TPM overviewfor case

Trade Promotions Management
An In-depth Review

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Table of Contents
1. Introduction .........................................................................................................................................3
What is trade promotion management? ...................................................................................... 3
Why is trade promotion management important?......................................................................... 3
How is trade promotion management performed?........................................................................ 4
2. Overall Flow .........................................................................................................................................6
3. Process Steps......................................................................................................................................7
STEP 1: Allocate Budget to Accounts ......................................................................................... 7
STEP 2: Create Promotion Plan ............................................................................................... 12
STEP 3: Sell-in Promotion Plan................................................................................................ 19
STEP 4: Execute Promotion Plan ............................................................................................. 22
STEP 5: Monitor/Revise Promotion Plan ................................................................................... 25
STEP 6: Evaluate Promotion Effectiveness................................................................................ 28
4. Roles...................................................................................................................................................31
5. Key Process Measurements ............................................................................................................32
6. Overall Design Considerations........................................................................................................32
7. Trade Promotion Best Practices......................................................................................................33
8. Other Facts to Consider ...................................................................................................................34
Glossary.....................................................................................................................................................36

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1. Introduction
What is trade promotion management?
Trade promotion management is defined as the process of planning, budgeting, presenting and executing
incentive programs which occur between the manufacturer and the retailer to enhance sales of specific
products. For example, a manufacturer paying a retailer to feature their product in the retailer’s weekly
newspaper advertising or paying a retailer to build a special promotional display in their store are both
considered trade promotions.
Why is trade promotion management important?
Between 1978 and 1996 the dollars spent on trade promotions grew on average from 5% of sales to
13% of sales. This led to inefficient spending practices in the trade promotion area. There is a
significant benefit potential to improving trade promotion practices by fully understanding the costs of
promotions, running smarter promotions by knowing what works and what doesn’t, and focusing
promotions on what will increase profits, rather than just gross revenues.
Our clients have achieved or are expecting to achieve significant benefits from improving their trade
promotions processes. These include:
Value Proposition
• 10-25% reduction in trade promotion spending with no change in
volume
• 1-4% increase in pre-tax earnings
• Trade promotion ROI increase of more than 25% on average (more
than 200% on some events)
• 40% reduction in outstanding deductions balances
• Reduce trade spending from 17% of sales to 13% of sales
Improving trade promotion practices involves the coordination of strategy, process, people and
technology. This document will focus on providing knowledge of the overall trade promotion process and
will highlight best practices.

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How is trade promotion management performed?
Incentive programs vary widely from account to account. Incentives can involve discounts on each
product sold, payments of a fixed sum of money, or other special programs. In return, a retailer is
expected to generate greater volume through special pricing, advertising and other programs. The
following diagram provides listings of many of the types of incentives and programs that are run. Refer
to the glossary for further definition on these programs.
BenefitsPerformanceCosts
Manufacturers Offer Incentives
to Trading Partners . . .
. . . In Return for
Performance . . .
. . . To Generate
Consumer Sales . . .
• Off-invoice allowances
• Favorable payment terms
• Market development funds
• Sell-through guarantees/
failure fees
• Co-op advertising
• Bracket allowances
At Headquarters
• Plan
merchandising
• Buy in advance
of demand
• Set prices
• Authorize new
items
• Develop
planograms
• Incremental Sales and ProfitsAt Retail
• Merchandising
• Ad
• Display
• Reduced prices
• Coupons
• Everday Low Price
• Distribution
• Shelving
• Space
• Configuration
• Location
• Secondary
• Stock rotation
The determination of the incentive programs that will be run is based on corporate customer and product
strategies and specific account objectives. These programs are documented for each account and product
in a promotion plan. For most companies, the account level for which plans are created is a national or
headquarter account (i.e. one plan for the XYZ Grocery Chain); other companies may create a plan for a
specific region of the account if the account is very large, or maybe even for each individual store if there
are not many customers. On a similar note, the product level for which plans are created is often a
group of related products (liquid soaps, breakfast pastries, or personal printers). Plans can be created for
higher levels (soaps, ready-to-eat cereals, or printers) or even lower levels (6 oz. fresh scent soap, jumbo
box of corn flakes, or the LT5275 printer).
NOTE: In this document, the words account and product are used to refer to whatever account and
product level that the customer is planning.
The development of the promotion plan is a subset of the overall account plan for each account. The
account plan deals with higher level account issues, goals and types of promotions that will be run. The
promotion plan provides a more detailed roadmap of the specific promotions that will be run for a given
account.
Developing the promotion plan is typically a quarterly or semi-annual process. The purpose of this
process is to develop a clear plan for the promotional events that will be run to meet the revenue quotas
and to provide the greatest return on investment. The process for developing the promotion plan for an
account varies among manufacturers:
• Some manufacturers use more of a top down approach where national promotions are developed
by marketing for all accounts.

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• Other manufacturers employ a bottom up approach where each account representative has free
reign to develop individual promotions for their account.
• Other manufacturers fall somewhere in between.
This document will focus on the promotion planning, execution and post analysis activities performed by
the sales organization. Marketing and other activities are not included. Variations in the process will be
noted in the design considerations listed under each individual process step and for the overall trade
promotion process.
This document will detail the overall sales process and each of the steps involved. Key points to
understand include:
KEY POINTS
• Planning: In order to meet account objectives, it is imperative to have a solid promotion
plan for meeting those objectives. This plan should be based on past history, customer,
brand/product, and corporate objectives, and good judgment. Currently, many companies
have extremely informal or non existent processes. One company actually cites sales reps
creating their plans on a cocktail napkin.
• Executing: A primary stumbling block in the execution of the account plan is accurate
and timely payment to retailers for promotion performance. Processes and tools are
imperative to avoid costly deductions expenses and overspending due to poor accounting.
• Analyzing: Studies show that between 50-90% of promotions are not profitable. Many
companies are not performing any post analysis to determine which promotions are
profitable. Without this analysis, the same unprofitable promotions are run over and over
again.

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2. Overall Flow
Trade Promotion Management is part of an overall Selling Effectiveness Process Architecture:
Business
Plan
Customer
Strategy
Marketing
Strategy
Account-Based Selling
Promotions Management
Category Management
Retail Execution
Account Management Distributor-Based Selling
Sales Planning
Opportunity-Based Selling
Pipeline Forecasting
Opportunity Management
The Trade Promotion Management process is depicted below:
•Sales Quota by
Account/Brand
•Overall Spending
Budgets
•Historical Sales
Data
•Historical
Consumption Data
•Past Promotion
Results
•Retailer
Performance
•Marketing Plan
•Promotional
Strategy for the
Brand/Product
•Account Plan
•Customer
Promotion
Calendar
•Historical Account
Activity
•Understanding of
Customer
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
•Final Promotion
Plan
•Promotion
Results

3. Process Steps
STEP 1: Allocate Budget to Accounts
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
INTRODUCTION
Before a detailed promotion plan can be developed for an account, there are two important inputs:
• Sales Quota by Account/Brand: How much am I expected to sell of each product/brand at
my accounts? Sales quotas by account/brand and sales rep are established in the Territory
Management process and are included as an input into this allocate budget to accounts process
step.
• Spending Budgets by Account: How much promotional money do I have to spend at this
account? There are several ways that these budgets are determined:
In some instances, the spending “budget” is determined through a bottom up method and
therefore is not set until after the promotion plan is developed.
In other instances, the spending budget is developed through an accrual method where
accounts accrue a certain amount of promotion dollars for each unit of product that is
purchased. In this instance, the sales force is provided with per unit accrual rates for each
product.
In most instances, however, there is some bucket or lump sum of money that is allocated
to be spent at each account by sales management. This lump sum budget can be in
addition to dollars accrued per unit. It will also most likely be confirmed through bottom up
planning. The top down process of determining how much lump sum money should be
spent at each account is described in this process step.
For additional information on alternate ways of establishing spending budgets, refer to the
design considerations at the end of this process step description.

