How to Manage Chargebacks and Trade Promotion

Trade Promotion Marketing

While TPM can help increase your sales velocity, if not managed properly TPM can spiral out of control and become a sunk cost.

Given the risk, why even invest in TPM?

It’s one of the most powerful in-store marketing tactic to move the needle and encourage customers to buy your product. There are typically 3 reasons why a brand would consider trade spend:

Build Brand Awareness: In an hyper-competitive landscape like CPG, trade spend can help brand acquire new consumers and keep existing ones happy. By implementing favorable pricing or eye-catching displays, CPG brands are more likely to catch consumers attention and get them acquainted with their brand.

Boost Sales: Powerful trade spend strategies can increase sales. For example, product discounts, BOGO (”buy one get one free”) or X/For (”buy 3 for $8) can increase sales velocity and encourage new customers to try your product.

Solidify Partnership with Retailers: Trade spend typically helps to foster stronger relationship between the brand and retailer. By forging a strong relationship, CPG brands and retailers can collaborate to understand each others goals and encourage mutual growth and success.

In fact, it’s estimated that globally CPG brands invest 20% of revenue in trade spend, so it’s critical to have a set system for managing and running trade spend to ensure ROI.

Chargebacks

Now let’s look at Chargebacks. Chargebacks are an unavoidable reality for most CPG brands operating in the retail sphere. Nearly every major retailer imposes chargebacks as penalties for non-compliant shipments from suppliers.

Unfortunately, chargebacks affect brands of all sizes. These penalties can take the form of either a flat fee or a percentage of the gross invoice amount which can range anywhere from 1 - 5%.

CPG brands may incur chargebacks for various reasons including:

• Improper labeling
• Late or early deliveries
• Damaged shipments
• Improper packaging
• Incorrect carrier usage.

Mitigating the risk of chargebacks requires a proactive approach. Brands need to invest time and resources in thoroughly understanding and complying with the nuances of each retailer's routing guide. This includes staying up-to-date of any changes or revisions to ensure ongoing compliance and having the right tools in place to manage chargebacks.

Here are the top three tools in the game to help your brand manage tradespend and avoid chargebacks (as ranked by our customers):

• PromoMash: Frequently comes up as one of the top contenders in the space. Started by former brand founders they listen to feedback and are constantly iterating. The downside is it is expensive.
• Vividly: Frequently comes up as one of the top contenders in the space. They are also very highly regarded and can handle most all TPM/Chargeback use cases. It is also expensive.
• Floret: A startup that helps a range of smaller brands to large companies. They are not as feature rich but seem to be building quickly.

Do you need more help modernizing your tech stack? Reach out to Pantry AI to find out how we can help.