To maximize successful trade spending, careful planning is required. John Maggiore, principal at Maggiore’s Sales & Marketing, will discuss important considerations to make the best use of this budget, during the SFA Maker Prep webinar, “Understanding Trade Spending,” this Thursday, November 10 at 1 p.m. EST.
SFA News Daily recently spoke with Maggiore about the topic.
What are the benefits of trade spend?
Trade spend primarily functions to attract new consumers to your brand and to encourage consumers to buy your product because it is on sale and on display. The average supermarket has over 25,000 items in it and the average customer is going to buy less than 50 of them when they are shopping; trade spend helps you become one of the items they choose. Often, with a deal, your item will be signed and/or displayed which results in increased sales.
Is trade spending necessary?
Typically, yes. Most retailers require some type of trade spend as part of their agreement to carry your product.
What sort of control do specialty food brands have over the way retailers promote their products?
The biggest control brands have is by choosing what promotional vehicles they wish to participate in and at what level they are willing to spend. Most specialty brands are distributed by a third party (i.e., UNFI, KeHE, DPI) and most retailers have programs built that work in conjunction with their distributor’s promotional calendar. It is key for these brands to communicate to their distributors and retailers about what programs are working for them and, more importantly, what is not working. The goal should always be to make promotions a win-win.
Promotional retail is the choice of the retailer; however, you should always be advocating for the retail you desire. If a retailer deviates too far from your desired retail–either higher or lower, it should be addressed and discussed why this occurred. If necessary, make changes to future promotions to help you get to your desired retail.
Do you see specialty food businesses make any mistakes when allotting money for trade spend?
I believe the biggest mistake is underestimating how much trade spend dollars you will need for your brand, especially with new brands or existing brands entering new geographical areas. Additional funds will often be needed to bring your sales to the “benchmark” to remain in the planogram, either because your items are not turning fast enough or new competition has entered the category.
When brands enter new territories, they often assume that their sales will grow faster than they do. This is usually because brands have not done their homework on the area and don’t understand the size of the category or regional brand.
What are key considerations when paying to promote a product?
The main consideration should be whether it is the best opportunity to spend these funds at a given retailer. Just because a certain promotion or trade spend aspect worked at one retailer it does not mean it will work at another. Brands also need to be aware of what their competition is doing at the retailer because your buyer will likely expect you to participate at a rate equal to or better than your competition.
Are there any conversation points between a brand and retailer that should be touched upon before a promotion is initiated?
Absolutely. The brand should understand exactly what they are paying for and what the retailer expects from the event. This includes the timing of the event, retail price point, and display execution.
What would you like attendees to get out of the education session?
I hope attendees will leave this session with a better understanding of how best to utilize their trade spend dollars to maximize sales during these events. Trade spend is not a perfect science and requires adjustment based on factors in the market and in the category.
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