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FLOW
Establish
Allocation
Method
• Historical Sales
Data
• Sales Quota by
Account/Brand
• Overall Spending
Budgets
• Promotional
Strategy for the
Brand/Product
• Spending Budgets
by Account
Allocate to
Account Group
or Region
Allocate to
Account
INPUTS
• Historical Sales Data: Historical sales data provides actual sales volumes shipped to each
account in prior periods. This data is used when setting spending budgets based on past sales
volume.
Historical sales data needs to be available at the same account and product levels
designated in the promotion plan.
• Sales Quota by Account/Brand: Sales quotas need to be established for each account and
product/brand. These are established in the territory management process.
The account level to break down sales quotas should be consistent with the level that we
are developing promotion plans for. In some cases, each sales representative will be given
a total quota for all of his accounts. The sales representative will then want to break down
his overall quota into each of his accounts
The product level to break down sales quotas should be consistent with the level for which
we are developing promotion plans. In some cases, a sales representative will be given a
quota for a given product brand, but will be asked to plan at a lower level. He will want to
ensure that his expected sales for the individual products roll up to the quota he was given
for the product grouping.
• Overall Spending Budgets: Marketing will typically provide the sales organization with overall
spending guidelines by product group. During this process step, sales management or brand
management will allocate the total dollars to spend across accounts.
• Promotional Strategy for the Brand/Product: The promotional strategy is developed by
marketing and sales executives to clearly outline how the company wants to promote their
products. A key component of the promotion strategy is the role of trade promotions by brand.
For example:
Drive incremental sales
Increase market share and brand loyalty
Buy-down everyday retail price
A clear understanding of the types of promotional dollars and activities available, as well as an
understanding of how the promotional dollars should be allocated by account from a strategic
perspective, is required to effectively allocate promotion dollars to accounts.
Example: The brand strategy at one consumer products company documents what trade
promotion dollars are supposed to accomplish for each brand. For example, trade dollars
should build brand awareness and trial for new product introductions, while maintaining
market share without eroding baseline volume for established brands.

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Example: The promotional strategy for a given company focuses on driving incremental
sales. They want to focus on getting current consumers to buy more of the product and
getting new consumers to try the product. End aisle displays and other prominent
advertising to draw attention to the product is important. The promotion plan specifies that
all dollars will be allocated on a per case (rather than lump sum basis). All promotions are
set up on an individual account (rather than national) level.
Example: The promotional strategy for an alternate company focuses on buying down the
everyday retail price. This company does not offer any special promotions or coupons to
retailers and consumers. The money they save is used to reduce costs everyday. This
strategy is often referred to as Everyday Low Price (EDLP). This can be seen at retailers
such as Wal-Mart and Home Depot which are forcing many manufacturers to follow suit.
OUTPUTS
• Spending Budgets by Account: Detailed spending budgets for each account by product, or
product grouping, will be given as the output.
Example: An account manager for XYZ Grocery is given a quota of $250,000 for liquid
soaps. To reach this quota, the sales representative has $32,500 of promotional spending
allocated for liquid soaps.
ACTIVITIES
Activity 1: Establish Allocation Method
A. Review historical volumes
B. Establish allocation method
• Typically based on historical volumes at the accounts. More leading edge companies will base
on account potential.
• By law, must equally and equitably distribute promotion dollars to accounts.
Activity 2: Allocate to Account Group/Region (Iterative)
A. Allocate funds into first account grouping
• May first divide overall funds from marketing into major customer types (i.e. Club Stores and
Grocery Stores) or may allocate by geography, etc.
B. Continue to allocate funds until they are down to a sales representative level
Activity 3: Allocate to Account
A. Allocate spending budgets to account
• Typically the person with the most knowledge of the account, the sales representative, will be
involved in confirming budgets at this lowest level.
DESIGN CONSIDERATIONS
There are several factors that will affect how, or even if, the allocate budget to accounts process step
is performed. These factors are:

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Bottom up vs. Top down Budgeting
• Top down Budgeting: Spending budgets by account can be allocated by sales management to
each sales representative or account as described in the above process step. The advantages of
this method are:
Ensures budgets are allocated based on overall corporate Promotional Strategy for the
Brand/Product.
Ensures that account level budgets will meet overall spending budget.
• Bottom up Budgeting: Each sales representative can determine the promotion dollars needed to
meet their sales targets during the Create Promotion Plan process step. In this case, a bottom
up approach is used where each individual account budget is rolled up to an overall spending
level. The overall spending is compared to the total available dollars prior to approval. In this
scenario, the Allocate Budget to Accounts process step is not performed. The advantages of this
method are:
Budgets can be generated based on needs at the account.
Account opportunities rather than just historical sales can be included in the budgeting
process.
Lump sum versus accrual spending budgets: Promotion spending budgets are typically allocated at
the account/product level. Many manufacturers are struggling with whether this allocation should be
given to their account managers in a lump sum or by accrual based spending.
• Lump Sum Budgets: Lump sum is when a sales representative receives a set dollar amount to
spend on promotions for a particular category at a specific account. As an example, a sales
representative may receive 32,500 for promotional spending on liquid soaps.
Some of the advantages of lump sum are:
Maintenance
Easier to maintain and track.
Adherence to budget
Less likely to go over budget than with accrual based spending.
It is important to note that with lump sum, there is still the issue of controlling promotion
budgets. As an example, a sales representative may agree with a retailer to do a
promotion where they run an ad for $5000 and give the retailer $2.00 off per case of a
particular product. If the retailer buys a greater number of cases of the product than
anticipated, the sales representative may go over budget on the promotion budget. Also,
sales representatives may over commit on their promotion spending budgets.
• Accrual Based Budgets: Accrual based spending is where a sales representative accumulates
their budget for promotion spending based on the number of cases sold in a particular category
for a specific account. For example, a manufacturer may give a sales representative $2.00 for
every case of liquid soap the account buys. Therefore, if the retailer purchased 20,000 cases of
liquid soap from the manufacturer, the sales manager would have $40,000 to spend on
promotions for liquid soaps for that account.
Some of the advantages of accrual based spending are:
Directly incents

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This method directly incents the sales representative to increase the volume of a product
for a particular account.
Customer equity
This method represents a fair way of distributing promotion spending across multiple
accounts.
Greater control
Sales representatives prefer this method because it gives them more control over the
promotional dollars they have to spend.
Reduces incentive to forward buy or divert
Forward buy refers to the process of purchasing extra product while it is on promotion for
selling at a later date (stocking up). Diverting refers to purchasing product in one area of
the country or for an account that can get a cheaper price and sending (diverting) it to
another area with a more expensive price. With accrual rates, everyone gets the same
rate, every day thus reducing forward buy and diverting incentives.
Some of the disadvantages of accrual based spending are:
Adherence to budget
Tend to go over budget easily with accrual based spending.
The sales representative is spending the promotion dollars before they earn them. For
example, the sales representative may estimate that they are going to sell 20,000 cases of
liquid soap with their account and at an accrual spending rate of $2.00 per case, decides
they have $40,000 to spend on promotions for liquid soap. After spending the $40,000, it
may turn out that the customer only bought 15,000 cases of liquid soap. The sales
representative has now gone $10,000 over budget.
Maintenance
Accrual based spending is somewhat harder to track than lump sum dollars as the dollars
spent and accrued are not always part of the same event. In addition, the total spending
budget is constantly changing as more cases are shipped.
National vs. Account Specific Promotions: One of the issues manufacturers deal with today is what
sort of guidelines to give their sales representatives when planning trade promotions. There are two
different methods they may use or they may choose a combination of the two.
• Account Specific Promotion Programs
One method companies use, is to give the sales representatives a budget for their trade
promotions and allow them to tailor the promotions individually to the customer with no
guidelines from corporate. The spending budgets are developed during this process step.
• National Promotion Programs
Another method companies use is to have the marketing department define a list of national
promotions. These promotions will be available to all accounts and can not be altered by the
sales force. In this instance, the budgeting process step will not be performed. As an alternate
example, a key account manager may identify a list of promotions for the overall account.
Individual sales reps that call on the stores of this account choose from this list when defining
store-specific promotional activities.

