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Trade Marketing

Trade Marketing

When supply can't keep up with demand or demand can't keep up with supply, it's indicative of waste in the form of misallocated capital.

- Hendrith Vanlon Smith, Jr.

You must have seen some products in a supermarket better placed than others. Why is this the case? Well, it happens when manufacturers give incentives to retailers in the form of commissions or profit margins. It serves as a motivator for retailers to ensure product availability and display. Trade marketing works similarly, and in this explanation, we will cover the key concepts of trade marketing.

Definition of Trade Marketing

A product goes through many phases before reaching a customer. Key players in a product's supply chain ensure product availability to customers. These key players are manufacturers, wholesalers, and retailers.

Businesses cannot achieve success without the contribution of their supply chain partners. The question is: what is the role of trade marketing in all of this?

Trade marketing is a business-to-business (B2B) marketing approach that creates demand for a product amongst supply chain partners, such as wholesalers and retailers.

Wholesalers and retailers have many manufacturers as their business partners. Every manufacturer wants optimum results when it comes to product distribution. Therefore, creating product demand amongst the supply chain partners is essential. At the end of the day, these partners ensure product availability to the final customers.

A manufacturer offers different incentives to create product demand among supply chain partners. These incentives urge wholesalers and retailers to promote the product at their end. It creates a win-win situation for a manufacturer as well as its partners. The manufacturer gets effective product promotion, and partners get better deals.

A cooking oil manufacturer gives a retailer 10% of revenue as an incentive. It will prompt the retailer to promote the product in the store. They could place the product in an area with maximum customer exposure or directly involve themselves in sales by convincing the customers about its quality and benefits. Ultimately, the retailer will get 10% of its total revenue.

Incentivizing the wholesalers and retailers through profit/revenue margins is a common approach. However, this alone cannot work all the time. Manufacturers must communicate the product value to the partners. For instance, manufacturers can inform retailers about product quality, packaging, and variety.

Trade Marketing vs. Brand Marketing

Businesses use trade marketing and brand marketing extensively to achieve their objectives. However, there are differences between these two approaches regarding their focus and purpose in marketing. Let's look at some key differences between them.

Trade Marketing
Brand Marketing
  • Trade marketing is used in B2B dealings with supply chain partners.
  • Brand marketing is used in dealings related to customers.
  • It creates demand for a product or service amongst the supply chain partners.
  • It communicates brand identity and value to customers.
  • Its purpose is to increase product availability to customers.
  • Its purpose is to develop a loyal customer base.
  • A company incentivizes wholesalers and retailers for product promotion.
  • A company can either carry out brand marketing activities or hire an external agency.

Table 1 - Trade marketing vs. Brand marketing

Trade marketing and brand marketing may be different marketing approaches; however, companies can use these two in tandem to achieve their marketing and sales objectives. A company can employ brand marketing to develop the brand image and communicate it to the customers. It will help in promoting the brand to the target audience. Once it can establish a strong brand identity in the market, it can employ trade marketing to create demand for its products amongst the supply chain partners.

Trade Marketing Strategy

Businesses can face quite a few problems when it comes to carrying out trade marketing activities. Therefore, developing a trade marketing strategy before starting the campaign is essential. It allows businesses to plan and execute campaigns effectively.

  • Conduct market research – Market research is required before starting the trade marketing campaign. It allows a business to identify the gaps in the market and the problems customers face. The market research stage also helps a business resolve customers' issues through its campaign. Finally, market research helps identify potential problems a business could face from external sources, such as market competition and regulations.
  • Devise a plan – After conducting market research, it is time to devise a plan. In the plan, you set the goals for the campaign, identify the target market, and allocate the resources. Since you already know the gaps in the market and the challenges customers face, you can direct the trade marketing campaign to fill those gaps and present solutions to the customers.
  • Develop the product – At this stage, you already have market information and the plan for your campaign. It is now time to develop the product. You must ensure that the product meets the demands of your target market and provides a unique solution to their problems. Product development has a massive impact on trade marketing as it could allow a business to convince the supply chain partners about the product.
  • Work on branding – We discussed earlier that trade marketing, along with branding, could work wonders for a business. A business must establish a solid and unique brand identity. Strong branding creates a deep connection between a brand and its customers. The company could achieve more revenue and profit when customers show a willingness to buy its products. Additionally, wholesalers and retailers might be more interested in doing business with established brands.
  • Design the distribution system – In the last stage, it is time to design the distribution system. This system must align with the trade marketing campaign's objectives. A business should identify the regions it wants to cover and bring key partners, i.e., wholesalers and retailers, on board. It should also incentivize these partners to ensure increased product availability. Additionally, there should be a strong sales force that could collaborate with the business's key partners.

