In this article, learn about:
How to build a trade spend strategy
How to manage your trade spend strategy
How to measure trade spend success
For a CPG, building a strong trade promotion strategy is more than offering discounts—it’s about creating a data-driven program that drives brand visibility and increases sales. To ensure that your company’s efforts are worth the investment, it’s important to have a strategy that is intentional from start to finish.
There are three key pillars to an effective trade spend program: build, manage, and measure. In this guide, we’ll explain how to manage your trade promotions to maximize return on investment across retail partnerships, brand visibility, and sales performance.
4 Steps to Building a Trade Spend Strategy
Trade promotions are not a one-size-fits-all matter. For example, large enterprise CPGs may utilize trade promotions to gain an advantage over competitors by dominating shelf space. On the other hand, smaller brands may use trade promotions as a lever to move excess product or quickly sell an older product line before introducing something new.
Regardless of your company’s size, the golden ticket is building a strategy that aligns with your overall company goals, customers’ desires, and retailers’ objectives. Each retailer has its own guidelines, timelines, and priorities for approving trade spend, so collaboration and communication are key. Your strategy should be flexible enough to meet both your brand’s needs and the retailer’s expectations.
1. Create Objectives
The baseline is that trade spend should always create value—whether that looks like better brand visibility, increased sales, or customer satisfaction. In order to ensure that there’s value in your efforts and to be able to measure those efforts later, it’s important to set key objectives for your trade spend.
Here are some examples of objectives you may set:
Drive sales volume: Boost sales during your promotion period. For example, setting a goal of a 10% lift in sales from a temporary price reduction.
Increase or protect shelf space: Strategic promotions can help maintain or increase shelf space and secure premium spots like endcap displays.
Enhance brand visibility or online presence: Promotions can improve product visibility, especially on online platforms where discounts are often prominently featured.
Manage inventory: Sell excess stock or aging inventory quicker by offering a discount. If the merchandise is being phased out, this is often a cheaper option than writing off or destroying merchandise.
Build strong relationships with retailers: Strengthen partnerships with retailers by demonstrating your commitment to shared success.
By picking clear objectives for your trade spend, you can better measure your success down the line and have a baseline to measure future optimizations against.
2. Determine Promotions and Budget
Once your objectives are set, it's time to dive into what type of trade spend methods you want to use and what budget will be allocated. Trade promotions are often planned on a calendar basis to align with key selling seasons, retailer calendars, and category trends. The options can vary widely depending on the retailer you’re selling in. Here are some promotion types:
Type | Purpose | Potential Outcome |
Temporary Price Reduction | Offer a short-term discount at the shelf level or online to encourage sales and interest price-sensitive shoppers. | Quick sales lift (often ~10% or more), improved sell-through, and temporary market share gain. |
Cooperative Marketing | Partner with the retailer to fund shared advertising, digital campaigns, or in-store promotions. | Increased brand visibility and more exposure to targeted customers. |
Endcap or Feature Display | Pay for premium in-store placement or featured spots online. | Better traffic and sales velocity from increased visibility. |
Buy-One-Get-One or Multi-Buy Offers | Encourage bulk purchasing or trial of new products by offering additional units at a discount. | Increased unit sales, trial among new customers, and faster inventory turnover. |
Digital Retail Media (example: Amazon Ads, Walmart Connect) | Sponsor ads or promotions within retailer platforms to increase product discoverability. | Improved online search ranking, better click-through rates, and greater visibility in personalized ads. |
Slotting Fees or Pay-to-Stay Programs | Pay retailers to introduce new SKUs or maintain shelf presence. | Ensure placement in key retail locations and support new product launches. |
Display or Feature Fees | Contribute funding for in-store displays, signage, or special placements. | Strengthens brand recognition and drives impulse purchases. |
Please note: All of the trade strategies outlined above are consumer-facing—meaning they directly impact how shoppers see, experience, and purchase your products. However, trade spend can also occur behind the scenes. Some examples include warehouse allowances, freight allowances, new item setup fees, and bulk purchase discounts. While they don’t always drive immediate consumer engagement, behind-the-scenes trade spend maintain retailer relationships, keep products on shelves, and support the overall success of your trade strategy.