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• Account Specific and National Promotion Programs
A final method is to set up both national programs that sales reps can choose to run at their
accounts or not and potentially to supplement that with additional funds for establishing account
specific promotions. In this instance, those spending budgets will be developed during this
process step.
• For additional information on the lump sum vs. accrual decision, see the Overall Design
Considerations section of this document.
STEP 2: Create Promotion Plan
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
INTRODUCTION
Creating the promotion plan is the largest component of the Manage Trade Promotions process. A good
plan is the cornerstone to successful trade promotion activities. Typically promotions have been seen by
manufacturers as short term initiatives to meet sales projections for a given period. Instead, trade
promotions need to be considered more holistically to meet long term account objectives. Creating a
formal promotion plan helps manufacturers to take this longer term view.
Developing the trade promotion plan by account requires a strong understanding of past sales and
promotions and often simply a “gut feel” for future events. As a result, developing this plan can become
a “black box” with the historical data going in and a promotion plan coming out. The challenge is to
understand the thought processes that the best reps are using to create profitable promotion plans and
to translate that into reusable process steps.
Given the breadth of knowledge required to develop the plan, this process step should not be solely
completed by either marketing or sales. Instead it should be a collaborative approach. Typically
marketing will provide initial strategic direction, sales representatives will use that direction as well as
their extensive account knowledge to develop the detailed plan by account, and promotion specialists as
well as sales management will review and approve the plan.
Promotion planning is often done twice a year for six month periods. As companies become more
progressive in their promotion practices and utilize more tools, the goal is to move to more of a
continuous planning process that allows them to apply learnings from the Q1 promotions to adjust the
promotions for Q2.

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FLOW
Develop
Preliminary
Plan
Roll-up
and
Adjust Plan
Obtain
Internal
Approval
•Promotion Plan by
Account/Product
• Sales Quota by
Account/Brand
• Spending Budgets by
Account
• Historical Sales Data
• Historical
Consumption Data
• Past Promotion
Results
• Retailer Performance
• Marketing Plan
• Promotional Strategy
for the
Brand/Product
• Account Plan
• Customer Promotion
Calendar
• Understanding of
Customer
INPUTS
• Sales Quota by Account/Brand: An understanding of the revenue and volume targets that
must be met for each account and brand is a key input to the promotion plan.
See step 1 inputs for a further definition of sales quotas.
• Spending Budgets by Account: If lump sum spending budgets are used, detailed spending
budgets for each account by product, or product grouping, are needed in order to create the
promotion plan. If spending budgets are determined based on accrual methods, the dollars
accrued for each product sold are needed in order to create the promotion plan.
• Historical Sales Data: Historical sales data is used to understand baseline sales for the
account. (See step G below).
See step 1 inputs for a further definition of historical sales data.
• Historical Consumption Data: Consumption data refers to the amount of product the retailer
sells to the end consumer. If consumption is much less than actual shipment volume, the
retailer is not selling as much as he is purchasing. He is stocking up or “loading”. This loading
is often done during promotion periods when prices are lower. The retailer will then need to
purchase fewer products later on when prices are higher.
Because a manufacturers key objective is to have more product consumed by end users, not
just ship it to sit in a retailer’s warehouse, he needs to focus on consumption data rather than
simply sales or shipment data.
For consumer products companies, consumption data can be purchased from third parties such
as IRI and ACNielsen. Many retailers also have this data making it a best practice for the
manufacturer to partner with his retailers to share information.

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The promotion plan should strive to increase the volume of product “consumed” by the end
customers.
• Past Promotion Results: Knowledge of promotions that did and did not work well in the past
is a key input to planning future promotion events. Results of prior promotions are compiled
during step 6, evaluate promotion effectiveness. It is critical to capture qualitative data about
each promotion in order for this history to be useful. For example, you may want to capture
other “causal” information that had an impact on the success of the promotion, such as unusual
weather conditions, competitive promotional activities, news stories about your company or your
competitors, etc.
Example: Ran an end aisle display and reduced the price of liquid soaps in 10 oz. bottles
to $1.59 from $1.89. There was a volume increase or “lift” over base sales of 25% during
the time of the promotion. Competitor A also ran a promotion on their liquid soaps with
Retailer XYZ during this time. Their price point for the 10 oz. bottles was $1.69.
• Retailer Performance: Retailer Performance has two components:
Consumption Data:
Some companies will pay funds to their customers based on actual consumption data (sell
through) rather than on shipments to prevent forward buying and diverting. In this
instance, actual consumption data will be needed during the execute step as it becomes
available.
Compliance Data:
Syndicated data sources will provide information that can be used to see if the retailer
complied with the parameters of the promotion (consumer price for the product, number of
participating stores, % of stores displaying the product) The manufacturer may also receive
some “proof of participation” from the retailer (such as a copy of an in-store ad or
newspaper insert featuring the manufacturer’s product)
• Marketing Plan: To maximize the effectiveness of the trade promotion plan, account managers
will want to take advantage of already existing marketing events and consumer promotions. As
an example, if you are going to run a price reduction on bar soaps for Vons, a sales
representative may want to time that price reduction for a time when commercials are running
for their bar soaps.
Marketing will provide sales with a consumer promotion calendar showing when all events are
running. They will also provide samples of ad slicks and other promotional materials.
The marketing plan contains four main components.
Advertising: television, magazine, etc.
Consumer Promotions: coupons (Free-standing inserts (FSIs)), rebates, etc.
Marketing Promotions: “Win a Trip to the Super Bowl”, special packaging and displays, etc.
Sales Promotions: sales contests, bonuses for gaining distribution for new products, etc.
• Promotional Strategy for the Brand/Product: The sales force must be provided with
information about the overall strategy and any guidelines for using promotion funds prior to the
planning period. In addition, they will be provided with information about how to spend
promotion dollars and specific promotion details as appropriate.
A key component of the promotional strategy is the role of trade promotions by brand.
See step 1 inputs for further definition of the Promotional Strategy for the Brand/Product.

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• Account Plan: The account plan developed during the account planning process contains
information about the goals for the account as well as types of promotions that should be run at
the account. The promotion plan should be consistent with the objectives outlined in the overall
account plan.
• Customer Promotion Calendar: Customer promotions are special events that are run by the
retailer. Examples of customer promotions may include fall harvest days, turkey giveaways, etc.
It is important for the sales representatives to take into consideration the promotional events
occurring at their customer sites to ensure their trade promotions compliment the customer’s
planned promotions and meet the customer’s needs.
Example: XYZ Grocery may draw customers into their store by giving away a free turkey
at Thanksgiving to customers spending a certain amount at their stores. This would be a
good time to run a promotion on specific items due to the increased traffic anticipated in
XYZ stores during this promotion. If you carry items that complement a turkey such as
stuffing or mashed potatoes, it would be an ideal time to run a promotion on those
particular items.
• Understanding of Customer: Information required to understand the customer could include
the customer’s:
Products / Services
Strategy
Goals
Objectives
OUTPUTS
• Promotion Plan by Account/Product: The promotion plan for the account will list all of the
events that are planned during the planning period. Information about each event will include:
Event start and end dates as well as order and shipment dates for the promotion
Products included in the event
Expected base and incremental sales for each product (lift)
Event tactics (end-aisle display, temporary price reduction, ad feature, etc.)
Event costs (per case shipped to retailer, per case sold by retailer (scanned), lump sums)
Payment methods (off-invoice, bill back, separate check)
Expected profitability for the event (incremental Return on Investment (OI))
ACTIVITIES
Activity 1: Develop Preliminary Plan
A. Obtain Understanding of Past Performance
• Review past sales figures to determine products sold at account and their base volumes
• Review past consumption data to understand products sold to the end consumer vs. forward-
bought (products purchased by retailers at low promotion prices and stored for future sales).
Affect of forward buying on base sales should be accounted for in the promotion plan.

