trade Promotion
Best Practices
Achieve
2 Consensus
To get started read our article
entitled: Trade Promotion
Review Best Practices.
3 Information

Gather
4 Information

5 Set Goals

6 Define Measures

Follow the
7 Framework

8 Monitor

9 Optimize

5 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 2 - Achieve Consensus

Learn Best
1 Practices Achieve Consensus among
Stakeholders

2 Achieve
Consensus Have a meeting with key
stakeholders to align campaign
objectives.
Review
3 Information Use our Trade Promotion
Evaluation Matrix to select the
best promotion for your needs.
Gather
4 Information

5 Set Goals

Trade Promotion Evaluation Matrix

6 Define Measures

VIEW RESOURCE

Follow the
7 Framework

8 Monitor

9 Optimize

6 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 3 - Review Information

Learn Best
1 Practices Review Historical
Information
Achieve
2 Consensus Review past sales volumes
for the period, market
research data, costs of
3 Review
Information prior trade promos, and
customer data, to benchmark
results from previous trade
Gather promotion campaigns.
4 Information

5 Set Goals

6 Define Measures

Follow the
7 Framework

8 Monitor

9 Optimize

7 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 4 - Gather Information

Learn Best
1 Practices Gather New Information

Achieve
2 Consensus If you don’t have historical
information, consider adding
a vendor solution that can
Review
3 Information be easily integrated into your
ERP system.

4 Gather
Information

5 Set Goals

6 Define Measures

Follow the
7 Framework

8 Monitor

9 Optimize

8 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 5 - Set Goals

Learn Best
1 Practices Set Goals, Timeframes, &
Objectives
Achieve
2 Consensus
Your goals may be to
improve upon an existing
campaign, create a new
Review
3 Information campaign or to improve
relationships with retailers.

Gather
4 Information

5 Set Goals

6 Define Measures

Follow the
7 Framework

8 Monitor

9 Optimize

9 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 6 - Define Measures

Learn Best
1 Practices Define Measures of
Success
Achieve
2 Consensus Like all objectives, you need
to determine how success will
be measured, BEFORE you
Review
3 Information
kick-off your initiative.

These are the Key

Performance Indicators (KPIs)
Gather
4 Information
that will be benchmarked and
monitored to demonstrate
return on investment.

5 Set Goals

6 Define
Measures

Key Performance Indicators

Follow the
7 Framework
VIEW RESOURCE

8 Monitor

9 Optimize

10 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 7 - Follow the Framework

Learn Best
1 Practices Follow the Trade
Promotion Framework
Achieve
2 Consensus
Use this preceding lifecycle to
execute your campaigns.
Review
3 Information

Gather
4 Information

5 Set Goals

6 Define Measures

7 Follow the
Framework

8 Monitor

9 Optimize

11 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 8 - Monitor

Learn Best
1 Practices Monitor, Report, and
Analyze
Achieve
2 Consensus
Monitor the campaign closely
and use our Trade Promotion
ROI Calculator determine the
Review
3 Information return on your investment.

Gather
4 Information

5 Set Goals
Trade Promotion ROI Calculator

VIEW RESOURCE
6 Define Measures

Follow the
7 Framework

8 Monitor

9 Optimize

12 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

 Action Plan
STEP 9 - Optimize

Learn Best
1 Practices Category Optimization

Achieve
2 Consensus
Continue to test & monitor
campaigns and implement
profit maximizing tactics.

Review
3 Information

Gather
4 Information

5 Set Goals

6 Define Measures

Follow the
7 Framework

8 Monitor

9 Optimize

13 CLOSING THE LOOP ON TRADE PROMOTIONS HOW-TO GUIDE

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