Trade promotions involves B2B promotions focused on the supply side, incentivizing retailers to buy more products, so they are widely available to customers. Trade promotions can increase your bottom line upto 10-15%, according to a research undertaken by PriceWaterhouseCoopers. Here are some key benefits to look at:
Key Benefits of Trade Promotions in B2B Commerce
- Increased distribution: In B2B commerce, this is the main purpose of the trade promotions. For example, if Amul wants to improve the distribution of their butter, they can give 1 packet free with every packet sold. Hence, it adds more margin to the retailers’ profit. More margins invite more retailers; more retailers result in more sales opportunity as well as branding. Similarly, different types of trade promotions can increase the distribution coverage.
- Removes excess stock: Some products are seasonal, so they keep lying in the inventory when not in season. There are many disadvantages of having excess stock lying around: (1) Your inventory has less space to restock other products. (2) Excess stock might get out of trend before the next season arrives. (3) This stock might get damaged lying around. (4) Perishable products will anyway become useless. So, when the season goes, you can choose trade promotions to get rid of the remaining stuff; and use your inventory space for better profitable products.
- Increase order size: Selling to existing customers is much easier and cheaper than acquiring new ones. Research shows you are 3-10 times more likely to make a sale to existing accounts, compared to selling to new ones. Additionally, existing customers may not be fullyaware of everything you can offer, sticking to repeat orders of the same items. There is a clear opportunity to grow sales volumes within your existing customer base.
- Enhance loyalty: Promotions are commonly used to attract new customers, but also help to retain existing ones. This is extremely important these days as business customers buy more online and have fewer interactions with sales reps to guide and advise them. Harness the power of promotions to highlight new products, recommend bestselling items or cross-sell related articles. You'll create "stickiness” that will keep them coming back for more.
- Keeps products always available: People tend to buy the products that are immediately available with the retailer, rather than waiting for the product from a particular brand. In rare cases, people might wait, but most of the time their need or desire cannot wait, so they just choose from whatever is available. This is a strategy followed by Samsung and Apple. They ensure that the retailers’ shelves are always full of their products. This might put some pressure on the sales team, but more sales mean more profit and more profit means more payouts. So, salespeople will understand.
There are number of ways in which trade promotions help businesses grow and flourish better. But, the most important thing here is to understand that these are done considering wholesale customers in mind. Only retail sales are the real sale of your product, as this is the point where your product reaches the end user. Also trade promotions are great tool to guide B2B buyers on their self-served buying journey.
There are clear benefits to trade promotions, but getting them right is easier said than done. Learn how leading brands and wholesalers plan and execute their trade promotions, talk to our trade promotions specialist.