The world’s biggest brands have started investing in digital business promotion and are eager to partner with merchants who can run hyper-personalized, data-driven marketing campaigns to promote their products. Consequently, the trade promotion market has already reached a value of $465 billion, presenting an attractive financial opportunity for merchants and e-commerce businesses.

Leveraging the right technology will be key to acting quickly on this important trend. It helps lay the foundation for sustainable increase in profits, reduction of administrative work, improvement of business expenses and development of brand-merchant partnerships.

A brief overview of trade promotion

Trade promotion is a combination of sales and marketing activities carried out by retailers, merchant sellers and e-commerce businesses. The goal is to promote and drive sales of stock branded items, such as seasonal promotions, free samples, and marketing campaigns.

Brands provide funds from their trade spend budgets to omnichannel retailers, who in turn run trade promotions across their various customer touchpoints: stores, online store, e-commerce platforms (Amazon, Alibaba, Shopify, etc.), social media, website banners, events, etc. .). The process involves:

• Contact between retailers and brands
• Presentation of the commercial advertising and promotional formats available
• Selling and upselling: merchants receive sales spend budgets from brands
• Creation and management of marketing campaigns
• Performance measurement and reporting on trade promotion activities

Over the past several years, CPG companies have dramatically increased trade allocations due to changing market trends, such as changing consumer preferences and market consolidation. By selling more trade promotions, merchants aim to get a share of these expenses as a way to create a revenue stream.

New challenges require technological solutions adapted to scale

The rapid growth of trade promotion brings with it problems caused by older and generally dispersed methods of managing the process. Without the right technology to deliver speed and scalability, merchant teams complained of heavy paperwork, data entry errors, and missing or scattered information across multiple communication channels.

On the brand side, 85% of CPG companies face challenges such as overspending and inefficient business management. They have yet to succeed in maximizing trade promotion ROI, despite spending billions every year.

The problem comes down to companies that haven’t taken a digital-first approach in order to capture the full potential of business spend. A recent survey showed that 32% of companies do not use digital business spend capabilities at all.

3 Ways to Digitally Overhaul Trade Promotion

Create new revenue streams by monetizing touchpoint formats

To ensure long-term profitability in a changing market, traders must consider trade promotion as a real source of income. This means that sales teams should focus on monetizing ad space that is available or not yet considered. BCG estimates that the $110 billion commercial media market will generate nearly $75 billion in profits by 2026.

Advertising space in terms of business promotion differs from traditional advertisements on Google and Facebook; there are formats available at different types of customer touchpoints. You can see some examples in the infographic below:

Many retailers, especially new entrants, are not yet fully monetizing all of these formats. Leading the way is Amazon, which made $31.2 billion in revenue in 2021 from advertising alone. Retail media accounts for 68% of their global profits. These results are partly due to the fact that the process of using Amazon Advertising is extremely simple for brands. Learning from their example, you should make it easy to select and use a range of touchpoint formats.

Improve siled workflows with merchant-brand collaboration

A key part of the commerce spend strategy for merchants is to become the marketing partner of choice for brands. In addition to sales, position yourself as a premium partner who will build awareness and increase customer purchase intent for the brands you work with.

Merchants have the key advantage of owning the first-party customer information brands need, especially as Google and Apple will phase out third-party cookies by the end of 2023. With access to this valuable data customer, you are well positioned to closely follow tailored marketing campaigns that will engage the brand’s customers. You can also provide them with clear reports on trade promotion performance, a step often overlooked in brand/merchant partnerships.

In reality, distributor/brand collaboration requires updating at all stages of the sales promotion process. Both parties usually manage their responsibilities separately, despite many commonalities such as business spend overview, approvals, and campaign management. Information is usually shared via email, WhatsApp, PDF or PowerPoint.

To improve cooperation, retailers and brands should consider finding a central place to work to agree on outreach formats, manage campaigns and capture results. The POI 2022 State of the Industry Survey showed that promotions planning and optimization topped the list of what companies would like to improve this year.

Measurement and reporting for continuous optimization

As it stands, brands are providing trade spend budgets in the thousands to merchants, retailers, and e-commerce businesses without receiving many details about campaign status and overall performance. Usually they get a total number of sales at the end of the year.

Most businesses use spreadsheets to manage their business spend, putting them at the start of their journey with business analytics. However, new technologies such as real-time analytics and AI can allow you to analyze what is spent and how, optimize spending, and generate what-if scenarios based on adjustment variables such as as the placement or duration of the promotion.

Commercial spend can be better allocated to optimized promotions that take into account the buying behavior of specific segments. This helps increase sales, keep budgets on track, and reduce leaks.

According to a Promotion Optimization Institute survey, the benefits of trade promotion in 2022 included additional visibility into business opportunities and risks, underperforming promotions, improved processes and forecasting, and higher annual returns on trade spend.

Become the marketing partner of choice

The nature of competitive markets requires you to position yourself not just as a business partner, but as a strategic partner that brands want to work with. Digitally enhanced collaboration will make it easier to agree on appropriate digital marketing formats, align campaign management, provide spend transparency, and ensure long-term profitability in a changing market.

Richy Ugwu is the CEO and founder of unea