Careful planning is required to maximize budgets for trade spending, which is the process of paying retailers to promote a specialty food brand’s products to its customer base, said John Maggiore, principal at Maggiore’s Sales & Marketing, during last week's SFA Maker Prep webinar, “Understanding Trade Spending.” Maggiore discussed the important considerations to make the best use of this budget.
“The key thing is to remember that trade spending should be thoughtful, strategic investments, not a rote program. You want to build trial, you want to load some product into the store, you want to build the volume up,” Maggiore said when explaining the dynamic role the budget plays in a business’ success. “Trade spending is so important in creating your business and driving volume, then managing it so it doesn’t bankrupt you.”
A trade spending program creates opportunities for consumers to buy a product, incentivizes the retailer to feature an item, helps drive volume, allows a brand to capitalize on high-usage occasions like holidays while maintaining sales levels during periods of lower usage, and maximizes retail placement through distributors, Maggiore said. This type of program can include something like promotional placements for a product or brand throughout the store or on a rack and come at a higher price.
A successful trade spending program is purposeful and communicates events throughout an organization. Additionally, it is forward-thinking by anticipating a program’s impact on demand planning, operations, marketing, and cash flow, touching many different business areas. An empirical period should follow where the business evaluates what works and develops profit and loss sheets by customer type, according to Maggiore.
Collaboration between a brand, retailer, and distributor is also crucial, as everyone’s end goal is the same: to sell more product. Fostering a “win-win-win” scenario can be made easier through communication in a timely manner, in addition to aspects like being clear about how to achieve strategic goals and transparent about each channel strategy.
“The longer out into the future you communicate, the better chance you’re going to have of having more effective programs,” said Maggiore. A program may require six months or more to ensure it will flourish.
To learn more about the trade spending process, watch the webinar on demand in SFA’s Learning Center.
Related: Trade Spending 101: Q&A With Sales Strategist; Sherpa CPG's Ho Presents Best Practices for Package Design