Channel Pass-Through of Trade Promotions

Presentation

Based on Marketing Science article: Nijs, V., K. Misra, E. T. Anderson, K. Hansen, L. Krishnamurthi. 2010. Channel pass-through of trade promotions. Marketing Sci.29(2) 250–267.

 

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Teaching Objective

The objective is to demonstrate the value of measuring trade promotion effectiveness. Even though pass-through estimates vary significantly at each level of the distribution channel, we show that a large portion of trade deal money does not reach the end consumer. We demonstrate that manufacturers and wholesalers can avoid unprofitable trade deals for specific products and retailers by utilizing estimates of pass-through, consumer price elasticity, and margins. In our application selective use of trade promotions could improve deal profitability by 80% and reduce costs by 40%.

Keywords: trade promotion, pass-through, channels, competition, measurement

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