As a concept, trade marketing is often completely misunderstood. Yet it's an incredibly important business discipline, so today we're going to reveal everything about it.
We'll explain what trade marketing is, why it’s important, who uses it and how. We'll look at trade marketing examples, tools and techniques, plus we'll help you create an effective trade marketing campaign of your own.
What is trade marketing?
Let's kick this article off with a definition.
Broadly speaking, trade marketing is a form of B2B marketing.
It’s the art of marketing products specifically to businesses [as opposed to consumers]. Normally, the main objective of a trade marketing campaign is to sell products to other companies who can then go on to sell those items to their customers.
Who uses trade marketing and why?
Manufacturers use trade marketing.
[And to clarify, a manufacturer is a person or company that makes goods for sale.]
They use trade marketing tactics to try and sell their products to retailers, wholesalers and distributors [who are sometimes collectively known as supply chain partners].
Why? Well, for a product to be sold in a shop to the public, the retailer first needs to purchase the item from somewhere. Retailers could buy products directly from the manufacturer, but they might also go via a wholesaler or distributor.
[Wholesalers and distributors essentially act as middlemen. They don't make anything themselves; they buy products from manufacturers in bulk and sell them on to retailers.]
It's clearly better for the manufacturer to sell directly to retailers but they might not have the luxury of choice, in which case they need to promote their products to all 3 parties.
Trade marketing strategies are used to create demand for their own stuff and this is important, since retailers [plus wholesalers and distributors for that matter] have millions of products to choose from.
What's more, there's only so much shelf space too.
But marketing efforts can pay off. Whilst the margins can be wafer-thin, in a perfect world, everyone in the sales chain will make money [especially if we're talking about products in big supermarkets].
As you might have guessed, the retailer is ultimately in the position of power [and every party is acutely aware of this].
As such, there’s an ongoing battle between manufacturers to get products in front of supply chain partners and if a manufacturer doesn't use any trade marketing campaigns, it puts their profitability at huge risk..
Trade marketing tactics could prove to be the difference between a retailer choosing one product to sell over another so it's strange that manufacturing companies often ignore trade marketing or completely misunderstand it.
How did trade marketing become so important?
The concept of trade marketing really became relevant and important in the 1990s.
Previously, a manufacturer held a very strong negotiating position, but during that decade, the balance of power shifted considerably and retailers started to call all the shots.
Mike Anthony is a trade marketing expert.
Something of a pioneer in shopper marketing after a 17-year career in consumer goods, Mike is the CEO of engage, a company that helps organisations create the insight and strategy required to drive their marketing and sales efforts.
I spoke to Mike and he told me that trade marketing has been around for over 25 years. And that the need for trade marketing became more apparent when fast-moving consumer goods companies [FMCGs] became concerned about several critical issues.
In this blog post, Mike reveals how FMCGs were worried about 3 things in particular:
1. Media fragmentation
As technology advanced apace throughout the decade, the big business challenge was how to reach an increasingly dispersed audience.
Traditionally, companies were always able to communicate with a huge audience via a small number of [easily manageable] channels. Times were changing and this was becoming more difficult.
All of a sudden, consumers became more distracted than ever before. Where manufacturers could once speak to audiences whenever they wanted, now they couldn't.
As a result, the cost of communicating to consumers increased and the captive audience that exists in a retail shop became more valuable.
2. The popularity of category management
In the 1990s, businesses began to group multiple products into ranges, rather that treat them as individual items.
So, for instance, a toiletries section might include several things that aren’t always conveniently related. We might be talking about toothpaste, toothbrushes and dental floss, but equally, we might also have to consider deodorants, toilet paper and nail scissors.
The advent of category use in a retail environment caused 2 issues. Firstly, it completely changed a number of relationships.
Negotiations between manufacturers and supply chain partners hinged on the turnover of the entire category in question [not just the sales of individual products].
Manufacturers had to justify how their products could help a retailer grow a category, not just their brand.
Secondly, by generalizing in this way, it became more important that a product stood out. So, category management automatically increased the importance of brand marketing. Either way, you had to market your products better than your competition; there was no other option.
