¨ Allowances
- Off-invoice
Here marketers allow wholesalers and retailers to deduct a set amount from the invoice they receive for merchandise. This programme is really just a price reduction offered to the trade on a particular marketers’ brand for a specified short promotional period. The incentive for the trade with this programme is that the price reduction increases the margin (and profits) a wholesaler or retailer realizes on the off-invoiced brand.
This scheme is in general available for many products, where if the bill amount is above a certain amount you get a certain percentage discount. The % varies from around 2% to 10%, from company to company and also from time to time.
- Buying allowance
It is similar to the off-invoice allowance. It is a discount for the purchase of the promoted product during the specified period on the purchase of certain minimum quantity of the product. This trade incentive is often used to gain more distribution or to maintain the existing one.
- Display and advertising allowance
The retailer is required to arrange the product display in a prominent show-window or offer discount to consumers and advertise this offer in the local newspaper or arrange a point-of-purchase display on the shelf corner. The retailer earns the incentive only after meeting the conditions set by the manufacturer.
- Buy back allowance
Manufacturers sometimes announce a buy-back allowance to encourage re-stocking by retailers. This promotion immediately follows another type of deal offered to resellers and offered some incentive for new purchases. When the manufacturer realizes that after the initial deal the inventory levels at the retail level are quite low or depleted, such an offer helps in building the inventory level with retailers to normal.
- Bill back allowance
The manufacturer offers a discount for every item purchased during the promotion period. At the end after the promotion is over, the dealer counts the discount per unit for all the items bought during the promotion period, adds any additional promotional allowances as stipulated by the manufacturer and submits the statement. He also needs to submit the bill for all such items.
- Count and recount allowance
This allowance consists of an offer of certain amount of money to retailers for each unit of promoted product sold out of their stocks during a specified period of time. The sales person concerned counts the opening stock with each retailer at the start of promotion and a final recount is made at the end of the promotion period. It can be used to ensure that resellers are not out of stock. The deal is easy to implement and the allowance is paid only on product units sold from the retailer’s shelves.
- Slotting allowance
These are the fees that a retailer charges the manufacturers to make available the space on the shelf for their new products. Retail store owners say that the number of brands in each category is multiplying, there is increasing competition and margins are decreasing, hence they have no option but to ask for a fee to keep the product on their shelf and use the money to improve their shelf design and promotion, etc.
¨ Merchandise allowance
In the form of free products packed with regular shipments, are payments to the trade for setting up and maintaining displays. The payments are typically far less than manufacturers would have to spend to maintain the displays themselves.
Some of the schemes operating in town are:
- Buy Cadbury’s products worth Rs.3000/- and get 30 any chocolates worth Rs.5 free.
- Buy a box of Munch and get 1 Munch free.
¨ POP displays
Point-of-purchase displays i.e. product displays and information sheets are useful in reaching the consumer at the point of purchase and often encourage retailers to support ones brand. POP promotions can help win precious shelf space and exposure in a retail setting. From a retailer’s perspective, a POP display should be designed to draw attention to a brand, increase turnover, and possibly distribute coupons and sweepstake entry forms.
Companies do P-O-P displays as and when they have sales promotion schemes going on.
Some companies that do a lot of P-O-P displays on a regular basis are Gillette, Vicks, Duracell, Pepsi, Coke
¨ Cash rebate
This is a form of delayed value promotion for the retailer. Only after the proof of performance is furnished, the retailer is given a cheque for the amount of discount.
Once a retailer has met the laid down conditions, the rebate is given to the retailer. The advantage of this method is that the rebate is given only after the retailer has performed to qualify for the rebate.
¨ Free goods
A free goods promotion is a deviation from straight price cut. The promotion offer to trade is in the form of extra quantity of purchased product “free”. For example, the manufacturer offers one case of free goods with the purchase of 12 cases of the product. There may or may not be any limit on the quantity of the purchase during the promotion period. If the retailer purchases 36 cases of the product, then he gets 3 cases of the same product free.
Free goods deal often encourages resellers to stock more during the promotion period. For the manufacturer, it is an excellent promotion because it costs less than it otherwise appears.
- Buy 24 Close Up toothpaste and get 1 free.
- Buy Cadbury’s products worth Rs.3000/- and get 30 any chocolates worth Rs.5 free.
¨ Dating
Manufacturers of seasonal products often use dating as a technique of sales promotions. Dating is not a direct type of allowance such as free goods or cash. Manufacturer extends the facility to retailers to purchase a certain quantity of product now but the billing is done after a period of time. It is not only the billing, the retailer purchases the product at some reduced price during the promotion period, however, the goods are shipped at a later date.
¨ Trade coupons
It is a manufacturer initiated sales promotion, however, the coupon distribution is undertaken by retailers, either through local print medium or in some other manner. The important thing about such coupons is that they can be redeemed only at the distributing store. There is an agreement between the retailer and the manufacturer that some agreed allowance will; be paid to the retailer. Generally this is in the form of re-imbursement of some amount of money to the retailer for each coupon redeemed. The distributing retailer gets the double benefit due to the increase in store traffic and the incentive of reimbursement from the manufacturer. This is a string incentive to the retailer to arrange displays and promote the coupon offer.
¨ Dealer loaders
A dealer loader is a premium that the manufacturer gives to the retailers for buying a certain quantity of a product. There are generally 2 types of dealer loaders – buying loader and display loader.
A buying loader is given to the retailer on purchase of a specified quantity of a particular product.
A display loader is the premium given to the retailer for the window display. After the promotion period is over, the item or items, are given to the retailer as a free premium.
¨ SPIFFS (also called ‘push money’)
It is a monetary reward given to the salesforce of the dealers to sell a manufacturers product. For example, a manufacturer of washing machines may offer Rs.500 to each sales person who sells the manufacturers’ brand of washing machine. The SPIFF money varies as does the willingness of the dealers to allow the salesforce to accept the offer. Dealers who carry product brands of different manufacturers generally hesitate to allow such offers.
¨ Incentives
Incentives to the members of the trade include a variety of tactics like awards in the form of travel, gifts, or cash bonuses for reaching targeted sales levels that induce retailers and wholesalers to give a firms’ brand added attention. The incentive does not have to be large or expensive to be effective.
Another form of trade incentive is referred to as ‘push money’ i.e. SPIFFS.
¨ Sales-training Programmes
An increasingly popular trade promotion is to provide training for retail store personnel. This method is used specially for consumer durables like personal computers, exercise equipment, etc. the increased complexity of these products has made it important for manufacturers to ensure that the proper factual information and persuasive themes are reaching consumers at the point of purchase. For personnel at large retail stores, manufacturers can hold special classes that feature product information, demonstrations, and training about sales techniques. Another method to give information would be the use of videotapes and brochures.
Hewlett Packard
Promotion: Mystery shopper program
Objective: to revitalize the distribution chain, audit retailers and the competitive situation.
City: Delhi, Mumbai, Ahmedabad and many more
Strategy: aimed at the dealers, the objective of this promotion was top revitalize the distribution chain, audit retailer and competitive situation. Mystery shoppers visited the retail outlets to ascertain merchandising and retailer-consumer interaction.
¨ Trade shows
At trade shows, related products from many manufacturers are displayed and demonstrated to members of the trade. Literally, every industry has trade shows. Their representatives are there to explain the products and services and perhaps make an important contact for the sales force. The use of trade shows must be carefully coordinated and can be an important part of the business market promotional programme. Trade shows can be critically important to a small firm that cannot afford advertising and has a sales force too small to reach all its potential customers.
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