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• Review past promotion history to understand learnings from past promotions.
B. Review account plan to understanding account goals
C. Review promotional strategy for the brand/product and marketing plan to understand corporate
events/strategy
D. Gather/Create list of potential events.
E. Historical events can be used as the basis for the plan.
• Where national promotions or promotion guidelines are used, a list of potential promotion events
will be supplied by marketing.
F. Determine which products you expect to sell at the account during the planning period
• Based on sales of past products
• Based on objectives identified in account plan
G. Enter base or everyday sales for each product
• This is equal to how many units that we expect to sell at the account if we were to run no
promotions. The difference between these base sales and the target/quota as identified in the
account plan is the volume that we need to generate through promotions.
H. Select or plan the preliminary events to run at that account by product
• This step is completed based on knowledge of promotions that have successfully run in the past.
• For companies who set up promotions at a national level, the sales representative may simply be
selecting the promotions to run from a “menu” of options. In companies that allow for truly
account specific promotions, the sales rep will need to develop promotional events from scratch.
I. Determine the volume impact of the event based on past customer performance
• Some companies may employ sophisticated computer modeling tools to perform this step.
These tools use lift factors that can be purchased from outside sources, such as IRI and
ACNielsen, or lift factors that have been calculated internally based on past events to estimate
the future volume for similar events.
• Other companies intentionally do not employ these expensive tools. Their feelings are that
there are so many factors impacting future performance (competitor events, new product
introductions, even weather . . .) that volume is better estimated by a person than a computer.
• Often, manufacturers will have a modeling tool to show the expected sales lift at different price
points, based on the historical performance of the brand at that account.
J. Review event profitability/ROI for both the manufacturer and the retailer.
• The selection of events is based on profitability for both the manufacturer and retailer. Sales
reps must develop “win-win” promotional events in order to get the retailer to agree to the
promotion. Often, the sales rep will calculate the impact of the event on the retailer’s bottom
line to use as a key selling tool.
In many instances, events are being run simply to generate volume. For example, if we are spending
$20,000 to generate an increased volume of 10,000 cases where the net profit per case is $1.50, we may
be meeting revenue goals, but we certainly are not meeting profitability goals.
Activity 2: Roll-up and Adjust Plan as necessary
A. Roll-up each individual event to determine the overall volume and spending for the account by
product or product group

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B. Adjust plan if necessary to meet corporate guidelines and targets (volume, spending and ROI)
• The preliminary plan must be compared to corporate guidelines for promotion spending.
• The preliminary plan must also be compared to the sales targets that have been established.
C. Adjust plan if necessary to make it “sellable”
• The preliminary plan may need adjustment based on customer understanding and personal
knowledge of the account. While a plan may look good on paper, meeting the manufacturer’s
targets and appearing profitable for the account, it may not achieve the account’s stated
objectives.
Activity 3: Obtain Internal Plan Approval
A. Review plan with designated managers for approval
• Once the plan has been created, it must go through internal approval before being reviewed
with the customer. The internal approval process and who reviews the promotion plans will vary
for every company. This may include the regional sales managers, a company’s corporate
promotion specialists (customer marketing) and the brand managers for each product line.
These managers will analyze the following:
Aggregated event plans by Account, Market, and Channel.
Each person reviewing account plans will want to ensure that the aggregate of the account
plans that he is reviewing meets higher level spending budgets and sales quotas.
Overall promotional events.
Regional managers and promotion specialists will use their knowledge to ensure that the
promotions selected and the expected lift from each seem reasonable. They will provide
advice on ways to obtain the greatest lift for promotion dollars spent.
B. Revise promotion plan as appropriate
C. Get Corporate approval
• The finalized promotion plan is signed off by the designated corporate approvers. This will vary
from company to company but could include people such as the corporate promotion specialist,
division vice presidents, etc.
Level of detail at which promotion planning is performed.
• At what product level does a company perform its promotion planning process? As an example:
Deodorants - you could plan for all deodorants, or break it up by product type: roll-ons versus
solids, or break down into the different scents. The lowest level of detail would be by size and
scent (sku level).
• Most companies find a happy medium and base the level they perform their planning on a
number of factors, including:
Information needed by other corporate departments such as finance, order entry,
manufacturing and production planning.
Cost/benefit of time required to do specific level of planning to the sales force.

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Include customer needs/preferences in promotion planning.
• Utilize account teams and joint planning processes where applicable.
With key accounts or national accounts, a new model leading sales organizations are
working towards is one made up of account teams where the members of the team
represent areas/services the retailer values. As an example, if a retailer values category
management, a category manager would be part of the account team. For every account
team member on the manufacturing side, there is a corresponding member on the buyer’s
side. Leading sales organizations are working towards collaboratively developing their
promotion plans with this knowledgeable account team where the manufacturer and
retailer work together to determine which promotions would be most effective for both of
them.
Take into account customer promotions when creating your promotion plan.
Simulation vs. Historical Planning
• Many companies simply plan based on their prior year events. “This seemed to work last year so
let’s do it again”. Other, more progressive companies will incorporate these past events with
current strategies and guidelines communicated by marketing and sales management for the
coming year. At the leading edge, companies are developing plans based on simulation/”what if”
projections of event volume, spending and ROI aggregated into a total projected plan.
Software is available to perform this what-if analysis (IRI, ACNielsen and AIM within the
consumer products industry). It is important to note, however, that common sense and
human interaction is still necessary to incorporate knowledge of upcoming events (i.e. a
competitor just released a new product so past history is not as reliable).
Planning Horizon
• The length of time that a plan will cover will vary by manufacturer, with event by event planning
at the low end and long term six month to one year plans at the high end. These longer range
plans should be a collaborative effort created with the customer, based on volume, spending and
ROI targets.
Approval Process Options
• Who approves promotions and when they need approval varies by manufacturer. Options
include:
All events require approval.
Events outside of predetermined guidelines require approval.
Total plan determines whether approval is required rather than individual events. Total plan
requires approval only if total projected plan does not meet target objectives (volume,
spending, ROI).

