Trade Marketing

“If you control your factory, you control your quality; if you control your distribution, you control your image.” — Bernard Arnault, Louis Vuitton MH.

Trade marketing - category management and brand management

Exhibit 32.5   Trade Marketing, the partnership — it remains in the best interests of both manufacturers and retailers that categories are well managed.

Manufacturers rely heavily on their trade partners — a brand must first gain and hold distribution before consumers can buy it. To secure their trade partners support in procuring, distributing, promoting and merchandising, manufacturers need to market their products to them.

This form of business-to-business marketing where manufacturers seek to grow their business with their retailers, wholesalers and distributors by building value added relationships is called trade marketing (Exhibit 32.5). It is of great importance especially for products where brand choice decisions are made in stores at point-of-purchase.

Trade marketers devote considerable time and resource to partner retailers in developing their brands and categories in their stores. This is an ongoing process with long term commitment that yields business gains for both parties.

Trade marketing requires considerable tact as manufacturers and retailers strive to achieve the delicate balance between their shared objectives and their distinct individual goals. On the one hand, these partners work together to enhance marketplace equity, and improve the overall performance and profitability of the category, but on the other hand, they are engaged in competition for the profit that can be generated from the sale of goods.

They rely on conflicting profit models. Manufacturers seek economies of scale and a return on investment, whereas retailers are interested in economies of scope and return on inventory.

That they share complementary resources and capabilities strengthens their bond and increases the likelihood that both achieve their respective goals. Yet, there is the need to ensure that the engagement does not hover solely on negotiating discounts and trading terms, and that greater attention is devoted to the development of brand loyalty, store loyalty and marketplace equity. To sustain and strengthen the relationship, it is important the partners continuously align and strengthen their mutual self-interests.

The process of category management has become a crucial component of the trade marketing process. It serves to bring manufacturers closer to their business partners in a constructive process that encourages sharing of plans and strategies, synchronizing activities and resources, as they jointly work towards building marketplace equity.

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