13 minute read
Trade Marketing 101
by Jenna Movsowitz
Trade
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MARKETING 101
For emerging brands, getting on-shelf feels like the culmination of a grueling journey. Finally seeing the product that once was a mere whiteboard sketch in its physical form, sitting next to the brands you once admired, is priceless
But that’s just it — without getting into the hands of consumers, your shelf occupancy has no tangible value. Despite common misconceptions, there is actually no statistical correlation between %ACV (“all commodity volume”; a measurement of breadth of distribution) and average YoY growth for premium CPG brands (Richardson). Essentially, the number of stores or channels you’re in will not necessarily predict your growth – it will just trick top-line growth. A true measurement of growth is velocity, or units purchased per store per week.
In other words, with so many other brands fighting for shelf space, your continued stay on the shelf is determined by your ability to get off of it.
THE SECRET TO GETTING OFF-SHELF? THE UNSEXIEST FORM OF MARKETING
When you think of “marketing,” you likely think of brand awareness campaigns — the flashy photoshoots, the witty taglines, your product magically landing in the hands of an eager-to-share Kardashian — but these hot marketing tactics often have little to do with moving units off shelf for newbies on the scene. Brand awareness campaigns, or top-of-funnel awareness, are much more effective for BigCo brands than emerging brands. As James Richardson, author of Ramping Your Brand, explains, “big brands can rely on top-offunnel marketing because they are simply reminding consumers of their existence. Emerging brands are informing.”
Erin Fasano, Chief Marketing Officer of CORE Foods, shares this sentiment: “Don’t spend money driving people to the pasta aisle. Barilla already did that,” she says. BigCo brands are dropping thousands on top-of-funnel awareness campaigns to drive customers to the store — and small brands can piggyback off of their ad spend. “Focus on being the best competitive choice on shelf when someone else already drove them to the store,” Fasano adds. Though we like to believe that consumers go into a store with awareness-campaign-driven conviction, two-thirds of purchasing decisions are made in-store, leaving a huge opportunity for emerging CPG brands to get their products in front of shoppers at the point of purchase.
So how can brands leverage the instore experience, and, ultimately, drive velocity? It all comes down to trade marketing, or as I say, the unsexiest form of marketing. Buckle up.
WHAT IS TRADE MARKETING?
There is a suite of activations you can do in partnership with your retailer — and these are known as trade marketing. To understand the basic tenants of trade marketing, most marketing professionals refer to a quick acronym, MAPPS (or AMPPS), which stands for:
MERCHANDISING In-store merchandising is the fulfillment, organization and presentation of products within the store. Retail merchandising is most concerned with driving purchase at shelf
through inventory replenishment, beautiful product display, planogram compliance, and new product sell-ins.
Peter Boyajian, Head of Partnerships at Startup CPG, describes merchandising as the baseline of velocity. After launching multiple brands with retailers like Target, CVS and Sprouts, Boyajian believes that “getting off shelf is often a huge unlock for brands. Whether you’re Liquid Death building an instagram-worthy case stack Halloween display, IWON Organics with a packed out end cap, or Burts Bees with clip strips of product at the cash register, your goal should be to break free of just being found within your set.”
MERCHANDISING CONSIDERATIONS:
stories that standalone shelf space cannot. Cross-merchandising in particular is a merchandising tactic that allows you to tell your customers the story of how your brand will fit into their lives with other products they already enjoy. Anna Peck, co-founder of Chia Smash, emphasizes the brand’s early success in cross-merchandising at their first retailer: “In our first Whole Foods account, we found creative ways to build brand awareness and trial through cross-merchandising. We set up wing displays with Chia Smash and bread, or Chia Smash with nut butter and oats, and helped customers understand the use case for Chia Smash.”
ASSORTMENT: Assortment refers to the product variety, or set of SKUs, that are present in any given store. Different retailers likely have different assortment strategies, leaning more towards the tastes of their local consumers (localized assortment strategy) or appealing to the mass-market, like Walmart or Amazon (mass-market assortment strategy).
PRICING: The price of your product. Put simply, baseline pricing could make or break your velocities. It is critical to drive your everyday price to a competitive level. Check out page 23 of this edition to learn more about how to price your product for retail.
PRICING CONSIDERATIONS:
“In the initial conversation with your retail buyer or category manager, be transparent about the pricing you’re hoping to achieve at shelf,” says Boyajian. Though pricing is ultimately at the discretion of the retailer, you want to be transparent to enable your retailer to match your pricing strategy.
