Subject
Sales promotions to the trade.

Type of Report
Findings from field research.

Objective
To determine what criteria buyers use to evaluate trade promotion offers and which of these decision variables best explain buyers’ acceptance of a deal and the store’s performance in support of a deal.

Method
Collected data on 150 trade deals offered to five large grocery retailers in a major metropolitan market during a six-week period; used factor analysis to reduce the set of 30 subjective and objective measures to 8 composite factors that were used in discriminant analyses to predict retailers’ deal acceptance and promotional performance.

Findings

• The set of eight trade support factors–labeled item importance, promotion elasticity, manufacturer brand support, manufacturer reputation, promotion wearout, sales velocity, item profitability, and incentive amount–successfully predicted acceptance.
• The four most important factors influencing acceptance were item importance, item profitability, incentive amount, and manufacturer reputation. Item importance comprises the consumer appeal of the promoted item, its responsiveness to promotion, and the likelihood of competitive retailer promotions. The second two factors represent the economics of the deal, while manufacturer reputation includes product quality and the manufacturer’s reliability and responsiveness.
• The most important factors influencing performance were item profitability, manufacturer reputation, item importance, and promotion elasticity. However, only six of the eight factors entered the analysis and the relationship, although significant, was weaker than with acceptance.
• The gap found between acceptance of a promotion and retail performance may occur because performance is ultimately determined by one or more trade decision makers in addition to the buyer. This suggests that packaged goods companies should view trade decision making as a cooperative process rather than viewing the buyer, or buying committee, as the sole decider.

Target Audience/Applicability
Promotion managers