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State of Brands: How Trade Promotion Strategy Affects Brand Loyalty

With how much time and resources are invested into advertising and marketing strategies to increase brand equity, sometimes it’s easy to forget that the most effective moment of influence on a consumer’s view of a brand is still the “first moment of truth” – the moment at which the consumer encounters the product in store.

And of all the ways to impact the first moment of truth, one of the most effective ways is through tailored trade promotion strategy. An effective trade promotion strategy can be one of the best ways for a brand to increase brand loyalty. As trade spend continues to increase, every manufacturing company is working through ways to make trade spend more efficient, but often this is by trying to play a numbers game – how do I lower spend to increase ROI? We simply choose to invest in promotions that have the least spend or the highest ROI.

Often times we’re comparing strictly based on metrics that we see on paper without fully understanding what is driving the results we’re seeing. A perfect example of this is food and beverage client that Clarkston recently worked with. During year-end promotion analysis, sales teams realized one spring promotion had a particularly high ROI for a particular brand, so they continued to invest year after year into this event.

During the course of our time with this client, we realized that this event had a high ROI only because consumers were stocking up on the products during the promotion, but not purchasing during the subsequent months – a promotion with a high ROI had a detrimental effect on the overall performance of the brand! So how can we help improve our trade promotion practices to increase our brand equity? The two main ways are centered on organization and technology.

The organization needs to be built in such a way that the sales teams are working jointly with brand managers throughout the course of the year. We tend to have sales teams and brand marketing teams working separately, each with its own metrics and goals to execute against. In the example above, we see that the sales team is most likely measured against top line growth and reduction in spend, so investing in high ROI promotional activity seems like the best strategy.

Until the organization is structured so that sales and brand management have regular cross-functional alignment meetings, seemingly good decisions will be made that have detrimental effects on the overall goals of the company. On top of this, companies need to have the proper technology to provide accurate information on which sales and brand managers can base decisions. In our example, the company began by working with basic, yet accurate information about promotional execution.

Only once this very necessary first step was completed were they able to begin using more advanced reporting to dig deeper. At this point we can begin to look into answering questions that have a great impact on our brand performance.

Does this promotion increase long term brand performance, or only encourage an immediate boost? Can I run a promotion with two separate brands in my portfolio to help increase performance in both categories? Does my brand perform better when promoted at the same time as a competing brand? How does this affect overall category performance?

An effective trade promotion strategy can do more than just increase sales and decrease trade spend – it can be the most effective tool in your bag for increasing your brand performance and driving brand loyalty. By encouraging cross-functional alignment between sales and marketing and by investing in trade technologies and reporting tools, you can have a more practical impact on brand equity than any advertising strategy available.

Tags: Trade Promotion