MORE DOLLARS BEING AIMED AT TRADE PROMOTION: SURVEY

JAMES TENSER

WILTON, Conn. -- More brand money, and more authority to spend it, is flowing toward account-centered marketing activity, say the authors of a new survey on trade promotion spending.

But successful collaboration between brand marketers and retailers remains hindered by significant differences on key issues, notably trade promotion efficiencies and who foots the bill for in-store labor, says the 1996 Trade Promotion Spending and Merchandising Study from Cannondale Associates, a sales and marketing consulting firm with offices here and in Evanston, Ill.

"Concern about these issues should go above and beyond the marketing and sales forces," said Don Stuart, a partner at Cannondale who co-authored the survey report. "It is fundamental to what is going on for chief executive officers and presidents. It is a matter of effective asset utilization within their companies."

The survey results indicate that brand marketers need to abandon traditional ways of thinking about marketing spending, Stuart said, and make their advertising and promotion activities more account-centered. Nearly 300 manufacturers and retailers participated.

"For brand marketers, it has become inadequate to look at advertising, consumer promotion and trade promotion spending in isolation from one another," he said. "You must integrate the funding, then decide how you're going to spend against each account."

The difference of opinion about trade spending levels may be the most fundamental issue dividing retailers and brand marketers, the survey indicates. It found that 31% of manufacturers believe trade funds fall directly to retailer bottom lines, compared with just 11% of retailers -- a 20-point gap.

"Translated into dollars, this 20-point gap represents a $14 billion swing factor in trade promotion expenditures," said Stuart. "It exposes an area where enhanced communication and better executed account-specific programs could reduce the overall level of mistrust."

This mistrust is inhibiting optimal execution of many trade programs, he said. "Most retailers feel slighted. Only 31% believe they are getting their fair share of trade dollars. At the same time, manufacturers feel they are spending too much. Ninety-two percent identify trade productivity as the key issue."

This conflict may represent a natural state of affairs between buyers and sellers, but there is at least one area of strong agreement as well. "Account-specific

programs -- whether manufacturer or jointly developed -- are viewed as highly effective trade promotion tools by both groups," Stuart said.

Manufacturers appear to be aware that they may realize greater efficiency and effectiveness in their trade promotion spending when they integrate retailer and brand marketing objectives. Moves in that direction are being "greeted with enthusiasm" by the retail trade, he said.

Here is where top management ought to pay close attention, Stuart continued. "Because these new programs are consumer-driven, they often overlap with traditional consumer advertising and promotion plans," he said.

"Consequently, manufacturers may be creating new inefficiencies in their overall strategic planning and allocation of marketing resources," he said. "This is a direct result of their efforts to tighten up on the trade promotion spending front."

Currently, most customer-focused advertising and promotion programs are funded primarily out of trade promotion budgets. However, the survey results show that 72% of manufacturers said account-specific consumer promotion and trade funds should be integrated for this purpose. Only 39% said that trade dollars would be better spent on traditional consumer advertising and promotion.

Stuart said the results favor integrating the promotion budgets. "Keeping trade and consumer functions in separate buckets just about guarantees a duplication of effort and wasted resources."

In addition, the Cannondale study found that brand marketers have experienced an average 59% increase in account-specific promotion over the past five years. They anticipate an increase of 83% over the next five years.

This powerful movement toward account-centered promotion activity has put increasing pressure on both parties to manage in-store execution, said Ken Harris, another Cannondale partner. Retailer demands for in-store labor, he said, dovetail with the rapid growth of account-specific programs.

Rating the Trends [chart]

Brand marketers and retailers are fairly well aligned on many trade spending issues, but large gaps persist on the topics of Trade Promotion Inefficiency (20 percentage points), Private Label Growth (17 points) and Labor Costs (50 points).

PERCENT RATING VERY/EXTREMELY IMPORTANT

Trade Promotion Inefficiency

Manufacturer 92%

Retailer 72%

Category Management

Manufacturer 85%

Retailer 74%

Margin Erosion

Manufacturer 82%

Retailer 91%

Managing Variety vs. Duplication

Manufacturer 73%

Retailer 77%

Logistics Focus/ECR

Manufacturer 73%

Retailer 63%

Account-Customized Consumer Promotion

Manufacturer 65%

Retailer 69%

Private Label Growth

Manufacturer 56%

Retailer 73%

Labor Costs

Manufacturer 34%

Retailer 84%

Source: "1996 Trade Promotion Spending and Merchandising Survey," Copyright 1996, Cannondale Associates, Inc. Reprinted by permission.