How effective is your trade marketing strategy?

Is your trade marketing strategy as you intended it to be? Are you able to call the shots or are dealers working on their terms?

Trade marketing strategies need to be reviewed at regular intervals. 

It is essential to monitor the growth of your channel partners and leverage their knowledge.

The article is for manufacturers/sellers of products that use Channel partners for offline/retail sales.

What is the meaning of trade marketing?

Trade marketing is related to increasing the demand at the wholesaler, dealer, and retailer levels.

Over time the traditional trade marketing ie. brick and mortar environment has witnessed a change with new avenues available at manufacturers/sellers disposition.

Manufacturers/sellers reach customers from the following channels:

1. Directly to customer offline
2. Online sales – Directly or online platforms
3. Through Trade channel – Distributor/Dealers/retailer network
4. Through large-format stores

Customers make informed decisions by themselves while purchasing from scenarios 1, 2, and 4.

Trade Channel initial engagement

While selling through the trade channels, you are seeking to expand your sales through a physical store close to the customer. Companies have their criteria for the selection of stores and have the following steps:

1. Acceptance to manufactures/sellers code of conduct
2. Compliance of documentation and processes
3. Supplier reporting and tracking system

Engaging trade partners facilitate brand and customer engagement.

Key points of the trade channel partnership are:

1. Local dealers are long-established members of their communities and closer to customers than a company/ seller. To tap the full potential of the dealers, a company must forge close ties with them and integrate them into its critical business systems.
2. Dealers are important influencers and can provide customers with a wide range of services before and after the sale. The services include advice on the selection and application of a product, financing, insurance, maintenance, and repair, etc.
3. Creating a distribution organization requires significant investments by both the company and its trade partners. Although those investments take the usual forms of money and capital assets, they also include softer assets such as training and developing a common understanding of what it takes to provide superior customer service.
4. The quality of the relationship between a company and trade partners is more important than the contractual agreements that make the relationship work.

Based upon the criteria and expected sales, the manufacturing company engages with the dealer.

Industries like:

1. Automobile tyres, batteries, etc, 
2. Paints, waterproofing chemicals, etc
3. Electricals, Hardware products, sanitary tiles, plastic pipes, etc.   

undertake branding exercise at the dealer’s store to increase their visibility and thereby sales.

Initially, the dealers will comply with companies’ standard operating procedure (SOP) on aspects like sales etiquettes, display norms, retail selling price, % of total sales compliance, etc.

In the above-mentioned industries, there are few exclusive dealers and the majority are dealers for multiple products.

What defines the manufacturer–dealer relationship?

The relationship with the dealer depends upon:

1. What is the market share of the manufacturer in the country/zone/city? If the manufacturer having a majority share in the category while competitors lag by a far distance, then the manufacturer has an upper hand. Example Asian paints, Pidilite, etc.
2. How is the marketing strategy – pull or push strategy. A pull strategy with a lower dealer margin can still work due to customer demand. But a dealer can influence purchase towards competition for commercial benefits.
3. How is the manufacturer/seller communicating with customers? If the manufacturer/seller does not have a consistent outreach program nor a community that enables engagement, then bonding towards company brand will be less and dealer can easily influence final purchase decision making
4. Size of the dealer

Few trade marketing engagement strategies by manufacturers/sellers are:

1. Know your dealer – Understand your dealer and the geography/ location they represent. There are certain cultural and behavior that you need to keep in mind while communicating with them
2. Communicate regularly – Have a communication plan apart from the usual operational aspects. Identify the best channels, topics, and publishing schedule to reach the dealers.
3. Offer training and education that will improve their ability to perform productively.
4. Ask for inputs – Dealers have valuable information. Leverage their intelligence to formulate promotional activities and customer activations. Do provide a roadmap of your company and the dealers’ role. Set expectations and work out promotional and sales activities.

Growth of dealership increases ability to influence customers

The growth of the dealership depends upon the growth of the category/allied business in that area/city. Example:

1. The growth of automobile tyres is dependent upon replacement demand and the number of vehicles in that area/locality.
2. The growth of the paint category depends upon repainting and major repair demand.
3. The growth of tiles depends upon home renovation demand, etc.

As local demand increases, the dealer witnessed an increase in sales and so does the companies associated with them. But …. Is the increase proportionate / as per your expectation? This can be only answered by the dealer.

Over time, the dealer pushes brands which helps him to increase his profitability.

So, though as a manufacturer you may be growing at a faster rate you maybe not getting your fair share of sales.

If the dealer is a high-growth location, the dealer becomes more popular and the shop develops their brand. People then refer to as ….. purchase from ABC dealer instead of your company dealer.

The efforts of companies to ensure dealership compliance on aspects like sales etiquettes, display norms, retail selling price, % of total sales compliance, etc. will be minimal.

Although the dealer does not comply with the manufacturer’s SOP, they still stick with the dealer due to their long relationships, and the dealer still keeps the company happy by giving them a fair share of the business.

However, now the dealer is also a powerful brand as it has loyal customers for their shop.

Disruption due to COVID

Due to COVID’19, the supply chain of manufacturing companies got disrupted and marketing strategies have also got impacted.

COVID’19 has taught us – our closest partner is your retailer/dealer… someone who can meet your requirements.   

Companies are hardly communicating with customers directly.

There has been the effort of companies to leverage the digital medium but these are just to create brand awareness.

During COVID, the insurance sector witnesses an increased interest, and customers reached out to companies online. 

Indian customers which are traditionally dependent upon agents for insurance requirements moved online for their renewal and purchases.

Post the lockdown some would continue with online while some may stick with agents.

Changing power equation due to new intermediaries

It is interesting to note that insurance companies have hardly leveraged TV Ads due to the exorbitant rates.

However, Policybazaar, an Indian insurance aggregator and a global financial technology company spends much more on TV ads than established insurance companies. Policybazaar had roped in comedian Kapil Sharma and also upped their spending during IPL.

Another example of a trade channel becoming powerful is that of DMART – A one-stop supermarket chain providing a wide range of products under one roof is a powerful brand that does not require to exhibit FMCG brand names/logos outside their store.

D’MART the Indian chain of hypermarkets has ~ 200 stores in India and has crossed the ₹2 trillion market valuation (Jan 21)

So, as the intermediary/channel partner grows the power equation changes.

These examples are where the parent company & trade channel partner is from India.

Indian companies in a foreign land: International Scenario

If you look at Indian companies’ entry into foreign markets – they had to partner with a local distributor/dealer who has a strong network in that country.

Example:

Tata Motors entered Bangladesh with commercial vehicles in 1972. Tata has a leadership position in commercial vehicles.

Since 1991, Nitol Motors Ltd. Is the sole distributor of Tata Motors’ small, medium, and heavy-duty trucks in Bangladesh. This means that Tata had their challenges in the Bangladesh market till it aligned with Nitol Motors Ltd.

Key Takeaways:

1. Engaging with your dealer as dealers know their customers better than you.
2. Don’t bypass your dealers in good times for short-term gains as you can turn on them in bad times to avoid short-term pain.
3. Put in place a system to deliver the product before customers realize they need them
4. Before deciding which new products to add, always ask how we can leverage our distribution system.
5. Don’t be reluctant to tell dealers what you think they’re doing wrong. And let dealers be free to tell you where you are lacking

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