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Price competition in retail
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Trade Promotions: Analysis of the Key Determinants of Market Share
A proposal submitted in partial fulfillment of the requirements for the Degree of Master’s
Problem Statement
Trade Promotion can be defined as a campaign directed at channel partners like wholesalers & retailers and not at final customers. The incentives to channel partners are offered to encourage them to increase product sales by providing them with a better margin than competitors. The intention is also to have a drip down effect & pass on the margins to end customers in terms of lower retail prices. This retail pass through of margin to end consumers has been a concern for manufacturers for long. The trade promotion spending as a part of marketing budget has increased significantly over the years but the inefficiency in ‘retail pass through’ has been a big concern.
The purpose of this research to study key determinants that affect a retailer’s motivation to pass on the benefits to end consumer and help the manufacturer devise a promotion strategy to maximize its sales & help them translate it into high profits. We take manufacturers as test subjects & will make an attempt to understand the trade promotion strategy adopted by the company & determinants affecting the retail pass through. We will compare the practices of these companies & trade promotion activities to study the company’s performance & compare with industry average. We will analyze the company’s promotion strategy against market leader’s & give our recommendation to maximize the sales.
INTRODUCTION
Trade promotions are inducements offered by manufacturers to retailers to encourage them to reduce retail prices. Armstrong in a study in 1991 found that manufacturers more oft...
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...d nearly as much on trade promotion as advertising – which is more than $2 billion annually. Yet they go with the assumption that more than a quarter of trade spending goes directly to retailers' bottom lines rather than to cover promotion costs or reduce prices to consumers. They employed the services of Accenture in introducing analytics in TPM. Currently, retailers accrue funds from P&G based on the number of cases they buy. But while the funds are earmarked for specific promotion programs, retailers don't need to prove they executed the programs to collect. Better retailer performance could mean much better display or other in-store marketing for P&G brands at the same or lower cost as before-though even a $70 billion behemoth like P&G could have trouble taking money away from key retailers without getting punished by competitors.
...ir advantage. Franchises such as Walmart, manipulate product advertising and put items in specific places to increase chance of sales.
Kotler and Keller (2014) develop on what product represents in the marketing mix, as the idea centers around its design, quality and packaging. Continuing with the Four P model, price should be considered when marketing a product. The price component asks one to determine the list price, discounts, allowances, and payment period of a product (Kotler & Keller, 2014). Finally, Kotler and Keller (2014) list promotion and place as the final two variables associated with the older Four Ps. Promotion deals with how a product is advertised and what type of sales force will be utilized, while place is associated with the channels and locations for which your product will be featured (Kotler & Keller,
The Article "Flanking in a Price War" discusses how an economic experiment and data were used effectively in the Quebec grocery industry. The beginning of the article gives some history of the industry, introduces the major participants, and describes how one firm in particular, Steinberg, used a price cutting strategy to became the dominant player for 30 years.
Persuasion has always played an intricate role, in many ways, when it comes to promotion of a Fortune 500 companies like C.V.S. corporation. With the largest pharmacy chain of over 7400 stores in United States; no wonder they are at the top five largest pharmacies in the United States based on revenue generated from prescription only. However it's not only prescription is sold in stores; there are assortment of general merchandise including food, sundries, beauty products as well as health products sold there. In one of the stores I visited for this paper, located at 39th and Main street, I noticed that the products were sold in minute quantities so as to reduce the price of the merchandise.
Lamb, C. W., Hair, J. F., McDaniel, C. D., & Wardlow, D. L. (2009). Essentials of marketing (6th ed.). Cincinnati, Ohio: South-Western College Pub..
Helgeson, James G., and Eric G. Gorger. "The Price Weapon: Developments In U.S. Predatory Pricing Law." Journal Of Business-To-Business Marketing 10.2 (2003): 3. Business Source Complete. Web. 15 Apr. 2014.
Armstrong, G, Adam, S, Denize, S, Kotler, P, 2010, Principles of Marketing 5th Edition, Pearson Australia Group, Frenchs Forest
Pricing is an important aspect of every business. Chief Financial Officer’s (CFO) use pricing to create financial projections, establish a break-even point, and calculate profit and loss margins (Power Point, 2005). It is the only element in the marketing mix that produces revenue. Price is also one of the most flexible elements of the marketing mix as it can be changed very quickly. This is usually done to beat competitor prices in an attempt to fix the product’s market value position very low (Anderson & Bailey, 1998). After all, high prices make it difficult to become the market share leader. The leading US retailer, Wal-Mart, is an expert at low product pricing as evident in 2004 with $250 billion dollars in sales to their 138 million weekly shoppers. However, they are also responsible for reducing prices so low that it drives specialty stores out of business. This is the effect Wal-mart has had on many toy stores and has almost closed the doors of the famous toy store Toys “R” Us Inc.
Furthermore, I will explain the application of theory relating to me and my purchase. I will also review the marketing activity of the organization where I purchased from. This is to explain how the two theories have been used in the marketing strategy. In addition, recommendations regarding how the marketing strategy could have been improved by applying the 2 buyer behaviour theories are given.
Frequent Price promotions in fact, condition the consumers to expect deals and get desensitized to small ones. Retailers have to think about the customer behavior they want to encourage --or conversely discourage.
P&G’s purpose is to provide branded products and services of superior quality and value that improve the lives of the world’s consumers. P&G values their employees through leadership, ownership, integrity, passion for winning, and trust. P&G entices and recruits best people in the world, builds their organization by promoting and rewarding from within, and believes that their employees will always be the most important asset. P&G has many principles such as (1) showing respect to all individuals, (2) valuing differences, (3) inspiring and enabling employees to achieve high expectations, standards, and challenging goals, (4) valuing personal mastery, (5) believing that all individuals can and want to contribute to their fullest potential, (6)
middle of paper ... ... Secondly, Ecover should support its licencees’/dealers promotions. Thirdly, Promotional strategies like value added pack should be offered to the customers thus making the consumption more.
Rajagopal. "International Journal of Retail & Distribution Management." Emerald. Emerald Group Publishing Limited, 2011. Web. 21 Feb. 2014
...re chances of growth and development for the company which is clearly understood through the research done on the Ansoff’s matrix. P&G is much ahead of its competitors and has also won many honors in terms of offering quality and innovative products. The company’s products are also sold by wide variety of retailers around the world and also through many e stores that sells the product online. Finally the company has also got more expansion opportunities which is clearly understood through the Yips model of Internationalization. As the company continues to acquire international brands over the years and succeeds in offering quality and innovative based products to the people all over the world it tend to give a much better completion to its competitors and of course get a wider market share making its competitors give a tough time in the industry.
To achieve and maintain success in such a complex system as market it is essential to every marketing person to understand clearly consumer behavior. Understanding consumer behavior is not that easy as it may seem from the first glance. The reason is that there are plenty of various factors that may influence it in one certain way or the other. When considering each of the factors it is also important not to forget that they ought to be analyzed as different parts of one whole picture, that is, in correlation with each other.