---
title: "Three Major Distortions in Trade Promotion Policies and Countermeasures"
description: "This article discusses the common problems and solutions for trade promotion policies of weak brands, focusing on three main issues: overly broad and imprecise policies, excessive regional differences, and weak process supervision. It provides case studies and practical countermeasures to prevent policy distortion and ensure effective channel management."
author: "李政权"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2014-12-22"
language: "en"
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# Three Major Distortions in Trade Promotion Policies and Countermeasures

> This article discusses the common problems and solutions for trade promotion policies of weak brands, focusing on three main issues: overly broad and imprecise policies, excessive regional differences, and weak process supervision. It provides case studies and practical countermeasures to prevent policy distortion and ensure effective channel management.

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From manufacturer to consumer, all policies related to management, regulation, incentives, penalties, payment collection, and other profit-driven mechanisms—whether in advertising, promotion, or institutional frameworks—can be categorized under the term "channel policy." Given that channel policy is a broad concept and aiming for substantive discussion, the author focuses here on the distortion of trade promotion policies for weak brands and preventive measures.

For the majority of weak brands, on one hand, increasing product distribution reach and depth has become a key marketing task, with relatively generous trade profits and additional promotional benefits serving as important means to counter competitive pressure from strong brands and direct competitors. On the other hand, some damaging issues that cause trade promotion policies to deviate from their intended purpose persistently accompany us.

Once these issues are defined based on price and materialistic promotion premises, in my view, the main problems appear in three aspects: first, trade promotion policies are overly broad and imprecise; second, regional differences in trade promotion policies are excessive; third, process supervision of trade promotions is difficult to enforce strictly.

Let us analyze and resolve these three issues one by one.

**Trade Promotion Policies Are Overly Broad and Imprecise**

For many enterprises, discussions about trade promotions still revolve around gifts with goods, purchase bonuses, rebates, etc., because they overestimate the recognition and cooperation capabilities of channel members while neglecting many detail-oriented issues that should not be overlooked. Let us first look at a small case.

Tianqing Company, a new player in fruit wine, to boost merchants' purchasing enthusiasm, in addition to a 5%-10% tiered rebate, also launched a 10% physical gift campaign for purchases. However, later, due to the inability to fulfill necessary publicity and promotional support, the market lacked pull, which also affected push, leading to a large amount of products either accumulating at terminals or piling up in distributors' warehouses, or being dumped at low prices by some distributors eager to cash out.

In fact, Tianqing Fruit Wine's initial promise was to allow returns or exchanges after a certain period, but what to do with the returned products? If they didn't fulfill the promise, they could only delay and avoid handling it. This ultimately damaged Tianqing's reputation severely, leading some distributors to consider lawsuits, and others to ask Tianqing's sales staff, "Have you changed your boss?" Under such circumstances, Tianqing's survival pressure increased, gradually falling into a fate of opening new merchants only to lose them, and the market situation became increasingly severe.

**I. Main Problems**

A detailed analysis of the above case reveals that the primary reason for Tianqing and similar enterprises facing such situations is: to seize distributors' warehouse space and funds, they used gifts with goods, purchase bonuses, and purchase rebates to entice distributors to stock up heavily, transferring large amounts of inventory. However, because terminal promotional measures did not keep up and consumer pull cultivation was insufficient, distributors faced pressure from products approaching their shelf life. This naturally increased incidents of low-price dumping and cross-region selling for cash, creating excessive sales pressure in the channel—the more promotion, the less smooth the distribution.

In addition to the above, many weak brands also exhibit other problems in the aspect of overly broad and imprecise trade promotion policies, such as:

1. Lack of specific incentives for shelf display indicators and advantageous store displays, resulting in insufficient distributor enthusiasm for advantageous displays;
2. Failure to establish a reward system for sales competitions among intermediaries, making it difficult to enhance distributors' identification with the brand, further causing weak brands to be undervalued;
3. Neglecting exclusive incentives, leading to competition from competing products at the same distributor, further reducing the brand's importance to merchants;
4. Not setting new product promotion awards, causing some new products to receive insufficient attention from merchants due to longer market cultivation periods and greater effort required, increasing marketing variables for new product launches.

**II. Solutions**

1. Generally, the main purpose of manufacturer trade promotions is to achieve broad and deep distribution of products in a regional market and ultimately present them to consumers. To achieve this, it is essential to gain merchants' recognition and attention, reflected through higher distribution rates and better display quality.

