Consumer Promotions:

Building Manufacturer/Retailer Collaboration

by Adam Wilbur, Jacobs Agency
adamw@jacobsagency.com

May 2008
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INTRODUCTION
Manufacturers have long had a love/hate
relationship with consumer-facing promotions,
because they can be expensive, difficult to
track, and effective only for a short term.
However, consumer promotions remain a key
component of the manufacturer marketing
mix by providing premium in-store placement
that can help to drive sales, encourage brand-
switching, and positively affect consumers’
perception of the overall brand. Through
promotions, manufacturers are able to establish
strong marketing partnerships with retailers.
That partnership increases the value of
promotions well beyond the initial jolt to sales.

Key Takeaways

• Manufacturers can drive acceptance of promotional programs by considering

retailers’ needs when they develop their programs’ objectives, tactics, and
communication channels.

• It is vital for manufacturers to utilize tactics which will drive traffic to a

specific retailer.

• Promotional programs should be designed to guarantee that all promotional

activity upholds the brand promise, regardless of which retail chain is
executing the promotion.

A CHANGING PARADIGM
As a general rule of thumb, manufacturers
should not expect retailers to line up for a
chance to stock their product simply because
they offer a variety of promotional programs.
The days when retailers were quick to offer
Market Development Fund (MDF) dollars to
help fund a promotional campaign are long
past. To put it simply, retailers have more
control over the channel than ever before.
The rise of the big box retail chains and their
corresponding private-label brands has led
to a shift in the overall balance of channel
influence. Due to the sheer volume of items
large retailers purchase, manufacturers must
do everything they can to incent the retailer
to stock their products. For manufacturers
that enjoy widespread retail distribution,
there is still the issue of product placement.
Positioning products within eyeshot of
passing consumers on a consistent basis can
increase both product sales as well as overall
brand awareness.
While manufacturers and retailers both
continue to participate in promotional activities,
they do so for entirely different reasons. The
reasons for engaging in consumer promotions
most often cited by manufacturers are:
• Increase sales volume
• Maintain volume/share
• Increase market share

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Not surprisingly, retailer motivations for
participating in trade promotions are
quite different. Retailers engage in trade
promotions to:
• Increase store traffic
• Improve category profitability
• Increase customer loyalty
WIIFM?* (*WHAT’S IN IT FOR ME?)
In order to develop promotional campaigns
that are more likely to gain retail buy-in,
manufacturers must make a more concerted
effort to see the world through the eyes of
their resellers. Manufacturers pitch promotions
to retailers, promising an increase in product
sales. Increased product sales are good for
the manufacturer and good for the retailer,
right? It’s not always that simple. From a
TACTICS THAT WORK
The negative impact that promotions have on
category revenue for the retailer can be offset
by an increase in overall store foot-traffic,
leading to a rise in incremental sales in other
product categories. Therefore, when pitching
a promotional campaign to a retailer, it is vital
for the manufacturer to include tactics in their
promotional plan which will effectively drive
increased traffic to a given retail location. The
most effective promotional tactics to increase
foot traffic are:
• Targeted direct mail
• Co-op radio
• Loyalty programs
• In-Store demos and sampling
• Other engagement tactics such as contests
and celebrity appearances
While a promotional program may be wildly
successful in the eyes of the manufacturer for
driving product sales, it still could be perceived
as disappointing in the eyes of the retailer.
Therefore, in order to drive retailer buy-in of
promotional programs, manufacturers must
take an inclusive view of consumer-facing
promotions when considering objectives,
tactics, and communication channels.
retailer’s perspective, an increase in sales
of brand X during a promotion will inevitably
decrease sales of competitive and private-
label SKUs. Research indicates that a retailer’s
revenue gain from promoted items is about the
same or even slightly less than their loss from
non-promoted items. Therefore, manufacturers
must do more to offset the net-negative
impact a promotion has on retail revenue.
Manufacturers also need to keep in mind that
they are not the only channel members who
face vast competition. Retailers feel the
pressure as well and are no longer interested
in cookie-cutter promotional activities offered
through the channel to multiple resellers.
Manufacturers can take advantage of this
pressure to differentiate by offering up
promotions that are custom-tailored for
a given retail partner. That is to say, each
retailer will have the opportunity to opt-in
to a promotion that is available only to that
retailer should they choose to accept. In
this way, retailers can actually differentiate
themselves by participating in the
manufacturer’s promotional campaign,
even though that manufacturer may be
running a different version of a similar
promotion in competitive stores.
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When developing an account-specific
promotional strategy for a given retailer,
manufacturers would be well served to offer
creative platforms that support not only their
own brand, but that of the retailer as well.
One way manufacturers can tie into a retail
brand while still upholding their own brand
promise is to develop an over-arching umbrella
promotional platform or theme that extends
across all retailers and all promotions. By
doing this, manufacturers can develop specific
promotional programs for their retail partners,
so long as the messaging of the promotion
It is in the manufacturers’ best interest
to weigh the effects that promotions
can have on their brand.
is consistent with the overall promotional
theme. In this instance, the manufacturer’s
overall promotional theme guarantees that
all promotional activity upholds the brand
promise, regardless of which retail chain is
executing the promotion.
It is always in the manufacturers’ best interest
to weigh the effects that promotions can have
on their overall brand. While traditional pull-
advertising tends to focus on product features
and benefits, promotions have a tendency to
focus on price. Because of this focus on price
over product features and benefits, poorly
planned promotions can degrade overall
brand equity. This is a challenge for marketers
and brand managers who often fall prey to the
need for short-term price drops and rebates to
help spur product trial and increased sales.
There can be long-term negative effects from
these price manipulations. Marketers need to
seriously assess their willingness to cut into
their profit margins by offering price-based
product promotions. There is a vast array
of under-utilized promotional tactics and
communications channels at product
marketers’ disposal, many of which are highly
effective, measurable, and will not degrade
the brand’s equity.
Of course, no single tactic is appropriate for all
consumer-facing promotions. Marketers should
take into consideration a host of variables that
will determine the most appropriate set
of tactics against a given objective. Before
brainstorming promotional tactics, marketers
must make sure they fully understand the
business issue that the promotion seeks to
address, the objectives of the promotion, and
the metrics that will be used to evaluate its
success. Once promotional messages are
created, they may choose to spread the
word through a variety of integrated media,
including: in-store, print, online, catalog/direct
mail, and email. If the brand or program lends
itself to more creative ways of distributing the
promotional message, guerilla tactics, event/
experiential marketing, and package insert
programs may be appropriate. Marketers
should never forget that at the end of the
day, the focus should remain on engaging the
consumer. When running a promotion in-store,
companies may want to utilize online media
to drive traffic to retail locations. Just because
a customer chooses to shop online, they
shouldn’t be left out of the fun.
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otio
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A WIN-WIN COLLABORATION
Marketers often look to promotions as the
“magic bullet” for increasing awareness, sales
and market share for their products. However,
much care must be taken to ensure that
promotional dollars are spent in an effective
manner—encouraging retailer collaboration
and increasing sales volume without negatively
impacting the equity of the brand. It is a delicate
balancing act to embrace manufacturer goals
without alienating the retailer and most
importantly, while keeping the focus on the
consumer. It’s a complex situation with multiple
variables, some being well outside of marketer
control. But if manufacturers and retailers
collaborate to provide the consumer with
exciting promotional offers through a variety
of integrated messaging channels, everybody
can win.