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STEP 3: Sell-in Promotion Plan
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
INTRODUCTION
After a plan is developed and has received internal corporate approval, it is ready to be presented to the
customer for their approval and to obtain the customer’s commitment to meeting the sales projections
given the designated promotional spending.
During the account planning process, many companies will be meeting with their customers to finalize the
account plan. The promotion plan will often be discussed at these meetings as well.
FLOW
INPUTS
• Promotion Plan by Account/Product: The promotion plan created in Step 2 is shown to the
customer during the Sell-In Promotion Plan step.
See step 2 outputs for additional information on the components of the promotion plan.
Prepare for
Customer
Questions
Present
Plan to
Customer
Revise
Plan as
Needed
• Committed
Promotion Plan by
Account/ Product
• Promotion Plan by
Account/Product
• Historical shipments
• Historical
consumption data
• Past promotion
history
• Customer Promotion
Calendar
• Historical Account
Activity
Commit
the
Plan

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• Historical Shipments: Past shipment data will be used to show the customer how the current
plan varies (or does not vary) from the past.
See step 1 inputs for a further definition of historical shipments.
• Historical Consumption Data: Past consumption data will be used to show the customer their
historical sales to end-consumers and how the new plan compares to the past.
See step 2 inputs for a further definition of consumption data.
• Past Promotion Results: Past promotion results are used to show the customer what has and
has not worked in the past and how the new plan compares to the past.
See step 2 inputs for further information about past promotion results.
• Customer Promotion Calendar: The promotion plan will be mapped against the customer’s
promotion calendar to show how the planned events fit with the customer’s overall promotion
plan.
See step 2 inputs for a further information about the customer promotion calendar.
• Historical Account Activity: Results of account meetings, activities and issues addressed
should be maintained for each account. Information related to past promotion activities and
issues is useful in anticipating customer questions and objections to future promotions.
OUTPUTS
• Committed Promotion plan by Account/Product: At the completion of this step, the
promotion plan developed during Step 2 will be marked as committed to by the customer – the
customer agrees to the volume goals given the spending provided.
ACTIVITIES
Activity 1: Prepare for Customer Questions
A. Review Historical Data
• Prior to meeting with the customer, it is important to review historical data on the customer and
to understand past issues.
B. Anticipate customer questions and objections
• Using his understanding of customer “hot buttons”, the sales representative can anticipate
questions and objections to the current promotion plan that will be presented.
• The sales representative should formulate responses to anticipated questions and objections in
advance.
Activity 2: Present Plan to Customer
A. Prepare Customer Presentation
• Presentation to the customer should include several components:
Calendar showing all the promotional events you plan on running with the customer during
a designated time frame alongside corporate merchandising and advertising events.

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Supporting materials for the promotion (display material, advertising material, contests,
packaging)
Clearly stated expectations of the number of cases that the customer is expected to buy
along with what you will be giving the customer to participate in promotional activities.
Anticipated customer volume (consumption) and profitability.
B. Schedule and Conduct Presentation
Activity 3: Revise Plan as Needed
A. Update Plan based on Customer comments
B. Obtain internal approval as needed
• If the customer revisions have an impact on projected revenues or budget, they need to be
routed through internal approval once again.
Required secondary approval steps and guidelines will vary by manufacturer.
Activity 4: Commit the Plan
A. Interface plan with manufacturing for volume forecasting
• The overall sales plan is initially sent to manufacturing when completed. However, the
promotion plan now gives an even further level of detail on the products to be sold.
Manufacturing should reconcile this data to their production forecast.
B. Set up plans in order entry/invoicing system
• The specific promotions need to be set up in the order entry and invoicing system so that orders
will be generated taking into account the guidelines and prices specified in the promotion plan.
As an example, if part of the promotion plan involves $2.00 off invoice for every cased of bar
soap sold to XYZ Grocery during the month of July, this needs to be recorded to ensure that
Vons will receive the appropriate discount on the cases of bar soap they order during the month
of July.
C. Set up plans in accounting system
• In order to ensure timely payment of promotion checks and to accurately track promotion spending,
it is important to have promotions tightly integrated with accounting systems. If these are not
automated interfaces, promotion information should be entered into accounting systems manually.
Commitment of the Plan
• Plan commitment may take place either after internal approval or after the final customer
acceptance.
• When a plan is committed, some manufacturers will want to save this plan as a “baseline” to
compare to at the end of the planning period.
Approval of the plan

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• Whether or not the plan requires another round of approval after changes are made by the
customer will vary by manufacturer. In many instances, the plan or events will only require
additional approvals if the revenue or spending projections have changed.
• Companies may utilize the same approval process that was used during the creation of the
promotion plan, or they may have a simplified approval approach for changes to the plan.
Integration with other systems and departments
• The promotion plan contains information that is useful across the company (customer
accounting, manufacturing, customer service, etc.). Rather than keep this plan as a sales and
marketing document, leading companies are sharing the plan across departments. This sharing
can be manual or automatic links to other systems.
STEP 4: Execute Promotion Plan
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
INTRODUCTION
The promotion plan documents what the manufacturer will do for the retailer in exchange for what the
retailer will do for the manufacturer. During this step, the manufacturer needs to actually execute their
side of the plan based on previous commitments. This will entail finalizing ads where appropriate,
performing retail activities as needed, and giving appropriate payments and discounts. In addition, the
manufacturer will want to monitor retail activities to ensure that their customers are acting as agreed.
FLOW
Assist in
Merch and
Advertising
Monitor
Retail
Activities
Authorize
Payments
• Completed Event/
Proof of
Performance
• Customer Payment
• Closed Deduction
Account/Product
• Shipments
Resolve Deductions

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INPUTS
• Promotion Plan by Account/Product: The promotion plan developed and committed in
steps 2 and 3 is required to understand performance requirements of both the manufacturer and
the retailer.
• Shipments: During this step, we will view the volume of actual product shipments sent to each
account to confirm retailer performance and to make payments as applicable.
Consumption Data:
available.
Compliance Data:
During this step, we will be looking at actual compliance and consumption data and comparing
that to our planned consumption for the product.
OUTPUTS
• Completed Event/Proof of Performance: At the end of this step, the event will be
completed and proof of retailer performance (did they really run the ad, display, etc). will be
obtained. If the proof of performance is not available, payment should not be made.
• Customer Payment: Where proof of performance is met, payment will be made to the
customer based upon the spending agreed to in the promotion plan.
• Closed Deduction: Deductions occur when the customer pays less than their full invoice
amount. They often do this because prices and discounts on the invoice do not match what was
agreed to with the manufacturer or because the manufacturer owes them money for promotion
performance and has not yet paid. During this step, deductions will be reconciled against the
promotion plan and proof of performances are cleared where appropriate.
ACTIVITIES
Activity 1: Assist in Store Merchandising and Advertising
A. Finalize ad, price, etc. as agreed to in the promotion plan
B. Execute any agreed to store level merchandising
• Some manufacturers utilize their own employees to set up displays or perform other merchandising
activities. Other companies hire third parties to perform their merchandising. Some manufacturers

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pay the retailers to perform their merchandising activities. Merchandising activities can typically be
performed by part-time and lower cost employees.
Activity 2: Monitor Retail Activities
A. Monitor Retail Activities/Conduct Store Checks on Major Sales Drives
B. Verify and document performance
• This would include verifying an ad you agreed to run for your product in the retailer’s weekly
circular was actually run, an end aisle display was set up correctly, etc. Some companies will
have their own account managers do these store checks; other companies will hire a third party
company to do them. PIA is a common company used to perform these lower level
merchandising/monitoring activities.
• Plans for a chain may include an expected level of participation in the promotion by stores in the
chain. For example, 80% of stores in the chain are expected to have an end-of-aisle display.
Activity 3: Authorize Payments
A. Review event performance vs. commitments
B. Authorize payment to customer if customer is eligible
C. Send payment authorizations to Accounts Payable
D. Check to see if open deduction for performance before making payment
• If applicable, apply payment amount to deduction
Activity 4: Resolve Deductions
A. Establish agreed to process for dispute resolution
B. Receive open deductions for customer from Accounts Receivable
C. Match open deductions to promotion commitments
D. Send “matched” deductions to Customer Service/Accounts Receivable to clear
System Links with Order Entry
• When executing promotions, often times off-invoice payments are made. In these instances,
the order entry and invoicing systems need to know the terms of promotion plan agreements.
This process should happen via an automatic link, but may often be a manual interface until the
promotion planning system becomes enterprise wide.
• Capturing promotions in order entry can also enhance deduction processing. Ideally, promotion
numbers are captured on orders and processes are built in for the system to automatically clear
most deductions.
Payment options

