---
title: "Channel Promotions: Why Do They Fail to Please Despite Offering Profits? Why Bumper Harvests Don't Translate to Bumper Gains?"
description: "This article examines why channel promotions in the FMCG industry often fail to yield expected results, despite significant investment. It argues that the root cause lies not in the promotions themselves but in the lack of management capability, brand strength, and market foundation, leading to a situation where companies 'intensively cultivate' but cannot 'fine-tend', and 'reap bumper harvests' but not 'bumper gains'."
author: "方刚"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-06-05"
language: "en"
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# Channel Promotions: Why Do They Fail to Please Despite Offering Profits? Why Bumper Harvests Don't Translate to Bumper Gains?

> This article examines why channel promotions in the FMCG industry often fail to yield expected results, despite significant investment. It argues that the root cause lies not in the promotions themselves but in the lack of management capability, brand strength, and market foundation, leading to a situation where companies 'intensively cultivate' but cannot 'fine-tend', and 'reap bumper harvests' but not 'bumper gains'.

Reflections
(1) Channels, as the foundation of FMCG enterprises, can be reformed, upgraded, flattened, or weakened, but can they be 'demonized'?
(2) When all enterprises are treating terminal competition as the 'Bible', when more and more enterprises are 'intensively cultivating', and when numerous criticisms are directed at distributors, looking back, we suddenly discover: behind some seemingly beautiful concepts, there are countless tears and hardships—intensive cultivation without fine-tending! Bumper harvests without bumper gains! Offering profits without pleasing!
(3) How did this predicament come about? Can we escape the trap?
This article is excerpted from Mr. Fang Gang's book "FMCG Veterans Do This: Regional Manager Playbook" (《快消老手都在这样做:区域经理操盘锦囊》).
To purchase this book, click "**Read Original**" (阅读原文).
1**Perspective**
In recent years, with intensifying competition, **terminal grabbing** has become popular in the liquor industry, including marketing theories like 'disk-in-disk' and 'direct distribution'. The main methods are:
(1) **Implement 'promotion separation'**: Enterprises bypass distributors to face terminals directly. Based on the '80/20 principle', they 'lock in promotions' for influential terminals (hotels) in the area, leaving distributors to handle delivery and payment collection.
(2) **Use hotels' influence on the consumer market to drive other channels.**
Thus, under this approach, groups of 'terminal sales personnel' are busy shuttling across terminal markets. Various promotional tactics targeting terminal hotels begin to emerge (excluding entry fees, collectively referred to as exclusive venue fees).
1. **Exclusive shops**: Condition: The terminal exclusively sells this product for a period.
2. **Agreement shops**: Condition: The terminal sells a certain quantity of this product within a period.
3. **Promotion-exclusive shops**: Condition: The terminal can sell competing products, but only this product can conduct in-store promotions or visual merchandising.
As long as the terminal meets the above conditions, the enterprise gives certain rewards. Reward methods vary, such as monthly gifts of a certain amount of liquor, cash or equivalent liquor after the agreement expires, or even appliances or cars based on agreement completion.
Other promotional methods include providing travel, paying hotel staff wages, decoration fees, etc., which are numerous and varied. Many enterprises rack their brains over these, even to the point of frustration!
But what troubles enterprises even more is yet to come. In one liquor company, the enterprise complained bitterly:
**Grievance 1: High costs, difficult management, and enterprises are stuck between a rock and a hard place.**
(1) Exclusive venue fees increase year by year. Since agreements are signed annually, last year 70,000–80,000 yuan could secure a hotel, but this year, without 100,000 yuan, it's non-negotiable; otherwise, the hotel will sign with competitors.
(2) Exclusive venues don't guarantee exclusive sales, and enterprises dare not speak out. Hotels have ample reasons to explain the 'legitimacy' of competing products in their venues, such as customers bringing their own liquor for gatherings or wedding banquets, or influential figures (often government officials) specifically requesting certain brands, which hotels dare not offend. Moreover, some hotels brazenly claim they sold the products, and if the enterprise doesn't like it, they can sell competitor products instead, leaving the enterprise to swallow its anger.