About Jacobs Agency

Jacobs Agency is a full-service marketing communications agency
solving business problems for consumer and business-to-business
clients since 1997. Clients are from financial services, packaged
goods, retail, office products, technology and utility industries. With
Dimensional Marketing™, a proprietary communications development
process, the agency helps clients “enjoy their job” by implementing
smarter strategic solutions, relevant creative and a synchronized
delivery of measured media. For more information on Jacobs Agency,
visit www.jacobsagency.com.

Jacobs Agency 430 W. Erie St., Suite 403 Chicago, IL 60610

312.664.5000 newbusiness@jacobsagency.com

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FURTHER READING
Brickin, Shari. “Stupid vs. Strategic Sweeps.” Promo Magazine. July 1, 2007. http://promomagazine.com/
sampling/marketing_stupid_vs_strategic/.

Cecere, Lora, and Fenella Sirkisoon. “What Is an Effective Trade Promotion?” AMR Research. November 9, 2007.

Dekimpe, Marnik, Dominique Hanssens, Koen Pauwels, and Shuba Srinivasan. Do Promotions Benefit Manufacturers,
Retailers or Both? Rotterdam: ERIM, 2002.

Del Franco, Mark, and Sherry Chiger. “Multiple Views of Multichannel Promos.” Multichannel Merchant. December 1,
2002. http://www.multichannelmerchant.com/news/marketing_multiple¬views¬multichannel/index.html.

Dhar, Sanjay K., and Peter E. Rossi. “Why Responsiveness to Retail Promotions Varies Across Retailers: New Research
Looks Beyond Price Cuts.” http://www.chicagoexec.net/chicago.nsf/SBH (accessed October 23, 2007).

Karolefski, John. “Pushing Product: Is In-store Promotion Effective?” July 8, 2002.

http://brandchannel.com/featrures/effect.asp?id=106.

Klein, Howard. “Top of Mind: Science Meets Art In Account-Specific Realm.” Brandweek. November 15, 2004.
http://allbusiness.com/marketing-advertising/branding-brand-development/.

Liss, Boni. “Brand Marketing: Inside Information (The In-Store Juggernaut).” January 1999.
http://www.pmalink.org/resources/default.asp?p=whitepaper10.

MacInnis, Debbie, and C.W. Park. “Branding and Brand Equity: Clarifications on a Confusing Topic.” Branding
and Brand Equity. Marketing Profs LLC, 2006.

Marketing Profs. “Advertising vs. Promotion Decisions.” January 28, 2000. http://www.marketingprofs.com/
Tutorials/AdvsPromo.asp.

Park, John L., and Gene A. German. The Promotion World According to Retail. Ithaca: Cornell University.
January 1999.

Sales Promotion Services Inc., “Tips on Achieving More Effective Consumer Promotions.”
http://www.salespromo.com/buildingmoreeffectivepromotions.htm (accessed April 18, 2008).

Vurva, Rich. “Developing Killer Sales Promotions.” Progressive Distributor. January/February 2004.
http://www.progressivedistributor.com/progressive/archives/Marketing/KillerPromos.htm.

Wortsman, Marc, and Jonathan Ehpraim. “Summary of results: PMA 2004 Sweepstakes Response Rate Study.”
March 28, 2005. http://www.pmalink.org/resources/default.asp?p=res_2004ssrrs.

©2007 Jacobs Agency