Trade Promotions are a targeted marketing effort by manufacturers to promote their products to the retailers and build/enhance relationships with them. Some of the trade promotion techniques include low pricing, cash discounts, trade contests, free point of purchase displays, deal loaders, gifts, etc.
Trade promotions offer the following advantages:
- Allow the companies to differentiate their products from the competition: due to strong competition and a given number of retailers, a company has to work hard to promote their product and that is where a relationship with the retailer helps.
- Increased product visibility: a happy retailer will provide better visibility of the product and advertise it to the consumers.
- Increased product purchase rate (higher sale volumes): higher visibility and consumer awareness will likely lead to higher sales, including new consumers who may want to try the product.
- Allow entry into newer markets: unexplored markets can be tapped by extensive marketing at the retailer level.
- Enable higher market shares: increased sales will provide higher market shares to the company.
- Enable testing or launch of new products: new products can be tested at the retailer level and the same can be used to launch new products.
- Allow inventory control: excess inventory can be controlled by discounted sales.
- Better relationship with the retailers: incentives are likely to enhance the retailer-company relationship, which is beneficial to both (especially in the longer run).
Hope this helps.