Click the image for details By Chen Xiaolong In high-margin industries such as automobiles, real estate, and electronics, both distributors and manufacturers have substantial profit margins, so either party may cut prices or initiate promotions without the other's knowledge or consent. For example, Fuji once announced a price reduction for a digital camera online, then calculated distributors' inventory and compensated them for the difference. In the food industry, where margins are thinner, distributors organizing their own promotions without manufacturer support must adhere to the following five "military rules."
Rule 1: Proactively report the promotion process and results to the manufacturer When distributors request promotional support from manufacturers with low gross margins and limited profits, it places a significant burden on the manufacturer. Thus, most promotions obtained by distributors are beyond the manufacturer's budget, and the manufacturer may feel some reluctance. In such cases, distributors should proactively report the market results after the promotion to secure support for future promotions. A food distributor I know, under pressure from supermarket channels, made many promotional demands to the manufacturer but never reported the results afterward. As a result, the manufacturer became very displeased and gradually withdrew support.
Rule 2: Promotions should not hurt the manufacturer's feelings When distributors independently run promotions in their regional markets involving the manufacturer's products, they must fully communicate with the manufacturer's representatives to avoid mutual displeasure. This is especially important for price promotions. For instance, Brand A had a dispute with a Harbin department store over a special price. The store lowered the price for promotion, and the manufacturer claimed the store violated their price agreement, eventually taking the matter to court. Another case involved Brand B, which clashed with a chain store. The store launched a promotion for a competing brand, offering a Brand B product as a free gift. Brand B felt this damaged its corporate image, leading to a conflict. In the food industry, profit margins are generally low, especially for well-known brands. Some distributors, thinking they can't earn much anyway, lower the prices of famous brands to create an image of low prices, attracting downstream customers to buy other products. They treat famous brands as loss leaders. However, manufacturers may catch them, resulting in halted shipments, fines, or even termination of distribution rights. These cases illustrate that merchants and manufacturers are interdependent; market actions taken after full communication will give both parties confidence.
Rule 3: Avoid causing displeasure in surrounding markets Distributors rarely use their own resources for promotions; most are organized by manufacturers. However, some distributors, especially regional general distributors with some profit margin, may run local promotions themselves, sometimes funded by the manufacturer. A common problem with regional promotions is cross-regional dumping into new markets. Since one region has a promotion while others do not, that region gains an advantage and may easily flood goods into other markets, causing price chaos in surrounding areas. For example, in one regional market, because the promotion intensity in a nearby large city was greater than in the local area, customers went to the large city to purchase goods, leaving the local market unable to sell anything. This is a channel problem caused by promotions. Therefore, if the manufacturer runs a promotion only in your region, the distributor should, on one hand, make good plans and preparations, and on the other hand, strengthen market supervision. Most importantly, goods from your region must never flow to other markets.
Rule 4: Require guarantees from the manufacturer After a promotion ends, there are follow-up tasks, such as prize redemption. If the manufacturer cannot continue in one place, they can move elsewhere, but the distributor relies on the local market and must be responsible for it; otherwise, a damaged reputation will make it hard to stay. Therefore, when conducting such activities, the distributor should, before the activity, request a portion of goods or funds from the manufacturer to handle follow-up work, rather than advancing funds themselves. This is especially important for products that are not popular locally. A distributor in Yangshan, Guangdong, suffered a great loss because he didn't consider this. He represented a chocolate brand whose manufacturer organized a long-term promotion in the local area: recycling each single-piece chocolate wrapper box for 0.5 yuan. However, later a fierce conflict arose between the manufacturer and the distributor. The distributor withheld part of the payment, and the manufacturer withdrew from that market, leaving the distributor with thousands of product packages to recycle. Since the relationship with the manufacturer was severed and the distributor had withheld payment, he was in the wrong. He didn't want to spend money to recycle the packages, and the regional market was full of complaints. Although the distributor tried to shift blame to the manufacturer, his customers gradually left him in resentment.
Rule 5: When doing your own promotions, focus on key channels For regional promotions, whether supported by the manufacturer or paid for by the distributor, the resources available are limited. To achieve maximum market performance with limited resources, it is essential to prioritize and strategize. Here's another example: A manufacturer competing with a major brand in a county-level market in northern Guangdong. The distributor organized a promotion, and the manufacturer provided some gift-pack products for the regional general distributor to use for building relationships with restaurants or key figures. Later, the distributor calculated the costs, converted the products into cash value, and devised a brilliant plan: For newlyweds, presenting their marriage certificate and proof of banquet from a restaurant would earn them a free wedding photo session, free wedding dress rental on the wedding day, and a full video recording as a gift. The only cost was using their candy and cookies at the banquet, with no minimum purchase requirement. This move suddenly tore a gap in the barriers built by the dominant regional brand, and the wedding banquet market tilted overwhelmingly in their favor. Later, not only weddings but also other celebratory banquets adopted this approach, and the candy brand became famous in the region. The distributor grew from a small shop owner to a prominent new force in the area. This distributor's success lay in fully utilizing the manufacturer's resources and targeting specific channels for promotion, rather than spreading efforts evenly.
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