From manufacturer to consumer, all management, regulation, incentive, penalty, payment collection, and other profit-driven policies related to advertising, promotion, and systems can be categorized under the term 'channel policy.' Therefore, given that channel policy is a broad concept and the desire to be substantive, the author here mainly discusses 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 focus in marketing work, with relatively generous trade margins and additional promotional benefits serving as important means to resist competitive pressure from strong brands and direct competitors. On the other hand, some damaging issues that cause trade promotion policies to deviate persistently haunt us.
Once these issues are defined based on price and materialized promotion premises, in my view, the main problems appear in three aspects: first, trade promotion policies are rough and overly generalized; second, regional differences in trade promotion policies are too large; third, process supervision policies for trade promotions are difficult to enforce strictly.
Below, let us analyze and resolve these three issues one by one.
Trade promotion policies are rough and overly generalized
For many enterprises, even now, when it comes to trade promotion, they still rely on methods such as free goods with orders, purchase quantity bonuses, and rebates. Because they overestimate the recognition and cooperation capabilities of channel members, they overlook many detail-oriented issues that should not be ignored. Next, let us first look at a small case.
Tianqing Company, a new player in fruit wine, to increase merchants' enthusiasm for stocking, in addition to a 5%-10% tiered rebate, also launched a 10% physical bonus for purchases. However, later, due to the inability to fulfill necessary publicity and promotional support, the market did not form pull, which also affected push, and a large number of products were either piled up at terminals or in distributors' warehouses, or were dumped at low prices by some distributors eager to cash out.
In fact, Tianqing Fruit Wine's original promise was that returns and exchanges could be made after a certain period, but what to do with the returned products? If they did not fulfill the promise, they could only delay and not handle it. This ultimately left Tianqing Company with a poor reputation, leading some distributors to consider lawsuits, and some distributors even asked Tianqing's sales staff, 'Have you changed bosses?' Under such circumstances, Tianqing Fruit Wine's survival pressure increased, gradually falling into a fate of opening new merchants while losing old ones, and the market situation became increasingly severe.
I. Main Problems
A detailed study of the above case reveals that the main reason for Tianqing and similar enterprises facing such situations is: to seize distributors' warehouse space and funds, they used methods like free goods with orders, purchase quantity bonuses, and purchase rebates to induce distributors to stock up heavily, transferring a large amount of inventory. However, because terminal promotional measures did not keep up and consumer pull cultivation was weak, distributors faced pressure from products approaching their shelf life. In this situation, it naturally increased the occurrence of low-price dumping and cross-region selling for cash, putting excessive sales pressure on the channel, making promotions counterproductive.
In fact, besides the above, many weak brands also have other problems in the aspect of rough and overly generalized trade promotion policies, such as:
- Lack of specific incentives for shelf display indicators and advantageous store displays, resulting in insufficient enthusiasm from distributors for advantageous displays;
- Failure to specifically target sales competitions among intermediaries to form a reward system, making it difficult to enhance distributors' identification with their brand, further causing weak brands to be undervalued;
- Failure to consider exclusive sales incentives, leading to competition from competing products at the same distributor, further reducing their importance to merchants;
- Failure to set new product promotion awards, causing some new products to not receive sufficient attention from merchants due to longer market cultivation periods and greater effort required, increasing marketing variables for new product launches.
II. Solutions
- Generally speaking, the main purpose of manufacturer trade promotions is to achieve broad and deep distribution of their products in a regional market and ultimately present them to consumers. To achieve this goal, it is inseparable from merchants' recognition and attention, and from reflecting this through higher distribution rates and better distribution quality.
Based on this, you should change your previous overly simplistic trade promotion policies such as purchase quantity bonuses, free goods with orders, and volume-based rebates, and genuinely implement promotional methods that focus on details and processes, such as display awards, exclusive sales awards, new product promotion awards, and sales competition awards.
- Focus on the overall situation and replace point-line thinking in trade promotions.
The most important function of trade promotion is to promote the 'flow' of the channel. To truly promote 'flow,' when considering trade promotion policies and activities, you should combine the following issues and plan before acting:
※ Not only stimulate distributors to stock up, but also increase their recognition and attention to your products, stimulate them to distribute, maintain the channel well, and motivate them to actively cooperate with consumer promotions and publicity; ※ How to make wholesalers connect with upstream distributors or yourself, not only actively stocking up but also actively doing wholesale market displays, 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, ensure distribution and shelf presence, and how to encourage them to maintain displays with competitive shelf space and high-quality displays; ※ When goods circulate through various 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 own consumer appeal and attractiveness to merchants close to consumers (usually diminishing, with weaker product appeal at channel links closer to consumers) are relatively limited. If you cannot integrate and solve the above problems with a holistic, systematic approach in trade promotions, your attempt to use trade promotions to complete the marketing chain cycle from product to commodity to currency in various channel links will be difficult to achieve.
Trade promotion policies have excessive regional differences
Due to possible significant differences in economic levels, competitive conditions, consumption habits, and sales barriers among regional markets, and differences in distributors' capabilities and personal connections, promotional policies may sometimes be inconsistent.
