There is no question that trade promotion has its value, but overusing it dilutes its efficiency, erodes brand equity, and devalues the entire category. As we determine how marketing must evolve in the future, we need to give shoppers a better reason to buy our brands, one that is relevant and meaningful to them and does not solely depend on price and need. Emotion — not price promotion — is the new currency with which we can successfully sell goods and services.

1. OVERCOMING THE DECLINED VALUE
OF TRADE PROMOTION
Prisca Tsai and Christopher Brace

2. Unless you sell energy drinks, dry beans, or men’s shaving lotion, chances are your recent trade promotion
efforts haven’t yielded the results you were hoping for. That’s because outside of a few categories — such
as those mentioned above — trade spending is proving to be less and less effective. According to a recent
report by IRI, in 2012, 39% of categories were getting a promotional lift of 90% or more from merchandising
efforts, but in 2015 only 30% received a lift of this magnitude. Overall, any lift from merchandising support
declined across 58% of CPG categories in 2015 compared to 2014. In fact, Nielsen reports that even in the best
performing categories, only 50% of their promotional weeks break even or do better (Fig.1). More specifically,
67% of programs in all departments don’t break even (Fig.2). And how’s this for startling news? Nielsen also
estimates that eliminating 22% of promotions would actually increase sales revenues (Fig.2). Imagine the
impact on your bottom line if you eliminated that amount of trade spending!
% OF WEEKS WHERE PROMOTIONS DON’T BREAK EVEN
Read as: 74% of the promotion weeks for the produce category don’t break even.
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
DAIRY
75%
MEAT
62%
DELI
72%
PRODUCE
74%
BEAUTY
75%
CARE
GROCERY
73%
HOUSEHOLDCARE
50%
MERCHANDISE
50%
GENERAL
FROZENFOODS
50%
HEALTH
59%
PET CARE
66%
BAKERY
73%
PERSONAL
50%
The current level of trade promotion activity is partly
due to the recession of 2008-09 when budgets were
increased to fill volume gaps. But unfortunately,
companies haven’t adjusted their trade activity in
accordance with improvements in market conditions.
They continue to rely heavily on discounts to move
volume despite less and less success. On average,
15 to 20% of sales revenue is still allocated to trade
promotion, twice as much as advertising (7.5%).
Seemingly unfazed by the declining trade
efficiency — or perhaps in an effort to counter the
trend — 40% of categories increased their
promotional activities in 2014-15.
$
!
67%
DON’T BREAK EVEN
33%MAKE MONEY
ELIMINATING
22%
OF PROMOTIONS
WOULD INCREASE
SALES REVENUE
Source: Nielsen Trade Promotion Landscape Analysis 2014 Q3
ASSESSING TRADE
PROMOTION PERFORMANCE
Figure 1
Figure 2
1. Merchandising for Growth: Connecting the Dots for Maximum Activation, IRI November 2015
2. Merchandising for Growth: Connecting the Dots for Maximum Activation, IRI November 2015
3. The Path to Efficient Trade Promotions, Nielsen February 2015
4. Merchandising for Growth: Connecting the Dots for Maximum Activation, IRI November 2015

3. Much like an addiction, we are engaged in a vicious cycle that’s hard to break. But
spending more money on something that is becoming less and less effective each year is
a no-win situation and hastens any brand’s race to the bottom. To make matters worse,
we have inadvertently trained shoppers to expect and seek deals on everything all the
time: 64% of shoppers say they will shop elsewhere for competitive pricing or hold off on
purchases until certain products are on sale. This level of price shopping is how categories
turn into commodities. That’s not to say we shouldn’t invest in trade activity, but rather,
we need a viable alternative to pull us out of this addiction. We can no longer rely on the
default position of price promotion as a means to generate growth.
One viable alternative is to provide shoppers an additional reason to purchase by creating
an emotional want at the shelf. It’s a need that brings the shopper to the toothpaste
aisle, but when faced with a proliferation of brands, it is an emotional want that drives
brand choice. In the absence of a clear want, shoppers will default to the lowest common
denominator, price, thus increasing brands’ reliance on trade spending to drive purchase.
But people don’t buy just benefits and features: they buy stories, and stories are worth
more money. By story, we don’t mean a tale that’s meant to deceive; rather it is that art of
providing a relevant context and engaging with shoppers in a more personal, meaningful
way that inspires them. Said differently, it’s about striking the right emotional chord so
they want your brand instead of simply needing it. It should be noted that a brand story
is not the same thing as the story of a brand: while the latter is about the brand first and
foremost, the former is about the emotional lives of your consumers and shoppers. This is
the story that counts.
“Inspiration is one of the most underused drivers
of effective marketing and one of the most powerful.”
5. Reversing the Diminishing Returns of Trade Promotion, Acosta 2016
6. The Ultimate Marketing Machine, Harvard Business Review 2014
7. Havas Meaningful Brands Study, 2015
8. The Meaningful Brand: How Strong Brands Make More Money, Millward Brown 2013
Did you ever notice how people don’t have 30 seconds to be interrupted by a
marketing message but they have 30 minutes for a good story? Why is that? It’s
not just because stories are entertaining, but because they are relatable, inspiring,
and open room for interpretation, imagination and expansion. They are worth
following and evolve over time by adding chapters to deepen the story. Great
brand stories provide a level of emotional resonance that in turn creates the “want”
in addition to meeting the “need.” Meaningful brands that tell a story and strive to
contribute to our personal and collective well-being have been shown to gain 46%
more share of wallet than other brands. Not only that, they command an average
price premium of 13% higher than the alternatives.

4. So where should a brand start in order to write a story that has enough emotional resonance to create a
want? You start by identifying the emotional truths that trigger both consumption and purchase behaviors
in the category. Most organizations focus on understanding the behaviors — the what, where, when, and how
purchases are made — without understanding the why. While behaviors are important, the emotional truths
are the basis for a meaningful story. Take Dos Equis for example. Rather than being one of many imported
beer brands that can meet the needs of shoppers, they leverage a deep emotional truth among their target
consumers and shoppers to become a brand that people want. This allows the brand to maintain its premium
pricing without having to rely on deep discounting to generate growth.
There is no question that trade promotion has its value, but overusing it dilutes its efficiency, erodes brand
equity, and devalues the entire category. As we determine how marketing must evolve in the future, we need
to give shoppers a better reason to buy our brands, one that is relevant and meaningful to them and does not
solely depend on price and need. We must pay more attention to what we are learning about consumers and
shoppers, making sure we understand the why behind the purchase so we can create communications that
connect with shoppers, engage them in the brand story, then inspire them to purchase. Emotion — not price
promotion — is the new currency with which we can successfully sell goods and services.
Christopher Brace founded SyntegrateConsulting in 2006 and as CEO, leads all
client projects. He can be reached at brace@syntegrate-consulting.com.
Prisca Tsai is a Strategist at Syntegrate Consulting and leads the qualitative
research projects and all research integration work for clients. She can be
reached at prisca@syntegrate-consulting.com.
Syntegrate Consulting is an insight-based strategic consulting firm that
specializes in helping clients build better brands, communications, and
go-to-market strategies that create new value in the marketplace through
syntegration: the bringing together of dissimilar research, knowledge, insights,
and people to create something completely new.
Please visit our website at www.syntegrate-consulting.com.