Destiny - Trade Negotiations

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Manufacturers rely heavily on their trade partners — a brand must first gain and hold distribution before consumers can buy it. To secure their trade partners support in procuring, distributing, promoting and merchandising, manufacturers need to market their products to them. This form of business-to-business marketing where manufacturers seek to grow their business with their retailers, wholesalers and distributors by building value added relationships is of growing importance especially for products where brand choice decisions are increasingly made at point-of-purchase. Trade marketers are devoting considerable time and resource to partner retailers in developing their brands and categories in their stores. This is an ongoing process with long-term commitment that yields business gains for both parties.

Trade marketing requires considerable business acumen as manufacturers and retailers strive to achieve the delicate balance between their shared goals and their distinct individual goals. On one hand these partners work together to enhance marketplace equity, and improve the overall performance and profitability of the category. On the other hand they are engaged in competition for the profit that can be generated from the sale of goods. They rely on different, sometimes conflicting, profit models. Manufacturers seek economies of scale and a return on investment, whereas retailers are interested in economies of scope and return on inventory.

That they share complementary resources and capabilities strengthens their bond and increases the likelihood that both achieve their respective goals. There is the need to ensure that the engagement does not hover solely on negotiating discounts and trading terms, and that attention is devoted to the development of brand loyalty, store loyalty and marketplace equity. To sustain and strengthen the relationship, it is important the partners continuously align and strengthen their mutual self-interests.

The process of category management has become a crucial component of the trade marketing process. It serves to bring manufacturers closer to their business partners in a constructive process that encourages sharing of plans and strategies, synchronizing activities and resources, as they jointly work towards building marketplace equity. ... less

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Trade Negotiations

The objective of the trade negotiations is for the business partners to share plans, synchronize activities and resources, and agree to a set of terms and conditions outlined in a written agreement. These agreements spell out the discounts and incentives that retailer receives in return for bulk purchases, promotions, in-store merchandising and displays and co-operative advertising.

As participants get immersed in the Joka marketplace, and as they strive to improve the performance of their companies, trade negotiations in Destiny can acquire the level of intensity and anxiety as in the real world. During lectures participants learn about the different purchasing orientations, value-in-use, and the different approaches to negotiations. As they negotiate they get to experience these orientations, and experience the power or leverage that comes from the unequal distribution of the importance of a trade deal. They learn about good and bad negotiation practices, and get the opportunity to adopt different tactics and strategies.

Destiny agreements are full year agreements, negotiated at the start of Year 3 and Year 4, and formalized by means of contractual annual agreements that are signed off by both parties. These agreements cover the following areas:

  • Quantity Discount: Reduction in trade price charged by the manufacturer based on annual quantity commitments.
  • Co-operative Advertising: Arrangement whereby the manufacturer reimburses the retailer in part for advertising expenditures. Co-op advertisements, placed in conjunction with promotions, help to raise awareness of banner, brand and promotion. They impact on store choice by contributing to the banner’s perception on measures such as ‘attractive promotions’.
  • Point of Purchase Displays: Retail chains offer a variety of special in-store displays (categorized in Destiny as small, medium and large) including gondola end displays and block stacks. These displays can powerfully influence purchase behaviour and it is the norm that manufacturers pay fees for the opportunity to display their products
  • Promotional Support: This support which usually comes in form of cash transfer is typically linked to promotions. Destiny contracts allow promotional support by manufacturers for price-off promotions and display.
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