3. Gather Data to Inform Decisions
Once you’ve outlined your objectives and ideal promotion types, it’s time to build your case. It’s crucial to have retailers’ buy-in, or your plans will fall flat. For example, if you’re vying for premium space on an endcap, you’ll need data to demonstrate the potential return on that investment. Even though the supplier is the one paying for the placement, the retailer still needs to know that the placement will be successful, or else it could be a waste of time and money for both parties.
Here are some key data points that can help you demonstrate value:
Historical sales data: Showing strong past sales can demonstrate that a product has consistent baseline performance and consumer demand without promotion. This indicates that a product could do even better with promotion.
Previous promotion data: If you have done trade promotions before, even if it was with a different retailer, showing data such as sales lift or better sell-through rate can demonstrate your past success with managing trade promotions.
Consumer and category data: Retailers care deeply about what consumers want. If you have data showing customer preferences that back up your recommendations, this can go a long way in securing retailer buy-in.
4. Work with Key Stakeholders
The final step is bringing together all your key players to ensure your strategy can come to fruition. Firstly, your retailer must approve the trade spend agreement. Depending on the retailer, this may simply be approving discounts you’ve added to a supplier portal, or it might involve working with your buyer to add them into your supplier contract/agreement. If you’ve not previously done trade promotions with a retailer, line reviews are often an ideal time to bring new strategies and ideas to the table.
If a trade spend proposal comes into your business from a retailer, then approval from internal stakeholders is essential before moving forward.
Secondly, to ensure trade spend is effective and well managed, it’s important to have collaboration between all key stakeholders on your internal team. By communicating expectations across teams, like sales, accounting, and finance, you can ensure visibility and alignment across departments.
Related Reading: How to Prepare for a Walmart Line Review
How to Manage Your Trade Spend Strategy
Setting up your trade promotions is simply the beginning. Once your plans are in place, they require continued oversight to ensure a good return on investment. While some CPGs may simply view trade spend as a cost of doing business, the suppliers that regularly optimize their trade promotions are the ones who will reap true benefits.
Define Key Performance Indicators (KPIs)
One of the biggest benefits of setting objectives for your trade spend strategy is it helps you define how you will measure the success of your trade spend. Using those previously set objectives, you can develop KPIs that measure your success with specific, quantifiable metrics.
Here are some examples of what KPIs could look like based on the promotion objective:
Goal/Objective | Trade Promotion | KPI |
Increase sales on gourmet cheese during the winter holiday season. | Offer a 15% temporary price reduction from October 1 to December 31. | Achieve a 10% lift in sales volume compared to the same period last year. |
Improve brand visibility and conversion online. | Run an ad campaign through Walmart Connect. | Increase product page views by 25% and click-through rate by 10% during the campaign period. |
Reduce warehouse inventory of discontinued product. | Offer a BOGO promotion to accelerate product sell-through. | Deplete 80% of remaining stock within 45 days and avoid write-offs. |
Monitor Return on Investment (ROI)
With set objectives and KPIs, you can then implement systems to regularly monitor your trade spend performance. Whether that’s using a data analytics company, a retailer platform, or building your own dashboards, having visibility into your performance is crucial.
How to Calculate ROI for Trade Promotions
Simply selling more or increasing brand awareness does not always mean your efforts have had a positive ROI. Below are calculations to help you see the whole picture of a promotion’s success.
Measure | What it Means | Calculation |
Sales lift | How much sales volume increased during the promotion compared to baseline. | (Promo Sales – Baseline Sales) / Baseline Sales |
Incremental revenue | The additional money earned during the promo compared to baseline. | Promo Revenue – Baseline Revenue |
ROI | How much profit you made (or lost) compared to what you spent on the promotion. | (Incremental Gross Margin – Promotional Spend) / Promotional Spend |
Find Areas of Improvement
As mentioned previously, the suppliers who will likely see the greatest returns on trade spend are the ones who are continuously optimizing. Complacency in your trade spend can quickly become a drain on your financial performance.
It’s a common pitfall to assume that last year’s trade strategy will work again without any adjustments. With such a dynamic retail market, retailer strategy, customer preferences, and competitor activity can shift quickly. For this reason, it's crucial to take time to evaluate historical performance and current market trends to optimize your trade promotions year over year.
