Trade Promotion: Essential to Selling through Resellers.

The article focuses on how certain trade promotions increase total channel profits and the manufacturer's share of those profits beyond levels achievable with a single price and without promotions. Manufacturers, particularly in the packaged goods industry, have criticized trade promotions, claiming that they erode the power of brands. Managers with this mind-set advocate the "everyday low prices" or "everyday low purchase price." Even products with strong brands may need promotions to keep their retailers sufficiently aggressive. However, the authors assert that a single price to the trade may actually diminish manufacturer control over the retail price set by channel members. Instead, the authors focus on the importance of trade promotions and their role in increasing profits for manufacturers and retailers. They demonstrate how certain trade promotions increase total channel profits and the manufacturer's share of those profits, thereby benefiting the manufacturer as much as the retailer. Contrary to the way it is sometimes portrayed, pricing can be a creative area of marketing, and promotion is an important tool in this creative process. The manufacturer must design pricing schedules so the retailer finds it optimal to price at a level that maximizes total channel profit.