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• Manufacturers have many payment options available to them when promotion performance has
occurred. Any of these payment methods are acceptable. However, it is important to explicitly
communicate preferred payment options and to establish processes for executing those options.
Many problems exist when retailers and manufacturers are expecting payments in different
forms. Typically payment options include:
Gelco Draft: Gelco is a commonly used third party company for processing promotion
payment checks.
Separate Check: The manufacturer may directly issue a check to retailers for promotion
performance.
Credit Memo: The manufacturer may issue a credit memo to the retailer to apply to future
invoices.
Off-invoice: The manufacturer may take money directly off the invoice. This is typically
done on a per case basis. The invoice will show the regular price and a “sale” price.
Pre authorized deductions: In some cases, manufacturers welcome deductions from
retailers. However, it is important that the manufacturer be expecting these deductions
and have the appropriate clearing processes/systems in place to handle the deduction.
Prepayment: In this case, a manufacturer will pay the retailer prior to the promotion event
being performed. This ensures that retailers are paid on a timely basis and eliminates the
need for a deduction. However, many manufacturers do not favor this option because they
are concerned with non performance on the retailer’s part.
STEP 5: Monitor/Revise Promotion Plan
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
INTRODUCTION
The promotion plan acts as a guide for understanding the promotion spending and expected sales
volume at each account. An effective account manager will follow this plan to ensure that he is meeting
guidelines. During the planning period, any changes to the plan should be recorded along with actual
performance so that there is always a clear picture of expected performance and so that changes can be
made early on if expectations are not being met.

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FLOW
Track
Actuals vs.
Plan
Monitor
Inventory/
Shipments
Monitor
Trade
Budgets
• Updated Promotion Plan
by Account/ Product
(Current Forecast)
Account/Product
• Shipments
Revise
Plan as
Needed
INPUTS
• Promotion Plan by Account/Product: The promotion plan developed and committed in
steps 2 and 3 is required as the baseline to compare actuals to and to make revisions against.
• Shipments: During this step, we will be monitoring the volume of actual product shipments
sent to each account as they occur. These shipments are compared to our planned shipments.
Consumption Data:
available.
Compliance Data:
During this step, we will be looking at actual compliance and consumption data and
comparing that to our planned consumption for the product.
OUTPUTS
• Updated Promotion Plan by Account/Product (Current Forecast): As promotion events
are occurring and we are able to compare are actuals to our initial plan, we will modify the plan
to account for variances. The outcome of this step will be a current version of the plan based
on current knowledge and actuals. If updated diligently, this updated plan should always
represent the current forecast of total sales and spending during the planning period.
ACTIVITIES
Activity 1: Track Actuals vs. Plan
A. Apply actual figures to planned as available
• Actual cases

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• Actual revenue generated
• Actual promotional spending
• Actual profitability
• Participation
• Compliance with promotion parameters (price, stores w/displays, copies of ad features.)
Activity 2: Monitor Inventory/Shipments
A. Compare next weeks planned shipments to inventory
• This is a best practice to prevent out of stocks during critical promotion periods. It is not
currently seen at many clients.
• Timing of this activity (days, weeks) can vary based on cycle times.
Activity 3: Monitor Trade Budgets
A. Review and monitor trade budgets
• Capture promotion commitments/liabilities
Activity 4: Revise Plan as Needed
A. Identify variances to plan
• Progressive companies are using intelligent agents to scan for exception situations during
execution. In other companies, more manual methods are used and events are often only spot
checked.
B. Revise the plan as needed to meet new customer and business demands
• Significant differences to plan may require mid-course corrections. For example, expediting
additional shipments to support strong early promotion results or seeking additional funding
when promotion shipment volume is weak.
C. Obtain internal approval as needed
• If the customer revisions have an impact on projected revenues or budget, they need to be
routed through internal approval once again.
Required secondary approval steps and guidelines will vary by manufacturer.
Using the plan as a current “forecast”
• If the plan is monitored frequently and updated to show current actual shipments plus current
expected shipments, it provides a detailed forecast of total expected shipments at the end of the
period. The benefit of this forecast vs. the time commitment needed to keep the plan updated
should be addressed.
Capturing qualitative information about the event
• To make historical information more useful, it is important to capture other “causal” information
that may have impacted the success of the promotion for this account. This may include

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competitive activity, weather conditions, unusual publicity about the product or category (such
as a story in Newsweek saying that oat bran lowers cholesterol), etc.)
Approval of the plan
• Whether or not the plan requires another round of approval after changes are made during
execution will vary by manufacturer. At this stage in the process there is little that can be done
about volume changes and thus approval is typically not required. Additional spending will often
require approval.
• Companies may utilize the same approval process that was used during the creation of the
promotion plan, or they may have a simplified approval approach for changes to the plan.
STEP 6: Evaluate Promotion Effectiveness
Allocate
Budget to
Accounts
Create
Promotion
Plan
Sell-in
Promotion
Plan
Execute
Promotion
Plan
Monitor /
Revise
Plan
Evaluate
Promotion
Effectiveness
INTRODUCTION
As earlier discussed, past history is an important input into the planning process. In addition, studies
show that anywhere from 50% to even 90% of promotions are not profitable. The easiest way to
increase the profitability of trade promotions spending is to shift funds from what doesn’t work to what
does work. Thus, post analysis is a critical component of trade promotion planning process to ensure
that the most effective promotions are utilized.
As important as post analysis is, many manufacturers have resource constraints and do not perform
adequate analysis. Those that perform this analysis most effectively have promotion or customer
marketing specialists in the sales organization working closely with the sales representatives to
understand and document promotion performance.

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FLOW
INPUTS
• Promotion Plan by Account/Product: A copy of the baseline and current plans (if they are
both available) is necessary for comparing actual performance to plan during the post analysis
step.
• Shipments: Reports of actual product shipments to each account are required to compare to
the plan.
• Consumption Data: Actual consumption data, if available, is needed to understand the end
result of each promotion. How much was actually purchased by the end consumer?
OUTPUTS
• Promotion Results: During this step, we will analyze and document the results of the
promotion plan. These results are a key input to future planning sessions. This should include
qualitative data about the other “causals” that may have impacted the plan.
• Promotion Effectiveness Scorecard: Leading edge manufacturers will develop a formal
scorecard to consistently and effectively perform post analysis.
ACTIVITIES
Activity 1: Gather Promotion Results
A. Gather Actual Shipments
B. Gather Actual Consumption
C. Gather Actual Spending
Activity 2: Evaluate Individual Promotions
A. Calculate Performance Metrics
• Several metrics are used to analyze the effectiveness of a given promotion
% Lift:
To determine which event type provided the largest sales increase.
Weighted Weeks of Support:
Gather
Promotion
Results
Evaluate
Individual
Promotions
Document
Promotion
Learnings
• Past Promotion
Results
• Promotion
Effectiveness
Scorecard
Account/Product
• Shipments
• Consumption Data