Based on this, you should change your previous overly simplistic trade promotion policies such as purchase bonuses, gifts with goods, and volume-based rebates, and genuinely implement promotional methods that focus on details and processes, such as display awards, exclusive awards, new product promotion awards, and sales competition awards.

2. Adopt a holistic perspective and replace point-to-point thinking in trade promotions.

The most important function of trade promotion is to facilitate the "flow" of the channel. To genuinely promote "flow," when considering trade promotion policies and activities, you should integrate the following issues and act after careful planning:

※ Not only stimulate distributors to purchase, but also increase their recognition and attention to your products, stimulate them to distribute, maintain the channel, and proactively cooperate with consumer promotions and publicity;
※ How to align wholesalers with upstream distributors or yourself, not only actively purchasing but also actively displaying in wholesale markets, proactively and even preferentially recommending to downstream merchants, to effectively digest upstream shipment pressure;
※ At the retail terminal level, how to use trade promotions to encourage them to accept goods, ensuring distribution and shelf presence, and how to encourage them to maintain displays with competitive shelf space and high-quality presentation;
※ Once goods circulate through channel links, can the consumer market digest them within a reasonable period? If not, what measures should you take to cultivate and increase consumption?

For weak brands, their consumer appeal and attractiveness to merchants closer to consumers (typically diminishing as you get closer to consumers, with weaker product appeal at channel links nearer to consumers) are limited. If you cannot integrate and solve the above issues with a holistic, systematic approach in trade promotions, your attempt to use trade promotions to complete the marketing chain cycle from product → commodity → currency across all channel links will be difficult to achieve.

**Excessive Regional Differences in Trade Promotion Policies**

Due to significant differences in economic levels, competitive conditions, consumption habits, and sales barriers across regional markets, as well as differences in distributor capabilities and personal connections, promotional policies may sometimes be inconsistent.

For example, Renyuan Liquor's 500ml product had a first-tier shipment price of 240 yuan per case. In a purchase bonus promotion, considering that Region A was a newly opened market with high competitive barriers, the promotional policy for local merchants was "buy 50 cases, get 5 free," which was better than the neighboring Region B's "buy 50 cases, get 3 free." The result was that goods from Region A flowed into Region B, which had already achieved a certain sales scale, at prices below 230 yuan per case. In this situation, Renyuan Liquor's attempt to build a sales network in Region A not only failed but also disrupted market order in Region B, leading to loss of control and defection of merchants in Region B.

**I. Main Problems**

Combining the Renyuan Liquor case, it is very clear that when promotional policy differences exist between two regional markets, and transportation and loss costs cannot offset the profit margin from cross-region purchasing (of course, products may directly flow to regions with smaller promotional policies and better market foundations), channel promotion issues like cross-region selling are inevitable.

In fact, this is not a problem unique to a few enterprises. Among many weak brands, the occurrence of this problem is further increased due to reasons such as inadequate consideration by policy makers, the "capability" of sales personnel requesting policies, and managers' indulgence or preferential treatment of certain merchants.

If we only consider the formulation of regional channel policies, how can we avoid the destructiveness and lethality of differentiated promotional policies from the start?

**II. Solutions**

The key is to rationalize trade promotion policies that were previously highly differentiated and arbitrary. This is specifically reflected in the following aspects:

1. Give less promotional benefits upfront and more afterward, using restrictive measures to deter merchants and gain more control.
2. Convert explicit concessions into hidden rebates, and refine broad physical concessions and point-based rebates, rather than giving merchants additional benefits solely based on purchase volume, sales volume, or payment collection.
3. Estimate sales scale.

Taking Renyuan Liquor as an example, when formulating promotional policies for Region A, it should comprehensively evaluate the startup and cultivation of the consumer market, competitive difficulty, the number and quality of distributor networks, and the sales volume that can be digested at that stage to determine an approximate sales scale. When merchants purchase beyond normal sales scale, vigilance should be heightened, adding a warning line against the toxic side effects of trade promotions.

4. Balance promotional policy differences as much as possible.

Again, using Renyuan Liquor as an example, if it fully considered the transportation and loss costs of shipping goods from Region A to Region B, and converted these costs into the per-case cost borne by second- and third-tier merchants in Region B, then when formulating promotional policies for the two regions, if Renyuan Liquor could balance the benefit differences between them with these costs, the effectiveness of its trade promotions might be much better.

**Difficulty in Strictly Supervising Trade Promotion Processes**

This is mainly due to underestimating the subjective initiative of channel members and sales personnel and other related stakeholders.