PROMOTION: Also known as temporary price reduction (TPR), this is when your product is discounted (at least 5% or more) from the regular price for a given period of time. TPRs are the only time a retailer will see a reduced price as they scan, as they are measured using the retailer’s POS system.
There are two ways to run a promotion: off-invoice or chargeback/scanback. Off-invoice allowances are processed through the distributor; you sell the distributor inventory at a discount, so you pay the price of the discount upfront, even if the units don’t get sold during the promotional period. Chargebacks, often seen as a more preferable method, are processed through the retailer; the retailer bills the vendor for each item purchased at a discount at the end of the promo period.
As a consumer, you’ve likely seen your fair share of TPRs indicated by the yellow sale tag on the shelf. Consider how this tag impacted your purchase. Whether subconsciously or not, yellow tags have wriggled their way into our shopper psyches — and you don’t want your brand to miss out on the chance to drive incremental velocity.
PROMOTION CONSIDERATIONS:
Each retailer will have different expectations for how often TPRs are run and the depth of the promotion. Most retailers encourage 3-4 promotional periods per year. If your retailer is everyday low cost (EDLC), you can expect frequency or depth of promotion to be a bit lower. As you’re setting up your promo calendar, be sure that your expectations are aligned with those of your retailer.
Most retailers have a minimum threshold for putting up that yellow tag on shelf that indicates a TPR to the customer — make sure you know this threshold (it’s often 20% or more). Some retailers also expect that you spend additional trade dollars on advertising during a promo period, and may withhold the vital yellow tags without this added spend. “You’ll need a best-in-class team to make sure that tags go up. Retailer compliance is not guaranteed,” says Boyajian.
Beyond the depth and cadence of promotion, Boyajian suggests that you ask your retailer about how they typically back promotions with added activations, as many retailers will want you to spend a bit more on top of your promo.
Knowing this, it’s critical to go into buyer meetings “knowing your numbers”, advises Jake Huber, US Sales Director of St. Pierre. “Let your budget be their budget. If you come in with a solidified promotional plan and marketing plan, and your buyers ask for a program at an additional cost, you need to be transparent — if you pay Paul, you have to rob Peter,” Huber says. “That could come in the form of pulling back on a promotion, or pulling away some marketing, but if you make that decision together, you are both responsible for the success of your promotion. Being credible and knowing your budget for a promotion makes it a partnership, as opposed to a transaction.”
SHELVING Shelving is focused on where your product physically sits on shelf. The placement of your product can have a major impact on sales, the truism behind the saying “eye level is buy level.”
SHELVING CONSIDERATIONS:
You’re never guaranteed a specific place on the shelf. Oftentimes, the planogram won’t even be shared until you’re already on shelf. But Boyajian advises that you talk about shelving upfront with your buyer. Ask for a more premium location — don’t assume they know you’re seeking one. “It’s likely for emerging brands to start out on the bottom shelf,” Boyajian warns. “Your job is simply to support your items, and eventually be able to show data that indicates that you’re outsized for where you’re placed,” he says.
When Boyajian was working at a previous brand that had 4 SKUs on a retail shelf, it took up 8% of (non-eye level) shelf space but was driving 30% of volume in category sales. “We went to the buyer with this data, and explained that they were leaving dollars on the table by not giving us more shelf space and better placement,” he shares. Approaching buyers with data that supports your request in their favor is key to maximizing trade spend.
SO, WHAT KIND OF SPEND ARE WE LOOKING AT?
“We analyze potential trade spend with a bottoms up approach and then build out our forecast for each unique retailer,” says Dana Mensah, Director of Marketing at Soom tahini, which just launched nationally at Whole Foods Market. “The goal is to impact distribution and velocity but still hit our net trade spend revenue targets.”
Though many stick to the “20%” figure as a good rule-of-thumb for trade spend, industry vets often differ in opinion — especially early into your retail journey. In the first year, many retailers will expect freefills and heavy TPRs to demonstrate early commitment: “For your first year in retail, it’s not unreasonable to exceed 30% on trade marketing alone, not including shopper marketing,” says Boyajian.
Philippe Chetrit, CEO of Toodaloo, emphasizes the many small items often left out of budget chats: “If you’re expanding beyond your region, you’ll want to bring on a merchandising team. Your merchandising team is going to want t-shirts. You’re going to want them to have enough product on-hand to be able to buy a manager a bag every time they’re in the store. There are a lot of little pieces that are probably the ones that impact you the most — and that you might not have budgeted for.”