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To understand the quality of support and type of ad support for the event activity.
Pass-through Analysis:
To determine what amount of merchandising funds have been passed through in terms of
reduced price to the consumer.
Trade Margin Analysis:
To identify whether an account is inclined to invest in brands and categories.
Spending Efficiency:
To determine the relative return on merchandising fund investment at the account level.
Cost Per Incremental Case:
To determine the cost of each incremental case sold during an event.
Profit Per Incremental Case:
To evaluate the profit generated by each incremental case sold during an event.
• Metrics can be documented on a promotion effectiveness scorecard for consistent
documentation and easy viewing.
B. Review performance metrics and determine root cause of problems
Activity 3: Document Promotion Learnings
A. Document customer and event learnings
• Document external factors such as retail competitor actions, significant out-of-stocks or
seasonality that may help interpret promotion results.
• Document additional learnings about what did and did not work well with the promotion.
B. Share findings within and between companies
• Communicate findings to other departments (marketing, manufacturing, customer accounting,
etc.) and mutually develop recommendations for the next planning cycle.
• Communicate findings to business partners and customers to help them understand what does
and does not work.
Tie consumption data back to promotions
When estimating the effectiveness of a promotion, it is important to understand not only how much
product was shipped to the retailer, but how much of your product was actually purchased by the
end consumer. This data helps manufacturers control things such as diverting products and forward
buying by the retailer. It also helps the manufacturer understand which promotions were truly
effective and which were not.
• Don’t underestimate the complexity.
Consumption data is purchased from third parties such as IRI and ACNielsen or from retailers.
Because of this, the manufacturer does not have any control on how they get this data or how
the 3rd parties track this data. If the manufacturer tracks and plans for their promotions at a
different level than the 3rd parties track actual consumption, it is difficult to tie this data back to
the promotions. Decide early what data you need to tie together and ensure that systems and
processes are in place to appropriately track the data.

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At what level should analysis be performed – Product or Account?
Post analysis should actually be performed at both the product/brand and the account levels.
• Typically overall product or brand analysis will be conducted by a marketing brand manager. He
is interested in determining which brands and products should get future promotional dollars
and how should future funds be allocated.
• Customer level analysis will be done by the field sales representatives and trade marketing
specialists within the sales department. They are interested in which events look most
promising for the account, in light of past performance, and how to maximize future event
performance.
4. Roles
There are several people involved in the trade promotion process, all with unique skills and
responsibilities. In leading edge companies, these roles are assembled into a cross-functional account
team to serve each customer as effectively as possible.
• Marketing Brand Managers:
Responsible for providing marketing plan and high level spending budgets to sales for a
particular brand or brand group
Establishes national level promotions and promotion guidelines
Performs post promotion analysis at a brand level
• Sales Management:
Overall ownership for meeting sales volume and profitability goals within pre determined
spending budgets
Allocates quotas and budgets to a sales representative or account level
Provides guidance during the creation of the promotion plan
Acts as a primary approver of the plan
• Field Sales Representative/Account Manager:
Primary responsibility for creating the promotion plan
Sells in promotion plan to customers
Executes and tracks plan
Performs post analysis at an account level
• Customer Marketing:
Promotion Specialists within the sales or marketing organization
Assists in plan creation and post analysis
Acts as a reviewer of the plan
• Customer Accounting:
Monitors spending budgets

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Oversees payment of promotion dollars
5. Key Process Measurements
• Trade Promotion Spending as a Percent of Sales: A common goal of initiating effective
trade promotion practices and analysis is to be able to more efficiently spend trade promotion
dollars – getting more revenue gains for fewer dollars. Measuring trade fund spending as a
percent of sales will help to determine if we are meeting that goal.
• Return on Investment for Promotion Dollars: Currently many manufacturers look at
revenue and case volumes rather than ROI. Implementation of effective trade promotion
processes will enable us to capture ROI and to see it increasing.
• Accuracy of promotion plan – revenue and spending projections: Compare actuals to
plan and document where differences occur. Over time we should see greater accuracy of the
plans – eventually leading to better production scheduling and reductions in the number of out-
of-stocks.
• Number of outstanding deductions: The overall deduction balance should decrease over
time
• Time to resolve deductions: The amount of time needed to resolve and clear a deduction
should decrease.
• Additional distribution for a product
• Adding more facings for an established brand: Gaining facings for a new product
• Consistency of product demand: While promotions are being run, we will often see huge
increases in shipments of the promoted products followed by little or no demand for the
product. This indicates that retailers are forward buying the product at the lower promotion
price and storing it for future sales. The overall promotion strategy and plan should look to
reduce the amount of forward buying and diverting by retailers and even out the demand.
6. Overall Design Considerations
National versus account specific promotion planning
• One of the issues manufacturers deal with today is what sort of guidelines to give their sales
representatives when planning trade promotions. There are two different methods they may
use or they may choose a combination of the two.
Account Specific Promotion Spending: One method companies use is to give the sales
representatives a budget for their trade promotions and allow them to tailor the promotions
individually to the customer with no guidelines from corporate.
Advantages:
♦ Allows the sales representative, who knows the customer’s needs best, to tailor
the plan specifically to meet their customer’s needs.
Disadvantages:

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♦ Sales representatives are not promotion experts and hence, may not know which
promotions are most effective.
National Promotion Spending: Another method companies use is to have the marketing
department define a list of national promotions. The sales representatives are given the list
of these national promotions and choose which promotions they will run for their accounts.
Advantages:
♦ Gives sales representatives specific promotion guidelines and provides them a
little lead way on customizing the promotions for their accounts.
♦ It is easier to set up the various promotions in the system since it can be done at
a national level rather than by specific accounts.
Disadvantages:
♦ Less flexibility to tailor promotions to individual customer needs.
Common Problems / Issues
• Over-promoting the brand may erode baseline volume.
• Too much promotion creates an expectation for the consumer that they should only buy the
brand when it is “on sale” leading to an erosion of baseline volume. In effect, you are “paying”
the consumer to buy a product that they would have otherwise purchased at full price.
• Under-promoting the brand may lead to loss of market share and distribution. If the brand is
not promoted, consumers may buy other brands that are “on sale” instead of paying full price.
• Plan not tied to clearly defined goals and customer strategy.
There are several typical “disconnects” when creating a promotion plan. Before embarking on
the trade promotion planning process, these “disconnects” should be addressed.
Targets are often not established up-front for trade promotions.
Brand/sku level spending efficiency and promotion profitability is not known.
Strategy decisions are made without factual basis.
The role of trade promotion by brand is not clearly articulated or communicated to the field.
7. Trade Promotion Best Practices
• Deal Simplification
Deal simplification looks to reduce the administrative costs of running promotions. The
complexity of managing many fund options across many events consumes an estimated
30% to 50% of an account manager’s time. The challenge lies in striking the right balance
between automating and standardizing processes to manage this complexity and
maintaining the incentive to perform.
Manufacturers have sought to simplify trade promotions by:
Reducing the number of options
Standardizing promotion frequency

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Offering advance payments
Simplifying off-invoice allowances
• Joint Planning
Although manufacturers can impose new promotion structures and plans on their own, it is
a best practice to work in concert with retailers in planning promotions.
By planning promotions together, manufacturers and retailers can develop more informed
production and operating plans.
Joint planning of events (their frequency, timing, conditions and configuration) greatly
reduces the uncertainty in promotion events and performance thus helping to better
understand the supply chain.
Processes and technology should be flexible enough to catalog, track, and share customer
specific information and include customer preferences and needs as part of the standard
process.
• Use of Post Analysis
As mentioned earlier, up to 90% of promotions ran are not profitable. Post analysis is an
essential best practice to understand what does and does not work to better plan future
promotions.
• Revisit the strategic role of the promotion
While trade promotions will not disappear from the industry landscape, manufacturers
should reconsider its use.
The key question is, Would less traditional, more targeted alternatives for reaching
consumers, like retailer’s card based programs and co-marketing solutions be a better use
of marketing dollars?
Whatever the promotion strategy, it should be clearly communicated and incorporated into
each individual promotion plan.
• Continuous planning – moving away from planning twice a year to continuous learning and plan
adjustments throughout the year.
• Align incentives to specific performance
Currently, most sales representatives are incented on meeting specific volume projections.
To obtain maximum ROI, sales representatives should be incented on meeting profitability
measures and account goals.
8. Other Facts to Consider
• Amount of trade promotion spending is dependent on brand recognition
The number of trade promotions you run is very dependent on where you stand in the overall
marketplace. As an example, for Dial, with the exception of their soap, most their products are not
#1 in the marketplace. Hence, customers do not demand certain Dial products causing Dial to have
to put money into trade promotions to move their products. On the other hand, Proctor and Gamble
have a number of products that are #1 in the marketplace which do not require such a heavy
investment in trade promotions to move their products. Specifically, Dial makes Purex soap. If a

