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In the fast-paced world of Fast-Moving Consumer Goods (FMCG), staying ahead of the competition requires innovative strategies that not only drive sales but also strengthen relationships with channel partners. Among these strategies, trade promotions stand out as a powerful tool to boost product demand and market share.
Simply put, trade promotions are targeted initiatives designed to increase product demand at the distributor and retailer levels. These initiatives focus on incentivizing channel partners—distributors, wholesalers, and retailers—to stock, display, and sell products effectively.
In industries with high competition and rapid product turnover, trade promotions ensure consistent availability and visibility. By incentivizing channel partners, brands can penetrate markets more effectively and maintain consumer trust through uninterrupted supply.
Trade promotions aren’t just about offering discounts or deals; they’re about creating a win-win situation for both brands and their channel partners. Here’s why they’re essential:
According to a study by McKinsey, Consumer Packaged Goods (CPG) companies invest around 20% of their annual revenue in trade promotions, making it one of the largest items on the profit and loss (P&L). Analysis has shown that 28 to 50 percent of retail sales volume across CPG categories in Europe is based on promotions.
Now that we’ve established their importance, let’s explore the top 10 types of trade promotions you can implement to drive demand, enhance visibility, and boost sales. These strategies are designed to captivate your channel partners and, ultimately, your end consumers.
This blog serves as a guide for you in understanding the different types of popular trade promotion strategies used by FMCG companies along with examples and benefits.
Get ready to transform your trade promotion game and elevate your FMCG business to new heights. Let’s dive in!
The QPS Scheme is one of the most widely used trade promotion strategies in the FMCG sector. Its primary goal is to encourage retailers and distributors to buy products in bulk by offering attractive discounts on large orders.
Let’s break it down with a practical example:
Imagine a detergent brand running a QPS promotion that offers a 10% discount on orders exceeding 500 units of washing powder. Here’s how it plays out:
Retailers are motivated to stock up on the detergent to take advantage of the discount, reducing their per-unit cost and improving profit margins.
Equipped with this scheme, sales representatives can confidently pitch to retailers, urging them to increase order sizes by highlighting the immediate savings and added value.
By incentivizing higher purchase volumes, FMCG companies can accelerate inventory movement and ensure their products remain consistently available on store shelves.
By offering special benefits—such as discounts, cashback, or free products—on select items, this scheme helps drive attention and demand for targeted SKUs. It serves as an excellent tool for brands to align promotions with their broader marketing objectives, such as expanding the reach of a newly introduced product or revitalizing interest in an existing category.
Consider, a snacks company introduces a Scheme on a Specific Product Category, offering 5% cashback on every purchase of chips and crackers worth ₹10,000 or more. Let’s break down the impact:
By encouraging purchases across specific product categories, this scheme helps retailers maintain a well-balanced assortment, ensuring a variety of products are available to meet diverse customer preferences.
Sales representatives can strategically focus on underperforming SKUs or new launches, emphasizing the value of this scheme to encourage larger orders and improve product assortment at retail outlets.
Strengthens the market share of specific products by creating a competitive edge. This scheme also helps companies drive attention to new product launches or underperforming categories.
Designed to cater to the unique needs and preferences of specific geographic regions, this scheme helps companies to;
Here’s an example to illustrate:
Imagine a snacks company introducing a buy-one-get-one-free offer on chips exclusively in Tier-2 cities during a local festival.
Retailers in these regions gain an exclusive opportunity to increase their sales by offering customers a festive deal that resonates with local celebrations.
Sales representatives can use this region-specific promotion to connect with retailers on a personal level, highlighting how the offer caters to their local market’s demand and cultural preferences.
The company achieves better market penetration in Tier-2 cities, enhances brand visibility, and stays ahead of competitors by aligning with regional trends.
The Retailer Channel-Group Specific Scheme is a focused trade promotion strategy that helps businesses balance their market presence across retail channels, improve channel-specific performance, and build long-term loyalty.
Imagine a beverage company introducing a special scheme for small retailers: 5% additional margin on energy drink purchases exceeding 100 cases for mom-and-pop stores.
Small retailers, who operate with limited budgets, benefit from the additional margin, enabling them to maximize their profits while offering competitive pricing to customers.
