Promotional Strategy: Group 8ABHISHEK (PGP30122) | BHANU (PGP30306) | NIKHIL (PGP30323) |NISHANT (PGP30155)

THE COSTLY BARGAIN OF TRADE PROMOTION

November 6, 2015

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SHIFT IN POWER

Manufacturer to Trader

Rise of trade promotions

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Problems of trade promotions:

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FORWARD BUYING

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Preserve self space against competitors Secure Trial for new product

PROBLEMS IN FORWARD BUYING

PILING UP OF INVENTORY

STORAGE COSTS

INTEREST EXPENSES

INSUARANCE COSTS

TRANSPORTATION COST

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NO-TRADE-DEAL DISTRIBUTOR INVENTORY

SAVINGS

COST OF BUYING

COST OF STOCKING

COST OF DOUBLE HANDLING

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FRACTION OF FORWARD BUYING OF TOTAL SALES

INTERVAL BETWEEN PROMOTIONS

NUMBER OF SKUs

RISE IN UNCERTAINITY

COST TO MANUFACTURERS

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GM CLOSES GUJARAT PLANT

NO FORWARD PURCHASES IN SHORT LIFE PRODUCTS

COST TO THE SYSTEM

A PART OF THE COST OF TRADE PROMOTION WHICH CAN BE QUANTIFIED

A PART OF THE COST OF TRADE PROMOTION WHICH CANNOT BE QUANTIFIED

Transportation & Handling cost Selling, General & Administrative expenses 16

SOME LIKE IT ! SOME DONT !

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SOME LIKE IT ! SOME DONT !

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DETERIORATION OF IN-STORE SERVICE

Living with Promotions

Trade Promotions( Forward Buying, Coupons, Contests)

High Cost

Manufacturer Retailer

How to Tackle?

EDLPP

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Everyday Low Purchase Price Example - India

What is EDLPP?

Followed By Walmart Inc., Leads to better relations among channel partners

Results in Low Fixed Cost(Less advertising, less labour, simple inventory management)

Involves low cost price strategy, Low SG&A expense

Less fluctuations in demand

Is EDLPP the solution to all the woes?Definitely NOT

BUT

Right Direction

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How to go about trade promotions?

They should be the last resort of any company – should be tried only after advertising andpackaging changes lead to minimal result.

If the company is going for promotions take the following steps

Focus on particular need of distributors Look for ways to reduce administrative burden Spread trade promotion funds fairly among distributors

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THANK YOU