3. Retail consolidation
In the 70s, many corporate big wigs believed that the best growth strategy was to acquire or merge with existing stores. The 90s saw this trend grow.
Opportunities for new products became more scarce.
In addition, the reduction of retailers really cranked up the pressure for manufacturers. Gradually, massive retail chains assumed all the power and control.
It wasn’t rare for manufacturers earn 80% of their revenue from just 3 retailers.
Therefore, manufacturers had to maintain good relationships with existing clients and do everything they could to stay in their good books. Trade marketing helped manufacturers level the playing field.
If you weren’t good at trade marketing at the start of the 90s, you sure were by the end.
And it’s clear how many of these issues are prevalent today. Manufacturers still have to differentiate their product from a rival’s and create a buzz before anything sits on a shelf.
They still have to contend with a busy audience with diverse agendas. They still have to cope with wholesalers and distributers that have diverse agendas. They still have to liaise with retailers in a position of power.
And trade marketing is still the answer.
In fact, it’s never been more crucial.
Methods of trade marketing
There are lots of different trade marketing methods in use today.
For some manufacturers, trade marketing is purely a shopper thing.
It's about accumulating data and using the information to craft persuasive messages that will convince sales chain partners to keep buying the product in question. For instance, suppose a company manufactured a fruit drink and this product line is really successful.
Well, the sales figures can be used for marketing purposes.
If a retailer sees another retailer making loads of money out of a product, it won't want to miss out, so this data can be very persuasive and manufacturers can play shops off against each other. However, for other manufacturers, trade marketing might be more about building relationships at trade shows.
For them, trade marketing is less about the shopper. Perhaps some companies don't have any market data to use or haven't been around for very long, so meeting key decision makers is a bigger priority.
As you can see, both approaches are very different. And we think there are 7 really important trade marketing strategies out there. In no particular order, let’s take a look at the main trade marketing strategies.
1. Trade shows
Trade shows are ideal for networking and forging good business relationships. Plus, if a manufacturer needs retailers, wholesalers and distributors to hear about their products, they’re also the perfect environments for improving brand awareness.
2. Trade promotions
Manufacturers need solid relationships with retailers, wholesalers and distributors.
Creative promotions and offer incentives can motivate clients and boost repurchase rates. The bottom line is: people love special treatment.
3. Trade magazines and websites
Adverts and articles will bring more eyeballs onto your brand.
Adverts may cost money, but you have to speculate to accumulate. Meanwhile, PR will give your business authenticity, trust and relevance.
Of course, marketing only really works if there’s a strong brand behind the product.
Supply chain partners aren’t out to make a quick buck. They want products that consumers will buy over the long term and that sort of customer loyalty only comes with smart branding.
5. Strategic partnerships
The aim of trade marketing is to create a win-win situation by achieving shared objectives.
In other words, manufacturers want to sell their products, as do wholesalers, distributors and retailers. So, if everyone wants the same thing, that’s a good starting point.
Relationships are crucial. Manufacturers should aim to collaborate with supply chain partners in all sorts of ways. That could mean aligning shipping and inventory management systems to generate shared savings.
Or swapping market research so that all parties can better understand consumer behaviour. Or maybe even partnering on advertising campaigns and sharing marketing collateral.
6. Ongoing market research
Knowledge is the key to building a profitable partnership with a supply chain partner. There's no getting around it - information is power, so data is hugely important in business.
The more manufacturers understand their product, their market and their target audience, the better placed they’ll be. They’ll be able to create better products and more suitable marketing.
7. Digital marketing
Of course, trade marketers must move with the times. Many trade marketing strategies can be executed online, just like digital marketing tactics for consumers.
Trade marketers should keep in touch with their prospects via social media, email and content marketing. Research by Vanessa Fox, who is a former PR rep for Google, thinks that the top 3 targets for trade marketers are:
- Social media marketing platforms
Now, clearly you’re going to need to make personal contact with a client every so often.
As a trade marketer, you must find the balance between the ease and effectiveness that digital marketing brings, and the sincerity and power of a phone call or meeting.
But the point is, close and frequent contact with your clients and prospects is essential and, to a large extent, you can achieve this by having a solid online presence and a comprehensive strategy for keeping in touch with your contacts.