Trade Marketing Market research is one of the pillars of trade marketing StudySmarterFig. 1 - Market research is one of the pillars of trade marketing

Tools of Trade Marketing

Businesses use different tools to implement the trade marketing strategy effectively. Let's discuss some of the common tools of trade marketing.

  • Customer relationship management (CRM) – Customer relationship management is an approach a business uses to manage relations with customers. It helps keep track of customers' activities and improves communication with them. It gathers data through customer interaction and allows businesses to measure productivity.

  • Email system – It is another tool of trade marketing. A business needs to communicate with its partners regularly. Therefore, it is vital to have an email system that ensures effective communication. The partners need to be updated about company plans and policies. The email system is equally important for communication with customers.

  • Brand story – Branding is integral to trade marketing, and every established brand has a story to tell. It inspires people to connect with the brand at a deeper level. As for trade partners, the brand story helps convince them about a brand's potential.

Trade Marketing Examples

A business could employ different ways to execute trade marketing campaigns. To understand these concepts fully, let's go through some typical trade marketing examples.

Trade exhibitions

A trade exhibition is a perfect opportunity for a business to showcase its products. It could create a buzz for the products when done correctly. Businesses can draw attention not just from potential customers but also from potential trade partners. It provides an ideal setting to grow the business network and build fruitful relationships.

Trade Marketing Trade exhibition is a vital part of trade marketing StudySmarterFig. 2 - The trade exhibition is a vital part of trade marketing

Trade promotions

As the name suggests, trade promotions are used to promote the trade of products. At first, a manufacturer can incentivize its partners, who then pass it on to the customers. Vendors give free samples and discounts to customers to promote the products.

Strategic partnerships

When two or more brands collaborate to achieve their marketing goals, it is called a strategic partnership. These brands use each other's customer base to enhance their value proposition. In trade marketing, the manufacturer signs an agreement with wholesalers and retailers to form strategic partnerships.

Trade Marketing - Key takeaways

  • Trade marketing is a business-to-business (B2B) marketing approach that creates demand for a product amongst supply chain partners, such as wholesalers and retailers.
  • Incentives urge wholesalers and retailers to promote the product at their end.
  • Trade marketing creates a win-win situation for a manufacturer as well as its partners.
  • Manufacturers must communicate the product value to the partners.
  • Businesses can use trade marketing and brand marketing in tandem to achieve marketing and sales objectives.

Frequently Asked Questions about Trade Marketing

Trade marketing is a business-to-business (B2B) marketing approach that creates demand for a product amongst supply chain partners, such as wholesalers and retailers.

Trade marketing is used in B2B dealings with supply chain partners. Whereas, brand marketing is used in dealings related to customers. 

A trade exhibition is an example of trade marketing. 

Trade marketing is used in B2B dealings with supply chain partners. A trade exhibition is a perfect opportunity for a business to showcase its products. It could create a buzz for the products when done correctly. Businesses can draw attention not just from potential customers but also from potential trade partners. It provides an ideal setting to grow the business network and build fruitful relationships. 

Trade marketing is B2B. 

Manufacturers use trade marketing. 

Final Trade Marketing Quiz

Question

Define trade marketing 

Show answer

Answer

Trade marketing is a business-to-business (B2B) marketing approach that is aimed at creating demand for a product amongst supply chain partners such as wholesalers and retailers. 

Show question

Question

Why is it important to create demand for products amongst the supply chain partners?  

Show answer

Answer

It is important to create demand for products amongst the supply chain partners because they ensure product availability to the final customers.  

Show question

Question

To create product demand among supply chain partners, a manufacturer offers different incentives to them.

Show answer

Answer

True

Show question

Question

The incentives urge wholesalers and retailers to promote the product at their end.

Show answer

Answer

True

Show question

Question

________ creates a win-win situation for a manufacturer as well as its partners.

Show answer

Answer

Trade marketing

Show question

Question

Trade marketing is used in B2C dealings with supply chain partners. 


Show answer

Answer

False

Show question

Question

Brand marketing is used in dealings related to customers. 



Show answer

Answer

True

Show question

Question

_________ communicates brand identity and value to customers. 

Show answer

Answer

Brand marketing 

Show question

Question

The purpose of ____________ is to increase product availability to customers.  

Show answer

Answer

Trade marketing

Show question

Question

The purpose of ___________ is to develop a loyal customer base. 

Show answer

Answer

Brand marketing

Show question

Question

Trade marketing and brand marketing work well together. 

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Answer

True

Show question

Question

What is CRM? 

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Answer

Customer relationship management (CRM) is an approach a business uses to manage relations with customers.

Show question

Question

Branding is an integral part of trade marketing

Show answer

Answer

True

Show question

Question

Businesses can draw attention not just from potential customers but also from potential trade partners through ________. 

Show answer

Answer

Trade exhibitions

Show question

Question

The manufacturer forms strategic partnerships with its partners in trade marketing.

Show answer

Answer

True

Show question

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