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Essay / Trade promotions: analysis of key determinants of...
Trade promotions: analysis of key determinants of market shareA proposal submitted in partial fulfillment of the requirements for the master's degreeProblem statementTrade promotion can be defined as a campaign intended to distribution partners such as wholesalers and retailers and not to end customers. Channel partner incentives are offered to encourage them to increase their product sales by providing them with a better margin than their competitors. The intention is also to have a ripple effect and pass on margins to end customers in terms of lower retail prices. This pass-through of retail margin to end consumers has long been a concern of manufacturers. Spending on trade promotion as part of the marketing budget has increased significantly over the years, but the ineffectiveness of “retail transmission” has been a big concern. The aim of this research is to study the key determinants that affect a retailer's motivation to pass on profits. to the end consumer and help the manufacturer to design a promotion strategy to maximize their sales and help them translate it into high profits. We take manufacturers as test subjects and will try to understand the trade promotion strategy adopted by the company and the determinants affecting retail transmission. We will compare these companies' practices and their trade promotion activities to study the company's performance and compare it to the industry average. We will analyze the company's promotion strategy compared to that of market leaders and give our recommendations to maximize sales. INTRODUCTION Trade promotions are incentives offered by manufacturers to retailers to encourage them to reduce retail prices. Armstrong, in a 1991 study, found that manufacturers were investing more often in paper, almost as much in trade promotion as in advertising - amounting to more than $2 billion a year. Yet they assume that more than a quarter of trade spend goes directly to retailers' bottom lines rather than covering promotion costs or reducing prices to consumers. They used the services of Accenture to bring analytics into TPM. Currently, retailers accrue funds from P&G based on the number of cases they purchase. But even if the funds are earmarked for specific promotion programs, retailers don't need to prove they ran the programs to collect them. Better retailer performance could mean much better display or other in-store marketing for P&G brands at the same or lower cost than before - although even a $70 billion giant like P&G could struggle to take money away from major retailers without being punished by competitors..