There’s little doubt that the battleground for consumers is now online. Retailers that are adopting digital marketing are seeing 2.5x-3x lifts in key performance metrics.
Most companies with an online presence have a little knowledge of digital marketing.
Whether Facebook ads to SEO, email marketing to lead generation, customers are more accessible than ever.
But so are supply chain partners. They are real people and can be targeted in exactly the same ways, so clever manufacturers can target these guys with effective digital strategies as well.
How to create a trade marketing strategy in 7 steps
Conduct market research
For trade marketing to work, you must fully understand your target audience. You need to create an accurate buyer persona and know what your consumers want. It's vital to investigate the market.
Who are your competitors? What are they doing well? What are they doing badly? Are there any opportunities for you to expoit?
Understand current shopper behaviour
There are more key questions to focus on. Where does your target audience currently shop? How does your buyer persona browse and buy?
Do some digging to work out the kind of in-store activity works with your audience.
Develop your product further [if necessary]
Now that you understand your customers’ needs, ensure that your products meets the requirements. If it doesn't, change it.
Work on your branding
As the saying goes, you only get one chance to make a good first impression. A stylish brand is everything, especially in today’s world, where retailers and consumers alike have such high expectations.
Establish consistent messaging and imagery, communicating USPs effectively and having a tone of voice that helps achieve your goals.
Create a product proposition
The next job is to come up with a product proposition that you can offer to retailers, wholesalers and distributors.
Work out your short and long term goals. Factor in any future offers and promotions. Make sure you’re good with your numbers. Retailers are known for having razor-thin profit margins, so every penny counts.
Also, it’s a good idea to do some risk analysis at this stage, so as to limit your exposure at any given time.
Define your advertising and PR agenda
As we’ve seen, trade marketing happens both digitally and face-to-face. From trade shows to digital marketing, plan at least 3 months of activities out and work out what you’ll be doing when.
Trade marketing tools
As far as digital trade marketing is concerned, you’re going to need:
- An efficient website
- Various social media platforms
- Email marketing software
- Landing pages for lead generation
- Branded content
For physical trade marketing tools, we’re talking about things like:
- Display boards
- Business cards
Try to be different. Trade marketing tools need to be functional, but they can also be quirky.
Remember that the quality of your product isn't always your most important priority. Just as you do with consumer marketing, your trade marketing campaigns need to be memorable.
The benefits of trade marketing
There are a number of reasons why trade marketing is so valuable, but the exact benefits you’ll enjoy will depend on your situation.
Beyond the obvious [making more money] here are the common trade marketing benefits…
Benefit #1: By generating more purchases at supply chain level, trade marketing ensures that the supply of your product can always meet demand.
Benefit #2: If your marketing is good enough, retailers will promote your product over a competitor’s, giving you a long-term competitive edge.
Benefit #3: Trade marketing can establish and maintain relationships with key supply chain contacts. This’ll only be good for the future of your product.
Benefit #4: Successful businesses use trade marketing strategies, but don’t understand how to execute a plan properly. Therefore, there’s a golden opportunity right now.
Benefit #5: Trade marketing will help your business stay profitable if you don’t have a good idea of who your end user is. That’s a situation that must change, but it’s a good fix.
Benefit #6: Trade marketing reduces the element of guesswork in marketing, since it’s effective if you have no relationship with the person using your product or service.
Benefit #7: If your chances of upselling or remarketing to your target audience is small, then trade marketing is great for business growth.
The issue with trade marketing today
Trade marketing is vital in today’s world, but it’s really misunderstood.
There’s a lack of knowledge about the strategic role it should play within a company.
Is trade marketing a specialist job?
How does it relate to consumer marketing? Or shopper marketing?
Meanwhile, not everyone understands what a good trade marketing strategy looks like. Businesses really struggle to come up with a clever approach to trade marketing that delivers.
By way of a quick example, a study by Nielsen claims that less than half of all trade promotions fail to increase brand or category growth.
And that’s pretty shocking, because that’s precisely what trade marketing is supposed to achieve. Trade marketing exists in some format in the majority of businesses, but it’s hard to clarify exactly what’s going on.
