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Incremental Volume or Subsidization?

Most manufacturers would be surprised with how few of their trade promotion dollars actually drive incremental volume.  Take a look at the volume composition of a typical brand in a mature category :

(see volume classifications explained)


For this manufacturer's brand, 69% of the dollars they spend on trade promotion drive no incremental volume and are "non-working."  These non-working trade dollars are absorbed in either customer or consumer subsidies.

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Volume Classifications    [TOP]

In the trade promotion world, there are three meaningful volume classification breakdowns:

Deal & Non-Deal Volumes

Non-Deal volumes are those shipped to customer at full list price without any discounts or expected merchandising support.


Deal volumes are those shipped to customers with any type of promotional allowances, fixed funds or accruals associated with it. The overall deal volume % of total volume is typically most impacted by the frequency and depth of promotional discounts offered.

Promoted & Non-Promoted Volumes


Non-Promoted volumes are those sold to consumers by retailers at the regular, everyday retail price.  These volumes are sold off the shelf and have no retailer merchandising activity associated with them.


Promoted volumes are those sold to consumers by retailers during a period of merchandising support activity.  Promoted volumes are most often sold to consumers at a discount from the regular, everyday retail price.  

Baseline & Incremental Volumes


Baseline volumes are those that would be sold to consumers by retailers regardless of the presence of any merchandising support activity or retail pricing discounts. 


Incremental volumes are those sold to consumers by retailers solely due to merchandising support activity.  Incremental volumes are equal to the amount of total promoted volume less baseline volume.   


Non-Working Trade (Subsidies)     [TOP]

Using these volume classifications, companies can make a rough estimate of the amount their trade promotion funds that are "non-working."  Non-working trade promotional funds do not generate incremental volume for your business and are mere subsidies for customers and consumers.

Customer Subsidization - Is the amount of promotional dollars spent on deal volumes in excess of the customer's promoted volume.  How much did your customer's buy-out cost you?

Consumer Subsidization - Is the amount of promotional dollars spent on customer promoted volumes in excess of the promotion's incremental volumes.  What discounts were offered to consumers who would have purchased your product without a promotion?
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