Trade Dollars Not Very Loyal
By John Hennessy
PROMO Xtra ran an item on March 17th covering the Trade Promotion 2005 study by Cannondale Associates. The study measured a decline in the money consumer packaged goods companies spend on trade promotions (down to 48 percent of total marketing budgets from 49 percent in 2002 and 51 percent in 2001) and an increase in their spending on advertising (now 25 percent of total budgets up from 24 percent where it has been since 2000).
Cannondale attributes the shifts to changes in accounting practices rather than actual decreases. They also chide CPGs for ignoring that retailers’ need to focus on categories and consumers rather than short-term, brand-level growth.
Retailers ranked Kraft (cited by 36 percent), Procter & Gamble (32 percent) and General Mills (19 percent) as the CPGs that are best at trade promotion overall. But all three slipped from their 2003 ratings.
CPGs ranked Wal-Mart Stores (cited by 69 percent), Publix (28 percent) and Kroger (26 percent) as the retailers with the best strategic vision for trade promotion.
Moderator’s Comment: Why do you think packaged goods trade spending is in decline? What can be done to reverse the trend? Should it be reversed?
The decline in trade spending says it isn’t working. If trade promotions were delivering superior returns, more money would be flowing into them, not seeking
better performing alternatives.
On the one hand, Cannondale chides manufacturers for focusing on short-term brand growth at the expense of category and consumer strategies. On the other
hand, retailers are expanding private label programs, thus engaging in brand-focused initiatives of their own.
All parties would be better served by gaining a better understanding of the preferences of the customers buying their products and shopping their stores.
George Anderson – Moderator