Trade promotion spending is an important part of most companies’ annual budget. Although not always thought of as a component of pricing, a trade promotion is like a discount. It is another mechanism for transferring money from the seller’s pocket to the buyer’s pocket. On the other hand, a trade promotion can be superior to a discount if it results in increased sales without damaging your long-term price levels or pricing structure. Unfortunately, according to Nielsen 67% of trade promotions do not break even. It is therefore critical to measure the ROI of trade spending, and ensure there is a process for managing trade promotion decisions.
In my last blog post, Dynamic Pricing Benefits Everyone. Politicians Should Stay Out of It, I described the many ways in which dynamic pricing benefits us all. As you can tell from the title, I also urged politicians to resist their natural desire to regulate things. Within a couple days of my post, there was an article in the Wall Street Journal, Why Do Gas Station Prices Constantly Change? Blame the Algorithm that I would describe as anti-dynamic pricing. The author was wrong. Dynamic pricing is not the bogeyman.