In the Battle for Budgets: Shopper Marketing versus Trade
In a tight retail environment where shoppers and consumers have more choices than ever, marketing budgets are under pressure to perform. When growth is hard to come by, departments within a company’s marketing arm are often compelled to compete internally for fewer resources and dollars while being required to drive more sales with less. In some cases, this can lead to a zero-sum game between the Shopper Marketing and Trade Marketing departments. When that happens, no one wins.
What is the difference between Shopper Marketing and Trade Marketing?
The Path to Purchase Institute, the industry association for shopper marketers, defines shopper marketing as, “the use of insights-driven marketing and merchandising initiatives to satisfy the needs of targeted shoppers, enhance the shopping experience, and improve business results and brand equity for retailers and manufacturers [original emphasis].” It has developed from the technologies and advancements in analytics in the marketing industry to become its own distinct field of marketing.
Trade promotions, as defined by the Path to Purchase Institute, covers “a wide variety of marketing activities” that allow brand marketers to have their “products merchandised and promoted by retailers, thereby increasing sales.” It, too, has arisen into its own field as marketing has professionalized over the last century. Typically, trade marketing includes the practices found in syndicated databases such as features advertising, in-store displays, and temporary price reductions (TPRs).
While the definitions proposed by the Path to Purchase Institute may seem clear, in practice these two fields overlap, vie for the same funding, crisscross in purpose and attention internally, and may be defined by each company differently. The purpose of this article is to dive beyond a definition and into the inherent qualities of both fields to help all marketers better understand the differences in the two fields and their potential for synergy.
Across the various marketing industry groups, shopper marketing can contain a variety of different activities and purposes. However, several themes emerge to create a consensus view on the definition of shopper marketing. Shopper marketing is, above all, shopper-centric. This field is dedicated to understanding the consumer beyond demographics and down to an intimate, personalized understanding of consumers buying behavior, values, and decision-making process. The role of the shopper as the purchase decision-maker drives the development and execution of shopper marketing programs.
Trade marketing tends to focus on retailer or channel strategies, as evidenced by the Path to Purchase Institute’s definition. For many traditional trade marketing departments, decisions on merchandising activation can be made based on developing relationships with the retail customers or in response to retailer pressures. Trade activity can provide leverage to the manufacturer when trying to convince a retail partner to increase the SKUs they carry or to provide other favorable in-store treatment.
Another source of differentiation are the types of levers shopper marketers can work with compared to trade marketers. Shopper marketing can seem – and indeed often is – a more discretionary marketing strategy process. The results of shopper marketing are measured at the event, or even the tactic, level. At Foresight ROI, we have measured over 680 different variation of shopper marketing tactics with new tactics added every year with expanding technologies. Foresight ROI works diligently to map all shopper marketing tactics into 27 major tactic groups for benchmarking capabilities within the industry.
Trade marketing is more standardized and often has longer program timelines. A temporary price reduction may accompany an in-store display for several weeks. Features advertising may occur in any variety of time periods, and may accompany (or not) the other two main trade tactics. By comparison, shopper marketing may be a one-day demo event, to a week-long digital offer campaign, to a themed event that may run for weeks or arc over a few months. The timeline on shopper marketing programs can be highly variable and range from incredibly short to quite long.
How Can Shopper and Trade Marketing Work Together?
At this point, the distinction between the two marketing departments may seem clear. For some companies, it is very clear which department funds and manages which program. For others, there is an internal battle for budget dollars where the two departments may be pitted against each other to prove results, resulting in disincentives to work together. Other companies are not providing much guidance and are allowing the departments to figure out their role in the new retail world on their own.
Increasingly, this clear distinction is fading. Trade marketing departments may pick up the cost of tactics typically associated with shopper marketing programs, while shopper marketing programs may end up funding or securing a secondary display or other tactics normally associated with trade events. As the walls fall between the two traditionally separate marketing departments, the path forward can seem unclear.
Through its measurement programs, Foresight ROI has identified that companies who consider shopper marketing events and trade marketing programs as a part of one cohesive strategy see stronger returns on their marketing investments than those who silo the two departments. Despite the evidence suggesting that shopper marketing and trade marketing should work together to optimize results and, for example, avoid ‘double-dipping’ offers that subsidize their base volume, it is harder to implement in reality than in theory.
The first step to exploring trade and shopper marketing synergies is during the annual planning process. While plans can change – and in shopper, the details often do – the overall strategy and annual vision should be set in conjunction with the two departments. When trade marketing funds a TPR, shopper marketing should consider adding complementing strategies to reach the shopper at additional touchpoints along their path to purchase to reap the full benefits of that activity. When the shopper marketing department plans on running a large event with a retail partner, trade should identify additional ways to support the program without duplicating efforts. In some cases, strong shopper marketing events can lead to additional retailer support, such as providing space in their weekly feature or additional secondary location displays that would not have occurred without shopper marketing support.
When Trade and Shopper Marketing work together seamlessly, all the relevant parties win. The shopper is converted into a buyer, trade programs build better relations with the retailer and add another touchpoint along the shopper’s path to purchase, and shopper marketing conducts a successful and highly efficient event. When a full Path-to-Purchase Shopper Marketing event runs in coordination with a trade promotion, that event has a 29% higher ROI when compared to similar Shopper Marketing events that run alone. This works to benefit trade as well – trade ROIs increase as much as 22% when full P2P shopper marketing events run in coordination with the trade promotion.
The historical definition between trade marketing and shopper marketing may have been distinct, but companies looking to the future should encourage their trade and shopper marketing departments to work together instead of pitting them against each other for budgets and funding. The companies winning at the shopping experience are experimenting with the right blend of trade and shopper to achieve the results needed to stay competitive and a part of the shopper’s path to purchase.
Foresight ROI is the leader in shopper marketing measurement, decision support, and software solutions for CPG companies and retailers. To learn more about our measurement, software or industry ROI benchmark solutions, contact us at: contact@ForesightROI.com