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Why Cutting Trade Spend is the Worst Advice Right Now

Why Cutting Trade Spend is the Worst Advice Right Now

At the beginning of the unfolding COVID-19 emergency, we posted about “doubling down” on the type(s) of promotion that brands should be doing during the pandemic. As it turned out, our ideas have largely been proven correct. However, there has been some contrary - we'll even call it bad - advice going around, so we’d like to go one step further and clarify what that bad advice is, as well as what brands should be doing instead and why.


Shopping bag and COVID-19 mask

As we predicted, many healthy and natural brands have seen record sales in the early phases of the pandemic. That’s the good news – for those brands who had already established themselves in desired categories. Being in the right place at the right time has resulted in some fairly easy pickings. But this is where it has gotten interesting… and not necessarily in a good way.


Some industry pundits and investors have begun to suggest adjustments to brands’ go-to-market strategies – and that’s appropriate in a changing environment. But as often happens, the suggestions being made could have the opposite effect than what was intended.


The “easy pickings” situation has led some to suggest that it’s a good time to cut out all trade spending. And this makes sense, right? Why offer discounts on items that people are going to buy anyway?


The problem with this thinking is that it is extremely short-sighted. We need to consider not only short-term profits, but also the other objectives of product promotion: gaining long-term profits, creating long-term customers, and building the relationship with (getting the attention of) retailers. Unless we are already done building our brand and our market awareness, we seek more customers, and we seek to stand out as a preferred business partner to retailers.


Soon enough, we can be confident that the pandemic will run its course, and business will return to some type of normalcy (though it may be a “new normal”). And when it does, what will our relationship with retailers look like? Will we have their attention?


Woman shopping with COVID-19 mask

To be sure, adversity tends to weed out the weak and inflexible. This will without doubt also be true of the current pandemic: some brands won’t make it through to the other side of it. Brands who take advantage of opportunities and continue to actively differentiate themselves now will be able to secure a better position with both retailers and shoppers - now, and in a post-pandemic world.


Despite the short-sighted, bad advice, many brands appear to be taking the advice anyway. One can easily see anecdotally that the number of coupons and price reductions has decreased significantly at Kroger stores for example (and presumably many others). We think this is a mistake.


An appropriate counter-strategy would be to double down, and promote as much as (if not more than) before. If it was a good idea to promote before, then for all the same reasons it’s still a good idea now. And it should also be easier to do right now: If a brand was able to spend to promote its products before the demand spiked, there should be even more cash available to do so now. The only reason not to promote now is the belief that it’s safe to take the foot off the gas pedal. But that is a dangerous presumption. Even if retailers are not pressing brands for promotional dollars at this particular moment (presumably because they too are distracted by the side effects of their own record sales), brands would do well to press for the opportunity to promote.


It all boils down to this: If you stop promoting your brand, you risk losing both the shopper AND the retailer. During the period where shoppers are sucking all products off the shelf, it will be easy to make a few extra bucks right now. The interesting and critical times ahead will show up when the situation normalizes. Those brands who worked hard to stand out even during times of easy pickings will have a significant edge when competition returns.


What has your brand promotion strategy looked like during the pandemic? We'd love to know - comment below!

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