Sales representatives can tailor their pitches to highlight the exclusive nature of the offer, strengthening their rapport with smaller retail partners.
The company can stimulate sales growth in a specific retail segment, ensuring its products remain competitive and widely available across diverse retail formats.
The Scheme on Product or Customer Attributes is a highly strategic trade promotion model ensuring efficient resource allocation and market penetration. By focusing on specific attributes—whether product-related (e.g., seasonality, category, or feature) or customer-related (e.g., region, purchase history, or segment)—companies can achieve tailored marketing outcomes.
Imagine a beverage company offering a special discount to retailers in rural markets to promote its newly launched energy drink.
Rural retailers receive exclusive pricing, making it easier for them to stock and introduce the product to local consumers at competitive rates.
Sales representatives can leverage this customer-specific scheme to penetrate new markets and strengthen relationships with rural distributors.
The company gains access to untapped markets, expands its reach, and establishes a stronger foothold in targeted regions.
POP displays are more than just promotional tools; they are a visual sales driver. By strategically placing branded displays in high-traffic areas like store entrances, checkout counters, or aisles, companies can boost product visibility, encourage impulse purchases, and reinforce brand awareness.
Let’s take this example to understand the benefits of POP displays;
Imagine a snack brand launching a new line of chips. To maximize visibility and sales, the brand sets up a brightly colored POP display near the checkout counters of grocery stores. The display showcases the chips in an attractive arrangement with signage highlighting a “Buy 2, Get 1 Free” offer. Customers waiting in line are drawn to the display, and many make unplanned purchases as a result.
How does this scheme benefit brands and their channel partners;
This approach leverages a points-based system, where trade partners earn points for every unit purchased. Over time, these points can be redeemed for attractive rewards, creating a win-win situation: retailers gain extra benefits, and companies drive higher sales and strengthen loyalty.
Let’s say a beverage company offers 10 points to retailers for every crate of soft drinks purchased. These points can later be redeemed for gifts, cashback, or additional product discounts.
Benefits?
Liquidation Scheme is a strategic tactic used by FMCG companies to clear out excess or slow-moving inventory by offering significant discounts or other incentives to retailers and distributors. This approach is particularly useful for managing stock nearing its expiration date.
By offering attractive deals, companies can;
The Free Goods and Sampling Scheme is a powerful trade promotion strategy where companies provide free products as part of bulk purchases or offer samples to introduce new products. This approach is designed to entice retailers and distributors to increase orders and familiarize customers with the brand’s offerings.
Seasonal Promotions are a highly effective trade promotion strategy used by FMCG companies to capitalize on specific times of the year when consumer demand for certain products naturally increases. These promotions align with seasonal trends, holidays, or events, enabling companies to boost sales and maximize revenue during peak periods.
Seasonal promotions are successful because they:
For example, confectionery companies often launch special packs during festivals, while winter clothing brands roll out exclusive discounts during the colder months.
By implementing Seasonal Promotions, businesses can create urgency, strengthen customer relationships, and make the most of high-demand periods. This strategy not only increases sales but also reinforces the company’s ability to cater to evolving consumer needs.
Trade promotions are a cornerstone of success in the FMCG and CPG sectors. By adopting the right mix of strategies, brands can drive demand, foster stronger relationships with channel partners, and ultimately achieve sustainable growth.
However, the successful implementation of these strategies hinges on communication and having the right tools to manage and optimize trade promotions.
Trade promotions serve as a catalyst to drive business. The key to an effective promotion lies in ensuring that the benefits are successfully passed on to the retailer or consumer. A well-structured trade promotion should be executed at the right time, targeted at the right audience, and supported by clear and impactful communication. This is the foundation for successfully promoting any new product.
Having a robust Trade Promotion Management (TPM) tool and powerful analytics capabilities can help you in:
Looking for a solution to simplify and supercharge your trade promotions? Botree DMS is here to help. With advanced features tailored to trade promotion management, Botree DMS enables companies to streamline execution, track performance, and achieve unparalleled efficiency in their promotional strategies.
Meet Priyanka Allu, our in-house content marketing specialist. With a background in literature and communications, Priyanka brings in her expertise in crafting compelling brand narratives and engaging content across various marketing channels. Outside of work, you can find her quickly escaping from the mundane city life by the beach or mountains, spending quality time with loved ones.
