Traditionally, trade marketing has been relegated to a secondary place in the marketing discipline, altogether a bit too close to more commercial functions. This is largely due to the fact that big budgets reside – or should we say, used to reside – within the realm of consumer promotions. However, with the increasing power of trade customers and the proliferation of brands, trade marketing has become integral when connecting shoppers with products, ultimately helping to ensure that channel promotions are effective marketing tools, rather then price bashing, brand diluting, and other retailer enriching activities.
Intuitively, we know this, but what else can we learn? In order to understand the current and future challenges of the discipline, I tried to go to the source of the problems, by interviewing experts in the field.
“In the out-of-home channel, the focus is shifting”, suggests Christian Maffeo, International Marketing Manager at SAB Miller in the Czech Republic. “We used to build scalable trade marketing activities to promote our brands, based on standardized materials: visibility and product trials were the only objectives. Now, co-branding is a significant component of our strategy as well.” In premium, out-of-home outlets in particular, it is impossible to utilize only standard point-of-sales and marketing materials (e.g. bar mats, branded glasses,…) and deploy standard activations because owners and managers need their outlets to stand out from the competition as much as our brand needs to stand out from their competitors. “We are co-creating with customers’ solutions that enhance our visibility at point of consumption, while at the same time, building our brands and their brands. The challenge is betting on the right customers, and ensure that the investment spans several years”.
However, what about the future? Maffeo goes out on a limb and suggests that we will see more tailor-made products for important customers, such as special editions and boutique offerings. Is trade marketing driving product innovation? The truth is that the idea is not far-fetched at all, because it is happening already in travel retail, where, for example, whiskey and cognac producers showcase limited edition bottles with prices in the range of several thousand pounds, and in consumer electronics, where portfolios in certain categories are slightly different from customer to customer in order to avoid full price comparison.
“In modern trade retailers, loyalty depends on two factors: tailor-made portfolios and customer-centric services” explains Sergio Locatelli, brand director at Alacon and previous marketer at P&G. “Brand owners play the enabler role, letting their retailer customers build loyalty with their shoppers. Retailers become more loyal to brand owners, thus transforming this into a self-reinforcing, virtuous loop”.
Nevertheless there are differences on how trade marketing is transforming within the modern trade channel and in the out-of -home, channel, continues Locatelli: “In-store activation is focusing more and more on portfolio deals: typically a brand owner will try to find synergies between bigger brands and the smaller ones, so that the first ones can support the latter in their trade marketing promotional efforts”. If we read in between the lines, the increasing cost of promotion in larger retailers is becoming a looming barrier to development for smaller brands, hence my previous remark of “price bashing, brand diluting, retailer enriching activities”.
Overall, trade marketing is becoming an innovation platform on which professionals can co-create with customers, become a co-branding platform, enrich shopper experiences in premium outlets, and finally, create a platform on which future trade synergies can be identified. Higher budget brands can support smaller budget companies on the path to critical mass.