For example, Renyuan Liquor's 500ml product has a first-batch shipment price of 240 yuan per case. In a purchase quantity bonus promotion, considering that Region A is 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 the market order in Region B, leading to the loss of control and defection of merchants in Region B.
I. Main Problems
Combining the Renyuan Liquor case, it is very clear that when there are differences in promotional policies 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 problems 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 insufficient consideration by policy makers, the 'capability' of sales personnel requesting policies, and managers' accommodation and special treatment of certain merchants.
If we only consider the formulation of regional channel policies, how should we avoid the destructiveness and lethality brought by 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:
- Give less promotional benefits upfront and more afterward, to form a deterrent effect on merchants through restrictive measures, making it easier to grasp more initiative.
- Appropriately convert explicit concessions into hidden rebates, and refine rough physical concessions and point-based rebates, rather than giving merchants additional benefits solely based on purchase volume, sales volume, or payment collection.
- 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 the approximate sales scale. When merchants purchase beyond the normal sales scale, vigilance should be increased to add a warning line against the toxic side effects of trade promotions.
- Balance promotional policy differences as much as possible.
Still taking 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 trade promotion policies for the two regions, if Renyuan Liquor could balance the benefit difference between them with these costs, the effectiveness of its trade promotions might be much better.
Process supervision policies for trade promotions are difficult to enforce strictly
This is mainly due to underestimating the subjective initiative of channel members and sales personnel and other related stakeholders.
For example, QR Food, to increase shipment volume and stimulate broad and deep flow of goods, launched an activity of 'complete 50 cases of sales and get a 10% physical rebate.' Once the activity was launched, the original first-batch shipment price of 60 yuan per case (with a first-batch profit of 5 yuan per case) became 57, 56, or 55 yuan per case, disrupting the normal price order.
After the promotion ended, the sequelae of the activity inevitably appeared. Because restoring the first-batch price to 60 yuan per case meant a price increase. Could downstream channel members accept it? If not, wouldn't they switch to competitors? If they didn't raise prices, could they give merchants extra rebates and profits in the short term?
I. Main Problems
Rewards are based only on the results of meeting indicators, without paying attention to how channel members achieved them. Coupled with the fact that many enterprises' sales departments, market supervision departments, and personnel do not supervise or weakly supervise the sales implementation process of merchants in trade promotions, this further increases the occurrence of policy distortion like QR Food's promotion.
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 even encourage merchants to operate illegally due to interest relationships.
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 asking the enterprise for better promotional incentive policies, or finding a large wholesaler with strong penetration to ship goods for volume, which happens from time to time.
※ Because people are emotional beings, sales personnel, sales management, and some merchants have close personal relationships. This not only triggers favoritism in trade promotion policies, unbalancing the market order in a wide area, but also during trade promotion and channel management rectification, some merchants are not dealt with timely and effectively due to intricate relationships.
※ Because weak brands lack a strong backbone, they fear that strict measures will drive away distributors who were hard to establish cooperation with, affecting the sales network and consumer market they have painstakingly cultivated, so they turn a blind eye and speak softly. Little do they know that your product may quickly become unprofitable, and the market may not even be established before the product life cycle sharply shortens and eventually is abandoned by the market.
II. Solutions
- In any trade promotion, you should sort out the problems that may be caused by the activity and equip corresponding preventive measures and problem-handling measures.
For example, any concession promotion such as purchase quantity bonuses, free goods with orders, and volume-based rebates may disrupt the normal price order and create the possibility of cross-region selling (of course, for products of weak brands that have not cultivated consumer markets, due to no profit and no place to cross-sell, there are also situations where cross-region selling cannot occur). In such cases, you should prepare some preventive and punitive measures.
※ For example, withhold part of the physical goods for purchase quantity bonuses or free goods with orders, or increase the use of trade promotion measures such as sales quantity bonuses and sales gifts, to seek 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 avoid risks as much as possible. In actual implementation, whoever ships goods below the minimum shipment price or engages in cross-region selling will have their rebates deducted or even face stricter measures.
- Change awareness, enforce laws and regulations 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 mechanisms between relevant departments and personnel
But also involves the enterprise's execution capability. The practices of strong brands are worth learning from. For example, Pepsi-Cola, to prevent merchants from violating rules and sales departments from falsifying during the implementation of trade promotion policies, specifically stipulates that personnel from the marketing department and planning department form a joint team to conduct irregular spot checks and evaluations, ensuring accurate and truthful results, and truly rewarding distributors who jointly maintain and expand the market with the manufacturer. Obviously, behind the establishment of this checks and balances mechanism, it may also involve improving the organizational structure.
We know that if during the implementation of trade promotion policies, policy distortion truly occurs due to lax control and inadequate punishment, then the symptoms of local merchant and market loss of control may spread like a plague, ultimately leading to the loss of control in a wider market. There are not a few enterprises around us that have experienced this situation, and the author will not elaborate 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,' from the promotional interaction strategy section. Some modifications have been made.]
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