(3) The input-output ratio is severely imbalanced. If you don't sign an exclusive agreement, they won't sell your liquor. Every hotel wants an exclusive agreement, and not signing would offend them. The enterprise's goal is to 'lock in' the 'good stores' in the market, but the practice spreads so wide that even tiny shops demand exclusive agreements.
**Grievance 2: Loopholes everywhere, costs out of control.**
(1) Planting without harvesting. Enterprise sales personnel make 'signing stores' a daily routine, but after signing, they hand over delivery to distributors. Sometimes, sales personnel only visit the store once a year during the signing period, and are nowhere to be seen otherwise. This leads to situations where a hotel signs a contract for over 100,000 yuan in exclusive fees but sells less than 100 cases by the contract's end, with sales under 10,000 yuan.
(2) One store signed multiple times or fake contracts. Since signing stores is a manufacturer activity with little involvement from distributors, distributors exploit the manufacturer's weakness of 'signing without maintenance' and even not knowing where the signed stores are. They sign multiple contracts for one hotel or sign fake contracts to extract promotional funds. Even if sales personnel know, they turn a blind eye.
**Grievance 3: Chaotic sales, difficult promotion calculations.**
Since enterprises sign stores with 'cumulative volume' and 'exclusive' agreements, the same product may have volume agreements, exclusive agreements, and distribution through small shops. This results in a 'mess' when settling promotions with customers, leading to 'grabbing eyebrows and beards together' and duplicate promotions. When enterprises discover this problem, they try to assign one product for exclusive agreements, one for volume agreements, and one for small shops, but this not only causes brand confusion but also leads to consumers drinking products in hotels that cannot be purchased in circulation, leaving enterprises embarrassed.
**Grievance 4: Reasonable but not legal, offering profits without pleasing.**
Recently, national authorities have banned 'exclusive' promotions and classified them as 'commercial bribery', making them illegal. Enterprises have to take risks, playing word games in contracts while trying not to leave originals with hotels, because even if disputes arise, enterprises dare not pursue legal action.
At this point, exclusive venue promotions have become a hot potato, with some enterprises feeling like they're sitting on pins and needles or riding a tiger. So, have terminal exclusive promotions truly reached a dead end?
Before answering this question, let's explore the **causes of these grievances**.
(1) **Incomplete functions, imitating clumsily.**
Whether it's disk-in-disk or direct distribution, both require enterprises to bypass distributors and get closer to the market, abandoning the extensive approach of relying solely on channel warfare, and instead intensively cultivating and refining the market. To achieve this, enterprises cannot solve problems merely through strategic emphasis or technical imitation, because structure determines function. Without introducing a deep distribution system, insisting on 'intensive cultivation' of the market, though it looks beautiful, results in only cultivating without harvesting, insufficient market maintenance, and 'intensive cultivation' without 'fine-tending', often losing both promotions and soldiers, and even making a fool of oneself!
(2) **Unlimited desires, unlimited dangers.**
Intensive cultivation and facing terminals directly have become very Sinicized terms in marketing. But can every enterprise attempt them?
Enterprises suitable for intensive cultivation must meet the following conditions: First, they have mature management capabilities and strong execution as a guarantee, having passed the 'product manufacturing stage'. Second, they have certain brand strength and strong bargaining power in channel reform.
If an enterprise lacks these conditions and forces intensive cultivation, it will not only fail to overcome the hurdles of managing field personnel (including huge personnel costs and recruitment) but also face significant problems in distributor reform. Enterprises hoping to participate more deeply in the market often conflict with channel members. Due to weak brand bargaining power, they fall into a passive dilemma. If not handled well, after going deep into terminals, enterprises face a pincer attack from competitor competition and low distributor cooperation, creating risks. Such enterprises are characterized by relying on 'promotions' to sustain market operations, lacking market pull, and having to 'bend low' in the market, unable to hold their heads high.