For example, QR Foods, to increase shipment volume and stimulate broad and deep product flow, launched an activity where "completing 50 cases of sales earns a 10% physical rebate." Once the activity was launched, the original first-tier shipment price of 60 yuan per case (with a first-tier profit of 5 yuan per case) became 57, 56, or 55 yuan per case, disrupting the normal price order.

After the promotion ended, the aftereffects inevitably appeared. Because restoring the previous shipment price of 60 yuan per case for first-tier merchants meant a price increase. Could downstream channel members accept it? If not, wouldn't they switch to competitors? If prices weren't raised, could they afford to give merchants extra rebates and profits?

**I. Main Problems**

1. Rewards are based only on the results of meeting targets, without paying attention to how channel members achieved them. Coupled with the fact that many enterprises' sales departments and market supervision departments and personnel are inactive or weak in supervising the sales implementation process of merchants during trade promotions, this further increases the occurrence of policy distortion like QR Foods' promotion.

2. Inadequate punishment, "hesitation leads to chaos."

When merchants violate rules to earn promotional benefits during trade promotions, frontline sales personnel, regional managers, and even higher-level sales management are not unaware of the hidden dangers. Nevertheless, many still knowingly violate rules, and some even encourage merchants to operate illegally due to vested interests.

Why? Because:

※ Sales targets are ruthless, making sales personnel and merchants who want to easily obtain promotional benefits very close, forming a community of interests. Sales personnel and merchants collude, such as requesting better promotional incentive policies from the enterprise, or finding a large wholesaler with strong penetration to dump goods for volume, which happens from time to time.

※ Because people are emotional beings, sales personnel, sales managers, and some merchants have close personal relationships. This not only fosters favoritism in trade promotion policies, upsetting the balance of market order across regions, but also during trade promotion and channel management rectification, some merchants escape timely and effective handling due to intricate relationships.

※ Because weak brands lack a strong backbone, they fear that strict measures might drive away distributors who were hard to win over, affecting the sales network and consumer market they painstakingly cultivated. So they turn a blind eye and speak softly. Little do they know that their products may quickly become unprofitable, and the product lifecycle may be drastically shortened until eventually abandoned by the market.

**II. Solutions**

1. In any trade promotion, you should sort out potential problems that may arise from the activity and equip corresponding preventive measures and problem-handling measures.

For example, any purchase bonus, gift with goods, volume-based rebate, or other concession promotion may disrupt normal price order and create the possibility of cross-region selling (of course, for some weak brand products where the consumer market has not been cultivated, since there is no profit or place to dump, cross-region selling may not occur). In such cases, you should prepare preventive and punitive measures.

※ For example, withhold a portion of the physical gifts for purchase bonuses or gifts with goods, or adopt sales-based bonuses or gifts to gain higher initiative;
※ For example, increase hidden rebate measures for point-based rebates;
※ For example, set a minimum shipment price and sign product price protection agreements.

These are all trade promotion measures to strengthen process management and minimize risks. In actual implementation, anyone who ships goods below the minimum shipment price or engages in cross-region dumping will have their rebates deducted or face even stricter measures.

2. Change mindset, enforce rules strictly; otherwise, you will ultimately harm yourself.

This requires not only:

※ Strengthening management by walking around
※ Establishing market early warning information feedback networks and mechanisms
※ Establishing checks and balances between relevant departments and personnel

But also involves the enterprise's execution capability. Practices of strong brands are worth learning from. For example, Pepsi-Cola, to prevent merchants from violating rules and sales departments from falsifying during trade promotion implementation, specifically stipulates that a joint team composed of personnel from the marketing department and planning department conducts irregular spot checks and evaluations to ensure accurate and truthful results, truly rewarding distributors who jointly maintain and expand the market with the manufacturer. Obviously, behind establishing this checks-and-balances mechanism, there may be a need to improve the organizational structure.

We know that if policy distortion occurs during the implementation of trade promotion policies due to lax control and inadequate punishment, the symptoms of local merchant and market loss of control may spread like a plague, ultimately leading to broader market loss of control. There are not a few enterprises around us that have experienced this situation, and the author will not elaborate further here.

[This article is excerpted from Mr. Li Zhengquan's book "Weak Brand Marketing—The First Domestic Reading Material Systematically Solving Weak Brand Marketing Problems," in the section on promotional interaction strategies. Some modifications have been made.]

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