Business Intelligence and FMCG Glossary: #tradepromotions
Trade promotions
What are trade promotions?
A trade promotion is a commercial action jointly planned by manufacturers and retailers to highlight a product at the level of its:
- Price (example: discount on price, discount on volume, gift)
- Communication (example: media support, presence in brochure)
- Visibility (example: gondola head, linear highlights, tastings)
The main objective of trade promotions is to increase sales of a product by making it more attractive to potential customers.
In the case of innovations, promotions are aimed at increasing the awareness of the product by highlighting its benefits and value proposition.
Promotions have a high cost derived from the discount offered, possible additional in-store visibility and disruptions of the supply chain due to additional merchandise to be delivered.
It is important to accurately measure the success of promotions by calculating their uplift on normal sales and ROI on investments made (discounts, visibility, communication). Understanding what promotions work well and which do not is key to improving the promotional efficiency and return on associated investments.
Ultimately trades promotions would have to generate an increase in market share after the promotional period.
