HoukTPM

April 21, 2008

Shopper Marketing and Trade Promotion

I was reading an article about trade promotion in Advertising Age yesterday, something I generally do with trepidation, because that magazine repeatedly demonstrates a total lack of understanding of the topic. Nonetheless, being a glutton for punishment, I read the article, which contained this paragraph:

A study by Deloitte Consulting for the Grocery Manufacturers of America last year found shopper marketing, formerly known as trade promotion, is growing faster than any other medium for package-goods marketers, including digital advertising. Deloitte estimated package-goods companies spend 8% of their marketing budgets now on shopper marketing, but that percentage could be well over 35% if all forms of trade promotion are included.

Putting aside the mention of "well over 35%" spending - I suppose somebody may be in that category, and I wish them well, but that's about double the norm in CPG/grocery and even farther off for other categories - putting that aside, I'm wondering about that line, "shopper marketing, formerly known as trade promotion."

Huh? Did somebody change the name and forget to tell me? Is my book Trade Promotion Marketing already out of date? (It wouldn't be the first time - my previous book was called Co-op Advertising - though in that case, I knew the title was outmoded, but the publisher insisted on it).

So I contacted a few people who know whereof they speak. Rob Hand replied to my inquiry with his typical pithiness:

They have no clue...never did. Aren't they the ones who first coined high tech trade promotion as "soft dollars?"

Shopper marketing...that's a good one.

Andrew Wilson was a bit more diplomatic:

If they're referring to In Store Shopper Marketing (ISSM), this only covers a small (but significant) sub set of the total Trade Promotion activity. Why replace a perfectly good term with one that's more limited in reach?

It's taken us long enough to gain recognition for Trade Promotion as a discipline. Let's not confuse matters by rebranding it so quickly!

And Mike Kantor of the Trade Promotion Management Association indicates that they have no plans to change their name:

I appreciate the attempt by the publication (recognizing the strategic role of Trade Promotion), but to refer to Trade Promotion as Shopper Marketing is like calling Wal-Mart a drug store. Although Wal-Mart has pharmacy departments as part of their mix, it does not solely define their business. Same is true here - Shopper Marketing is an integral part of Trade Promotion, but we all know Trade Promotion as inclusive of integrated sales and marketing, demand planning, category management, brand management, account management, retail execution, and related back-end processes including settlement and analysis.

Actually, even the study they quote makes the point that shopper marketing is only a piece of the total trade promotion budget - an important and growing piece, but still just a piece.

Having indulged myself in a bit of Ad Age-bashing, the subject of shopper marketing is one that is worth some attention. It is a very fast-growing area of spending, because it is effective; because retailers demand such funding and retailers have power; beccause the mass media are fragmenting and in-store marketing is one of the most effective replacements* . and probably for numerous other reasons.

That Deloitte/GMA study also indicated that trade promotion (exclusive of shopper marketing) is anticipated to decline by 2% annually. To which I say: Good - since the portion being cut is presumably mostly pricing actions (TPRs, trade rebates, etc).

I think the subject of shopper marketing and how it should be integrated with and differentiated from the pricing aspects of trade promotion is the most interesting and important area of this subject, and worthy of a fuller exploration, so the next issue of TPM Update will feature some thoughts on how to approach shopper marketing in terms of strategy, tactics, planning, budgeting, and management.

But for now, my first reaction is that if the trend in trade promo is to move money away from price cuts and toward brand-building activities, then that's a very positive development.

Regardless of what you call it.

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* I commented on this point three years ago (ironically, in response to an article in Ad Age).

The views expressed here are my own and do not necessarily reflect the views of Oracle.

TPMA November Meeting

I'm very disappointed that I couldn't be at the TPMA meeting in San Francisco this week. I will definitely (I hope) be at the next one (and not only be cause it's in my native Valley of the Sun).

Mike Kantor dropped me this note: "The TPMA Annual conference will be held in Scottsdale, AZ November 9-12 2008. We will continue to have a core focus on TPM/TPO, trading partner collaboration, and complete supply-chain integration to maximize Return on Investment. Look for more information at www.tradepromo.org, or write to mkantor@tpcww.com."

The Accelerating Effect of a Slowing Economy

We often hear, at time like these, statements like, "So-and-so was driven into bankruptcy by the recession."

Putting aside whether we're in a recession or merely facing a slowing economy, I'm often tempted to reply that strong companies seldom go under because of a recession. A small, underfunded business may be ruined by having a bad year, but the major corporations that go under during a recession generally do so because they had serious weaknesses before the economy went south. The bad economy merely exposed their weaknesses and/or accelerated their decline.

They may be in trouble prior to the recession because of poor management or because of weaknesses in their sector or for other reasons, but in any case they are in a position where circumstances that would normally merely call for some belt-tightening instead prove far more serious.

In thirty-plus years of watching the department store channel (it's where I started in this business, though I got out as soon as I could), I've noticed that when the economy slows, the channel drops lower than the economy; then when the economy improves, we see news stories proclaiming that "The Department Stores Are Back!" But come the next downturn, the department stores once again drop, and each time the drop is lower than the last. In March, a bad month for retail in general, the department store channel was -- surprise -- the worst of all, down 11%.

I think we'll see something similar with newspapers over coming years -- a slow decline generally, accelerating each time the economy sours.

Meanwhile,

back at the blog ...

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