**Exclusive agreements and volume agreements are incompatible as fire and water.** Not every tactic can deal with enemies; some tactics, if used improperly, can cause self-injury! Exclusive policies do not count sales, while volume agreement stores do. During the agreement period, only two people know the hotel's sales: the delivery merchant and the hotel owner. Once there's an opportunity to fish in troubled waters, it's not the enterprise that benefits; when push comes to shove, the enterprise has to concede to the distributor.
In this regard, exclusive and volume agreements cannot coexist in the same market. If they do, the enterprise is only tying its own hands. A popular brand built with great effort at the terminal level dares not distribute through circulation. Creating popularity without being able to exploit it is a tragedy because once full-channel operations are opened, the 'high price, high promotion' at the terminal becomes self-deception and leads to total failure.
Here is an example of a beer company's terminal promotion policy for a certain product.
Entry price: 36 yuan/case. Hotel A: exclusive fee 50,000 yuan/year. Hotel B: volume agreement of 600 cases, with a gift of 5,000 yuan worth of × beer. Small shops: buy 10 cases, get 1 free. The delivery merchant is Customer C, with annual sales of 50,000 cases. Promotion settlement: Customer C is given a '10+1' policy for 30,000 cases. Customer C starts complaining: Store A only sold 5,000 cases! He has to bear the '10+1' policy for 10,000 cases. Since the actual sales of Store A cannot be verified (Customer C had already colluded with the hotel), the enterprise has to comply with Customer C's demands. Meanwhile, Hotel B, to complete its task, diverts goods at low prices to small shops. The beleaguered beer company, to change this situation, designates Product X exclusively for exclusive venues, adds Product Y for volume agreement stores, and adds Product Z for small shops. Thus, Products X, Y, and Z create a dazzling array in the market, 'confusing the eye with their variety'.
The three products are independent of each other, and consumers who are used to drinking X and Y cannot buy them in circulation. The result: buying stores only to make sales, self-deception, and self-entrapment!
The cost of buying stores is absurdly high. The original intention of grabbing big stores was to build image and drive circulation, but the result is 'dying on the high ground without being able to come down' (as the company president put it), leaving the enterprise stuck!
2**Solutions**
In this regard, the promotional traps in the liquor industry are largely self-inflicted. Therefore, liquor companies, especially weak ones, should follow these principles in market operations:
(1) **Be down-to-earth in the market**, and don't do things that look beautiful but are exhausting to implement. Many marketing executives are keen on 'innovation', grabbing terminals, cutting out big distributors, refining markets, with bold strokes and fearless advance... But the market doesn't take off, and their own brothers (distributors) start fighting among themselves. The result is often embarrassment, and looking back, they see a mess.
(2) **Be cautious about 'intensive cultivation' when your own strength is insufficient**, especially when the 'land' (market) is not in your hands!
For example, farmers' 'intensive cultivation' requires two prerequisites: land ownership or long-term use guarantees, and the purpose of intensive cultivation is fine-tending—planting high-yield, high-profit crops to offset the costs of intensive cultivation.
If an enterprise is still relying on low prices and low quality to compete, and it attempts 'channel intensive cultivation', the result is that planting melons won't yield melons, and planting beans won't yield beans! It might not even recover the 'melon vines'!
Marketing is not built on 'cleverness and tricks' but on management. Marketing without management is 'suicidal' marketing. Fully understand the ancient adage: 'Uphold righteousness and surprise the enemy' (守正出奇)!
For mature enterprises, brand is momentum, marketing is energy, and promotion can only be a lubricant!
**Weak enterprises inevitably rely on channel warfare. During this period, building a marketing platform suited to themselves through channels is the best strategy!**
Overall weakness does not mean there are no local advantages! Use regional advantages to build your base market.
'Bargaining power' is an eternal theme in market competition. Whether it's exclusive venues or volume agreements, they must be built on the foundation of the enterprise having certain bargaining power.
