The purpose of a trade promotion is to induce the retailer to acquire an increased stock of the product. If this can be achieved then certain advantages must automatically accrue. The trader who holds a large stock of one's brand is compelled to make a special effort to sell it. He will take an active part in the manufacturer's deal-out campaign to attract increased sales of the product to the consumer. This propensity on the part of the retailer to push the sale of one's product is of especial importance where brand preference on the part of the buying public is weak. The shopkeeper can often bring influence to bear upon the consumer's choice of product either by giving it prominent display in the fastest-selling position in his store or, in the case of personal service shops, by instructing his staff to introduce it to customers. The pressure of a heavy stockholding can produce advantageous results for the manufacturer, particularly where the retailer has been stocked with a new product, or an improvement to an existing product, and where a fast build-up of consumer sales is vital.
One of the side-effects of a successful deal-in is that, having been induced to purchase a large consignment of one's own product, the retailer with limited capital does not have the resources available to maintain a high stock of competitive brands. In some markets, where competition is particularly fierce, it can be almost as important to deny the opportunity for sales to your competitors as it is to achieve sales for yourself.
There are three main methods employed by manufacturers to encourage retailers to accept a bulk supply of their particular brands. The first is the provision of either a percentage discount or a straight cash allowance for each case of the product ordered during the period of the promotion. This discount is given for every case of the product which the retailer orders, not merely on the excess quantity he accepts over and above his normal ordering quantity.
An alternative method is to increase the case content, that is to say, if the normal case size contains a dozen items of the product, during the period of the promotion cases containing, say, fifteen items, will be supplied at the normal price applicable to twelve items.
The third method, one which often appeals more to the proprietors of small independent shops, is the offer of a gift in kind for the placing of an order of a given size. From the viewpoint of the manufacturer, there can be merit in this approach, because he can usually buy a quantity of gifts at a discount and the cost to him of a promotion of this nature will often work out cheaper than the provision of a cash allowance.
Apart from the tactical advantage to be gained from filling up the retailer's shelves and storerooms with one's product and thus denying sales to competitors, the deal-in offers the manufacturer a further benefit. It provides a means of transferring rapidly his own stocks and freeing his capital for other forms of investment or to create additional liquidity should the need arise.