The official role that trade marketing plays varies from company to company, but usually, one of 3 things is happening:
- Someone is being specifically employed to operate in a standalone trade marketing job.
- Someone in a more conventional marketing role is responsible for dealing with trade marketing issues.
- Someone is executing some sort of trade marketing strategy without actually knowing it.
Therefore, we’re looking at an incredibly inconsistent situation for something so vital. And in all 3 scenarios, there are plenty of problems. Most trade marketing experts seem to agree that profitable strategies are being ignored, underused or misapplied.
Trade marketing v marketing
A trade marketer will clearly need many mainstream marketing skills if they are to be any good at their job.
Trade marketing is about stylish branding, communication, advertising and differentiating yourself from your rivals. Just like consumer marketing.
However, it does require a few specialist skills.
A trade marketer will have to master how to manage:
- Product discounts [seasonal or otherwise]
- Product margins
- Cross promotions
- Consumer behaviour
However, there’s nothing that can’t be learned. The bottom line is:
All marketing exists to sell stuff - it doesn’t really matter to whom.
With trade marketing, the aim is to sell to people who will then sell your product to someone else. For the most part, you can tell whether a trade marketing campaign will work, just like you can with a consumer-based strategy.
Your success will depend on your ability to:
- Communicate your USPs effectively.
- Understand your market well.
- Create a consistent brand message.
- Understand the needs of your target audience.
- Enhance your brand via clever copy, logos and imagery.
- Manage relationships and master PR.
- Come up with desirable promotions.
They’re familiar marketing targets, aren’t they?
Ultimately, it’s pretty straightforward. Wholesalers, distributors and retailers all need to crave your product just as much as consumers do - even if the reasons why they do are different.
Trade marketing and shopper marketing
There are a lot of similarities between trade marketing and shopper marketing too. For instance, you’d probably use the same language to market to a retailer as you would to a shopper.
And trade marketers often find themselves working on shopper marketing tasks like:
- Coming up with in-store marketing ideas
- Consumer promotions
- Product displays
- Innovative promotional ideas
- Product visibility
- Loyalty programmes
- Sales promotion activities
- Guerrilla marketing and PR campaigns
Research shows that 70% of shopping decisions are made at the point of purchase, so it’s no wonder that these factors crop up in both areas. They’re that important.
It’s a logical scenario:
A manufacturer should know his or her product better than anyone. They must be able to understand their market, too. So, it follows that they should also be best placed to communicate and market what they’re selling.
Retailers want products to sell.
They want to provide a great customer experience. And if you can give them value, that’s only going to be a good thing.
Consumer goods companies need effective marketing strategies now more than ever.
What does the future hold for trade marketing?
It's future is hard to predict, other than the function of trade marketing will be different across the board. For shortsighted businesses, trade marketing won’t play much of a strategic role at all. For the others, things will be very different.
Everything will hinge around trade marketing. Anyone in a trade marketing job will play a huge part in deciding which channels and outlets represent the best opportunities.
They’ll require a deep understanding of the market they’re operating in. They’ll have to be an expert in many marketing disciplines and take on extra responsibilities.
Being involved with trade marketing is a breathless, often exhausting job.
Trade marketing doesn’t have to have a strategic role, but it can and probably should do. Hopefully you can see how vital trade marketing is in business.
As a manufacturer, you have a couple of options - you could manufacture private label products. The margins will be smaller for you, but private label products are always in demand.
Therefore, the opportunities to scale are greater. The trouble with private label products is that, as a manufacturer, it’s harder to adapt and move with the times.
But if you concentrate on improving your own brand and develop a more effective trade marketing strategy, that could be much more lucrative.
Trade marketing dictates whether a manufacturer succeeds or fails.
In general, when businesses look at their marketing strategies, most of them tend to focus on their efforts at a consumer level.
However, companies that always concentrate 100% on the customer might be missing a trick. Perhaps a greater emphasis on trade marketing could prove to be an incredibly lucrative move.
If you own, run or work for an FMCG company, you must have a trade marketing strategy in place. It’s a necessity, not a nice-to-have.
So avoid having tunnel vision.