As a concept, trade marketing is completely misunderstood.
Yet it's incredibly important, so today we're going to explain what trade marketing is, why it’s important, who uses it and how.
What is trade marketing?
Let's kick this article off with a definition:
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 sell those items to their own 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 acquire them 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 easier and more lucrative for manufacturers to sell directly to retailers but they might not have the luxury of choice. If they don't, they need to promote their products to all 3 parties.
Essentially then, trade marketing strategies are used by manufacturers to create demand for whatever it is that they produce.
And it's clearly critical for manufacturers to market their stuff because retailers [as well as wholesalers and distributors] obviously have millions of products to choose from when they're deciding what's going to be worth selling.
After all, there's only so much shelf space, right?
As you can see, the retailer is ultimately in the position of power [and every party is acutely aware of this].
As such, there’s a constant ongoing battle between manufacturers to get their products in front of supply chain partners. 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.
Trade marketing brings other benefits too…
By generating more purchases at supply chain level, trade marketing ensures that the supply of your product can always meet demand.
If your marketing is good enough, retailers will always promote your product over a competitor’s, giving you longevity.
Trade marketing can establish and maintain relationships with key supply chain contacts.
Most people don't understand how to create and execute an effective marketing plan. There’s a golden opportunity right now if you can .
Trade marketing will help your business stay profitable if you don’t have a good idea of who your end user is.
Trade marketing reduces the element of guesswork in marketing, since it’s effective if you have no prior relationship with the person.
If your chances of upselling or remarketing to your target audience is small, then trade marketing is great for business growth.
How did trade marketing become so important?
Trade marketing first became relevant and important in the 1990s.
Previously, a manufacturer held a very strong negotiating position, but during the 90s, the balance of power shifted 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.
We spoke to Mike and he told us that trade marketing has been around for over 25 years, but 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 developed 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 connecting with 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.
Let’s take a look at the 7 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 and trust.
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.
Thing is, most companies with an online presence have a little knowledge of digital marketing.
From 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.
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 issue with trade marketing today
There’s a real lack of knowledge about the strategic role trade marketing should play within a company.
Nowadays, trade marketing is a specialist job, but there are nevertheless plenty of unanswered questions.
How does trade marketing relate to consumer marketing?
Or shopper marketing?
Meanwhile, not everyone knows 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 really knowing too much about 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 either 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.
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 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.