Leveraging Promotions at Trade Shows
Leveraging Promotions at Trade Shows for Maximum Impact
Trade shows are critical for brand exposure, but the real game-changer lies in effectively leveraging promotions. Here’s a guide on how to use trade show promotions to boost your brand without compromising your margins.
Should You Run a Promotion?
Before diving into promotions, assess your goals, budget, and potential ROI. Ask yourself: Does this promotion drive sales, or does it merely cut into margins? Ensure the discount is attractive to both retailers and consumers. A well-thought-out promotion can boost sales, but it needs to be managed correctly to avoid pitfalls.
Types of Promotions: Off Invoice (OI) and Manufacturer Chargeback (MCB)
Off Invoice (OI)
An Off Invoice (OI) discount is applied immediately when you invoice the distributor for their purchase order (PO). Distributors tend to buy heavily during this period, which can help with product availability. However, if you run these too often, distributors might only purchase from you during OI discounts.
Pros: Applying an Off Invoice (OI) discount can provide an immediate boost to your sales figures. When distributors see a discount applied to their purchase orders, they often place larger orders to take advantage of the savings. This influx of orders can be beneficial for ensuring that your product is readily available on store shelves, thus increasing its visibility and accessibility to consumers. Additionally, a well-timed OI promotion can help you move large volumes of inventory quickly, which can be particularly useful if you have a surplus of stock or if you’re looking to make room for new product lines.
Cons: While OI discounts can drive immediate sales, they can also lead to forward buying, where distributors purchase large quantities during the discount period and then reduce their orders when the promotion ends. This practice can disrupt your sales cycle, leading to uneven revenue streams and potential cash flow issues. Moreover, frequent use of OI discounts can erode your profit margins over time. Distributors may come to expect these discounts and only place orders when they are available, which can undermine your regular pricing strategy. Additionally, large volumes of discounted inventory can lead to overstock situations, where products remain unsold for extended periods and risk becoming outdated or spoiled, resulting in chargebacks and financial losses.
Manufacturer Chargeback (MCB)
A Manufacturer Chargeback (MCB) is billed periodically from the distributor based on what they sell to retailers. MCBs come with fees, so factor these into your promotional budget. Ensure you read your agreement thoroughly to plan for these fees.
Pros: The primary advantage of a Manufacturer Chargeback (MCB) is that it aligns discounts with actual sales to retailers, rather than upfront purchases by distributors. This means you only provide discounts for products that have been sold through to the end retailer, which can help maintain your margins and prevent the issues associated with forward buying. MCBs also allow for better inventory control, as you won’t have to deal with sudden spikes in orders followed by periods of low demand. This steady flow of product helps maintain consistent availability on store shelves and ensures that your promotional efforts directly benefit consumer sales. Additionally, because the discounts are applied based on actual sales data, you can gain clearer insights into which retailers and regions are performing best, allowing you to tailor future promotions more effectively.
Cons: Despite their benefits, MCBs come with their own set of challenges. One significant drawback is the additional fees associated with this type of promotion. These fees can include administrative costs for processing the chargebacks, as well as any penalties for exceeding agreed-upon discount thresholds. These costs need to be carefully planned for in your promotional budget to avoid unexpected financial strain. Another issue is that retailers can sometimes overextend their inventory allocation, leading to discrepancies that are only discovered during post-promotion audits. In such cases, you might be billed for discounts that were given away erroneously, leading to additional charges. Managing inventory during an MCB promotion requires meticulous oversight to ensure that you do not encounter shortages or oversupply, both of which can negatively impact your brand’s reputation and financial health.
Ensuring Promotions Reach Consumers
It's crucial that your promotion passes through the entire supply chain to the end consumer. To achieve this, establish a scan agreement with retailers to ensure they pass the discount onto customers. This step ensures that your promotional efforts translate into actual sales lift rather than just margin loss.
Retail Direct Promotions
Trade shows are ideal for building new retailer relationships. However, remember that distributors charge fees to process retailer deductions. Budget for these fees or work directly with the retailer to process the promotion yourself. This can sometimes save costs and streamline the promotional process.
Following Up on Leads
Securing new leads at trade shows is just the beginning. A sale isn’t final until the order is placed and shipped to your distributor. Stay in touch with retailers to ensure they follow through with orders and receive deliveries of your product.
Managing Purchase Orders
Every purchase order needs careful management. Suppliers are responsible for out-of-date or discontinued products. Buyers have more than just your inventory to manage, and their incentives might not always align with yours. Stay proactive and monitor your inventory closely to avoid surprises.
Read and Understand Your Agreements
Your agreements are critical to knowing the costs associated with promotions and avoiding unexpected expenses. Failing to thoroughly read and understand your agreements can lead to significant financial strain. Companies that do not carefully review their agreements and accurately estimate the costs of discounts and fees often find themselves in financial trouble. Every year, businesses face bankruptcy because they did not account for the full impact of promotional costs. Don’t be caught off guard—ensure that you are fully aware of all terms and conditions, and do the necessary math to understand the potential impact on your bottom line.
Conclusion
To succeed with trade show promotions, it's essential to:
Assess the need for promotions carefully.
Choose the right type of promotion for your goals.
Manage inventory to avoid pitfalls like forward buying and inventory shortages.
Build strong retailer relationships to ensure the promotion's success.
Thoroughly read and understand your agreements to avoid unexpected costs.
By staying proactive and continuously learning from each promotional experience, you can maximize the impact of your trade show efforts without sacrificing your margins. Got any questions or tips on trade shows and promotions? Share them in the comments below!
For more detailed strategies and personalized advice on leveraging trade shows and promotions, connect with Mangrove Management Consulting. We offer expert guidance to help emerging brands navigate the complexities of the market and achieve their growth objectives.