**A market without brand assurance is 'renting' someone else's land (paying fees); a market with strong brand assurance is 'renting out' land to others (charging fees).**
Strong brands rent out the market to 'distributors' and also collect rent, weakening the distributor's position. Weak brands rent the distributor's land, giving the distributor an active position. Thus, the 'labor-capital' contradiction between manufacturers and distributors begins to emerge, either 'the customer bullies the store' or 'the store bullies the customer', and in some enterprises or industries, distributors and other channel members are demonized. Manufacturers and distributors constantly switch positions in the 'host-guest' relationship, making their relationship almost an irreconcilable contradiction.
After understanding the above principles, enterprises can begin to **crack the terminal promotion trap**:
(1) **The essence of the trap is not the promotion itself, but the enterprise itself.**
In martial arts novels, any 'move' has different power when executed by different people. The fundamental difference lies in the internal strength of the user.
So-called internal strength is the enterprise's management capability, capital strength, and brand height.
(2) **Dig a one-inch piece of land to a depth of one mile.** Focus resources, build a base market, aim for 'leading brand' and regional market 'rule-setting power', and seize market 'bargaining power'. Basic steps:
First, based on the base market, leverage regional advantages to build a harmonious and unified channel team, achieving seamless coverage of the base market.
Second, defend with heavy troops, not yielding an inch; attack with thunderous force, unstoppable. For example, enterprises can form professional mobile units based on actual conditions to participate in local market attacks or defenses, concentrating resources in a short time to overwhelmingly destroy opponents in local markets.
Third, penetrate peripherally, based on channels, establish a 'predatory' strategy, and avoid scattering forces like beans or casting nets in all directions.
Fourth, opportunities and traps coexist; you must give up something to gain something.
(3) **From a tactical perspective, there are hundreds of ways to break terminal exclusive or monopoly blockades.**
For example, using self-brought liquor to break exclusivity, using consumption leaders, using 'under-the-table promotions', or even using gift liquor to create conflicts. However, any method to break exclusivity must be based on 'execution'. Therefore, when the enterprise's brand is still weak, using execution to compensate for brand shortcomings is a viable path.
(4) **Uphold righteousness and surprise the enemy.** Philosophically, all things are mutually reinforcing and restraining. Similarly, in marketing, no tactic is unbreakable. Cleverness and tricks, moves and gimmicks, are not the main approach but 'surprises', and 'surprises cannot last long'! That is, they treat symptoms but not the root cause. Enterprise marketing must be based on management, 'governing the country with righteousness'! Pursuing 'tricks' results in flashiness without substance, ultimately falling into a 'trap' of one's own making!
(5) **Don't 'pull up seedlings to help them grow'.** Weak liquor companies, especially when developing new markets, must follow the natural laws of 'brand growth'! Without strong advertising support and brand accumulation, a 'rookie' product just entering the market must follow growth laws. Starting with exclusive venues and volume agreements from the outset is like 'pulling up seedlings to help them grow', undermining your own foundation!
Market development has its laws, and any attempt to break these laws will be punished!
(6) **Beautiful promotional tactics may look appealing, but they must be supported by a certain market management foundation, the most basic being sound financial management.** The 'promotion separation' in channel intensive cultivation looks simple, but in practice, it has stumped many major enterprises. Without accurate promotion planning and a complete execution system, relying only on 'shooting from the hip' for decisions, even the most beautiful promotional tactics are 'nice to look at but not useful', or even unusable!
3**Conclusion**
Weak liquor companies should base their marketing on management, rely on channels as their foundation, ensure survival, and focus on defense, being down-to-earth and steady. **First-class enterprises do 'momentum', second-class do 'market', third-class do 'tasks'.** Although some temptations are alluring, they are also dangerous! Any promotional tactic or marketing model has its advanced aspects in certain periods. What exists has its reasons, but it may not be suitable. This is what enterprises must pay attention to in fierce market competition.
If you find this article valuable and want to communicate with the author, please long-press the QR code below to add **Teacher Fang Gang** on WeChat, and reply with: **Learning** (学习).
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