Write a short note on trade promotions

Question

What will be an ideal response?

Answer 1

Like customer-oriented promotions, trade promotions, or incentives offered to the members of the channel system, can also be divided into groups based on their characteristics. Product-based promotions include free goods and generous return policies. Return policies allow the channel to return unsold merchandise for a full or partial refund, reducing the risk of carrying the product.
Price deals include various volume discounts and allowances, as well as financing terms such as a long period of time before payment is due or below-market interest rates. The most commonly used trade promotions are off-invoice allowances. The purpose of an off-invoice allowance is to give the channel member a discount on orders for a fixed period of time.
Place-based allowances are especially important for consumer packaged-goods companies. Often, the money a company spends to help the channel members sell its products is called market development funding. The largest amount of market development funds is spent on slotting allowances, which are payments to store chains for placing a product on a shelf.
Companies often provide cooperative advertising money to retailers. In this arrangement, the company and the retailer share the expense of the retailer advertising the company's products in the local market.
Finally, there are sales-based incentives, such as bonuses to the channel for meeting or exceeding a quota. Sales incentives can also take the more controversial (and in some cases, forbidden) form of direct prizes or bonuses (sometimes called "spiffs" or "push money") to the channel's sales force. The problem with spiffs is that the salesperson's financial interests in selling a particular brand or model can outweigh the customer's needs. Of all of the trade promotions mentioned, price-based ones carry the most risk to the company.