Program differentiation by product

In a recent conversation with an industry professional, he quoted a top Wal-Mart exec as saying that manufacturers often don’t realize that they have the upper hand when they have innovative products, and the retailers only have control with commodities.

An excellent point, which raises the idea of differentiating trade promotion approaches by product (and more specifically by product life-cycle). It’s not a new concept, by any means – I recall Levi Strauss withdrawing co-op advertising support from their 501 jeans about thirty years ago, trying to encourage retailers to promote other products, and I don’t imagine they were the first.

While I like the idea, a problem I see is the increasingly-rapid pace of commoditization. I was struck recently, while wandering through Best Buy, at how quickly MP3 players have moved from a totally new idea to near-commodity status (though Apple seems to be able to continue to demand a pricing premium, for the moment). And Best Buy is reported to be about to introduce private-label plasma TVs.

But that’s a problem with execution, not with the concept. It simply means that trade program managers will need to remain alert to the rapid changes in their product’s position in the life-cycle and be nimble enough to make rapid changes to the program in response. Differing marketing goals at different stages (e.g., awareness and acceptance in the introductory period, gaining distribution and grabbing market share in the growth stage, etc) will require managers to alter the program on the fly.

Add into this the need to differentiate your program by channel, and to maintain specific programs for key customers, and it demonstrates the growing complexity of trade promotion.