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30 July '14 | Debjyoti Paul

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How Global Companies Fine-Tune Local Promotions

Posted on: 06 September '11

On my last visit to Bangkok, I happened to stop by a small retailer, usually referred to as mom and pop shop, with the intent of buying my favorite brand of soap bar. Though I had the choice of going to a big retailer, I chose not to as it was far away from the place I stayed. I entered the shop and was greeted by a large banner with deals on another brand of soap bar, not the one that I was used to. The newly advertised soap bar fell in the same category of soap bars as the one I always use, but it was from a competitor. . I went to the shelf and I could see that the competing brand had consumed more space than the one I was looking for. Additionally, a free sample was being offered when somebody purchased the product in multiple numbers. I got curious about the multi-tier promotion on the new product and decided to go for the new soap bar which I had never used till now. Although I had come across the same brand (new product) in my home town, it had not lured me enough to buy it there. As a consumer, I had broken the product loyalty in a foreign country.

Many of you must have been in similar situations, where a product from the same manufacturer is being promoted in different ways in different markets. The shop owner from whom I purchased the soap bar mentioned that the multi-tier promotion is in place as this manufacturer is launching the product in this market for the first time. Although the product is in a mature and established phase in my home town, the same product is in an infancy stage in the country that I was in. Thus, we can understand that a product in different stages of its life cycle and in different markets would call for different trade promotion tactics. This may not be the only reason for a promotional activity to be different. There are multiple drivers which influence trade promotion management in different markets as depicted in Fig. 1 below.

Product Life Cycle

Fig 1: Drivers of promotion in different markets

One of the key drivers of promotion is the market structure – and the penetration of Modern Trade (organized retail) compared to Distributive Trade in a specific market. Typically, in the emerging markets the extent of modern trade is less compared to the distributive trade. This leads to the following challenges:

Multiple Hops: As distributive trade comprises of a large number of small retail stores, the number of intermediaries between the manufacturer and the consumer are more. In some instances there can be even five to six intermediaries in this supply chain consisting of multiple levels of distributors, big retailers and small retail shops. Obviously, it leads to complexity in terms of availability of products at the store.

Control of Manufacturer Vs. Retailer: As Distributive Trade is more common in the emerging markets, the manufacturer has a great influence in the way the promotions are planned and executed. Thus it becomes the responsibility of the manufacturer to manage the entire process. But on the other hand, in case of developed markets the retailers would have great influence and control because of the organized trade. So, in case of modern trade, the retailers would need the manufacturer to align their trade promotion with theirs so that it does not get counter-productive.

During the end of my stay in Bangkok, I went back to the same mom and pop store again after two months. Now, the banner was not to be seen but there was a price discount available on the same soap bar. From the manufacturer’s perspective, one of the most important objectives of promotion is to know whether the promotion that was run in the store was effective or not. The answer is not straightforward as it depends on the availability of sales data at a granular level over a considerable period of time. It also depends on the maturity of data analytics of the organization in converting the data to knowledge. A typical trade promotion maturity model is depicted in Fig 2. Every organization finds itself in different maturity levels in each of the markets when it comes to analysis of promotion data.

Trade Promotion Management

Fig 2: Trade Promotion Maturity Model

To know more about other drivers of promotion in different markets, achieving optimization through advanced analytics and a sneak peek into MindTree’s SaaS based solutions, join us on the Webinar with Consumer Goods Technology (CGT).

 

 

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  • Praveen

    Good simple article, which makes understanding the obvious things which we see and experince in daily life.

    Trade promotion in impulsive buy industry is very challening as the risk and cost involved is less for consumer, compared to the consumer durable industry.

    CPG industry is volume game with very less product differnciation, all the differencaition happens in packaging, celebrity endorsements, choice of media vehicle and timing, shelf space, availibility, et all..