Though trade spend expectations may seem monstrous, it’s worth noting that this spend goes far beyond CAC — which is why trade is considered an above the line spend. You’re investing in a relationship with your retailer, and, by proxy, in expanded distribution in the future.
A LOOK INTO NATURAL RETAIL STRATEGY: CHIA SMASH
When Chia Smash launched in their first Whole Foods store in Manhattan as a local vendor, the co-founders made it their mission to be the best retail partners possible. They went into the store multiple times a week, got to know everyone on the store team, and met frequently with their buyer. Boyajian describes this as the “soft” items of trade marketing: the way you’re perceived in the store, your relationship with store employees, and how you go to market (with a broker, merchandising team, or in-house support). In early days, the Chia Smash co-founders largely focused on building strong relationships, and working closely with their category manager to set up creative promotions and displays that met Whole Foods’ “clean floor policy.”
When Chia Smash later launched nationally in Sprouts, co-founder Anna Peck was determined to understand the ins and outs of their particular promotional strategies, just as she had with her local Whole Foods. While drafting a promotional plan, Peck encourages early stage brands to remember:
1. Promotions can and should look different depending on your category. Because jams and jellies are at the center of the store and receive less foot traffic than the store’s perimeter, Chia Smash goes heavier on depth and frequency of promotions than other categories. She suggests looking to
competitors within your category to outline your basic strategy. 2. Nothing is set in stone — which means that pivots can and should occur. “We’re testing as we go and making sure we’re always iterating. Whatever we do, we have a measurement framework in place. We analyze promotions as they’re happening, and pivot as needed.” For accounts like
Whole Foods Market, brands can see data through the portal and run analyses on promotions. But for accounts that go through a distributor like UNFI or KeHE, you’re only receiving selling data, not POS data. For these accounts, the Chia Smash team has built their own reporting dashboard (on Google Sheets) to get a feel for their velocities. 3. Maintaining retailer relationships is crucial. This data isn’t just valuable information for their team; it breeds a collaborative relationship with their retailer: “As we run our own analyses, we share our findings with our category managers. If a promo went well, we’re excited to share our success.
If a promo doesn’t hit our goals, we seek feedback from our category managers and brainstorm new ways to get creative within their store walls.” Regardless of the news they are delivering, the Chia
Smash team keeps an open flow of communication with their category manager. “This is how we proved ourselves early on,” Peck says.
Beyond the yellow tag TPRs, “retailers often offer creative ways to pepper in brand exposure outside of those promotional periods or on top of promotions. Brands should strategically lean in,” Peck suggests. Oftentimes, these initiatives span beyond trade marketing into the realm of shopper marketing, or activations intended to drive shopper purchasing decision without direct involvement of the retailer:
1. Pay-per-click (PPC): When retailers have their own sites or apps, vendors should consider leveraging this digital space as extra shelf space. To drive metaphorical foot traffic, Peck recommends leaning into PPC, or boosted search, on the retailer sites. Peck quickly discovered
Sprouts’s dedication to early brands through their shopper marketing portal: “We onboarded onto Instacart with Sprouts, and focused on PPC advertising off the bat,” she adds. 2. Digital Couponing: Though we have a whole other article on couponing, it’s worth mentioning here that retailers often encourage use of digital couponing on top of key promotional periods. Sprouts works with INMAR for digital couponing — so Chia Smash onboarded with INMAR, too.
Working with INMAR allows for digital coupons to show up in the
Sprouts app, and for customers to redeem them in the store. 3. Demos: If a hefty price tag is stopping you from considering demo opportunities, you’re not alone. Whether performing a demo with in-house employees or hiring out, demos can easily add up and feel like a waste of time or money. But Peck encourages founders to look at demos differently: “Look at demos from a qualitative lens,” she advises. Especially in a sleepy category with many legacy brands, Peck has found that Chia Smash’s target market isn’t necessarily looking for innovation. “It’s on us as a brand to have people taste our product, understand our differentiators, engage with customers one-on-one, and ultimately encourage conversion from their household staples.” Peck does note, however, that demos work better with certain partners than others. Stores like Sprouts and Whole Foods, for example, often attract customers seeking out brand discovery, as opposed to a Kroger.
