Meanwhile, as volume growth continues to be squeezed, getting better returns from trade spend is becoming an ever higher priority. The main reason for having a trade program is to incentivize retail customers to behave in ways that benefit the manufacturer. Most fail. The problem is that meticulously-constructed incentive programs may be appealing in theory, but in practice they are too complex to work. In economics it is an article of faith that ‘people respond to incentives’, and retailer Buyers and Category Managers are no exception. But they do not respond to incentives they do not know exist. They do not respond to incentives they do not understand. And they do not respond only with their brains.
If there is one thing all consumer goods manufacturers seem to agree on, it’s that trade funding isn’t as effective as it needs to be. Having worked on hundreds of manufacturer–retailer negotiations from both sides of the table, we’ve seen millions of dollars of trade funding fail to produce the desired outcomes – for either side.