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retailer does not carry Purex, most consumers would simple grab another brand of detergent and
continue shopping at that retailer. On the other hand, Proctor and Gamble make Tide. If a retailer
does not carry Tide, some consumers would actually go to another retailer who did carry that brand.
• Facts for ACNielsen’s Seventh Annual Survey of Manufacturer Trade Promotion Practices, 1997
Trends in Trade Promotion Spending
Trade promotion spending as a percentage of sales is 13% and has been constant from 1991
- 1996. Food manufacturers are the only industry showing an increase in trade promotion
spending, while both Health and Beauty Care and General Merchandise/Non Food
manufacturers indicate lesser levels of spending.
Manufacturers report a slight drop off in the share of advertising and promotion dollars
allocated to trade promotions in 1996. Trade promotion spending accounts for 54% of the
advertising and promotion budget, compared to 58% in 1995.
The slight reduction in trade promotion spending as a percent of advertising is due to
increases in the dollars spent on media advertising (i.e. commercials).
The allocation of trade promotion funds is becoming more fragmented as manufacturers use
a variety of tools to influence sales. Off-invoice allowances still represent the largest part of
trade promotion spending; however, this tool is declining in importance while street money,
pay for performance plans, and frequent shopper programs are expected to increase.
There is little certainty about the percentage of trade promotion dollars actually being passed
along to consumers. Managers estimates range from as little as less than 30% to as much
as 90% being passed along.
Problems with Trade Promotions
Trade deductions from invoices continue to be the problem which most companies feel they
need to manage better.
Slotting allowances, non-performance and non-pass through of deals are also areas that
represent problems for manufacturers.
Roles and Responsibilities
Senior sales management has emerged in the past two years as the main controlling
influence in managing the trade promotion budget. Brand management shows an increase in
management responsibilities from 1995 levels, although the responsibility level is half of what
it was in 1993.
Slightly more than half of the manufacturer companies surveyed claim the presence of a
Trade Marketing Department. This represents a substantial decrease from previous years.

Glossary
Account Specific Promotion: Promotions that are developed for and offered to a single account. See
Overall Design Considerations.
Accrual Programs: Programs for determining promotional spending budgets where accounts accrue
money to spend on promotions based on the number of cases purchased as opposed to having a set
dollar amount regardless of volume. See Step 1 Design Considerations.
ACNielsen: A 3rd party supplier of consumption data and promotion modeling tools for consumer
products companies.
ACV (All Commodity Volume): A measure of a particular retailer’s share of market volume for a
product/brand. This measure is often provided by syndicated data sources such as IRI or ACNielsen.
Base Sales: The sales volume that is expected to be sold to an account when no promotions are being
run. Also known as everyday sales.
Bill back: A bill submitted by a retailer to a manufacturer to be reimbursed for a promotion activity that
they have completed.
Bracket allowance: Providing discounted prices when shipment volumes reach certain revenue levels
or brackets. For example, if 1 to 25 items are purchased the cost is $4.50 each. If 26 to 50 items are
purchased the cost is $4.25 each and so on.
Cannibalization: Increasing market share for one product at the expense of another.
Consumption data: Statistics showing the volume of product that was actually purchased, and
presumably consumed, by the end consumer as opposed to the volume of product that was simply
shipped to a retailer. See Step 2 Inputs.
Co-op advertising: A manufacturer incentive to retailers where they will share the cost of a retailer
advertisement that features their product.
Coupon Ad Handling Fees: Money the manufacturer pays the retailer for processing manufacturer
coupons.
Customer Marketing: A group of individuals in the manufacturers sales or marketing department that
specializes developing, monitoring and evaluating effective trade promotions.
Deduction: The result of a retailer paying less than the full manufacturer’s invoice due to invoice error
or the manufacturer owing the retailer money, often for completion of a promotional activity. See Step 4
Outputs.
Discretionary Promotions: See Account Specific Promotion.
Display: Special shelving and placement to draw additional attention to a manufacturer’s product in a
store.

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Diverting: The retailer/reseller process of purchasing product in one area of the country or for an
account that can get a cheaper price and sending (diverting) it to another area with a more expensive
price.
End Aisle Display: A product display that is placed at the foot of a store aisle for maximum exposure.
Facings: Area on a store shelf in which to place the product. The goals is to get as much facings or
shelf space as possible.
Feature: Placement of a manufacturer’s product in a retailer’s consumer advertising.
Forward Buy: See Loading.
Free-Standing Inserts (FSIs): Groups of coupons that are placed in Sunday newspapers or in
mailings.
Frequent Shopper Programs: Programs such as Lucky Rewards where the consumer receives
discounts on certain products if they join the retailer’s club. These programs are quickly becoming
retailer’s performed marketing tools to build customer loyalty and track customer purchases.
Incremental Sales: The amount of product sold over and above the base (everyday) sales as a direct
result of a promotion being run.
Incremental TNDPC (total net dollars per case): A measure of promotional event profitability.
IRI (Information Resources Inc.): A 3rd party supplier of consumption data and promotion modeling
tools for consumer products companies.
Loading: The retailer action of purchasing additional product during lower cost promotion periods and
storing it for future sale when prices have increased (stocking up).
Lift: The amount of incremental sales, frequently seen as a percentage of base sales.
Lift Factors: Calculations of average incremental received for given promotions. These factors can be
purchased from third parties. They are often used to calculate the expected volume of planned
promotions.
Lump sum: A method of allocating promotion spending where a given amount of dollars are budgeted
regardless of actual volume as opposed to accrual programs.
Market Development Funds: Lump sum money that is allocated to push a particular product in a
given market/geographical area.
Market Share: The percentage of a manufacturer’s sales of a product of the total sales of that product.
For example, manufacturer Y has 27% of the printer, or liquid soap market.

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National Promotion: A promotion that is developed for and offered to all or many of a manufacturers
accounts, as opposed to account specific promotions. See Overall Design Considerations.
Off-invoice Allowances: Manufacturer practice of giving retailers a certain dollar amount off each unit
of product they purchase and deducting the amount directly from the invoice.
Out-of-stocks: When product is not available to be sold.
Pantry Loading: See Loading.
Payment Terms: The timing and methods in which a retailer must pay a manufacturer for products
purchased.
Planograms: Detailed store shelf “maps” showing placement of manufacturer’s product.
Return on Investment (ROI): A calculation of the dollars made given the total dollars spent. ROI is
an important post promotion calculation that is often overlooked.
Sales target/quota: The dollar and unit amount that each sales rep is expected to sell at his accounts.
See Step 1 Inputs.
Sell-through: See Consumption Data.
Sell-through guarantee: A guarantee made by manufacturers to retailers that the retailers will sell a
given amount of product to end consumers during a specified promotion or the manufacturer will provide
the retailer with additional promotion dollars or incentives.
Separate Check: A method for manufacturers to pay retailers for promotion performance by sending
them a check for the dollars promised.
Slotting Allowances: Additional funds provided by the manufacturer to the retailer to carry on new
product on their shelves.

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