293. The Promo Mistake That's Draining Your Runway

0:00Welcome to Day 21, How to Know the Value of Promotions and Effective Strategy you. If you're feeling like promotions are a necessary evil, you're not alone. Most founders I talk to say some version of, we promote because we're told we have to. But honestly, I don't really know if that's working. Here's the hard truth. Roughly 20 % of a brand's gross sales goes to trade spending. And yet 70 % or more of that is wasted or ineffective. Whether you agree with the exact percentages or not is irrelevant. If even a fraction of your trade spending is wasted, that's lost runway, lost growth, and lost negotiation power.

0:36Today we're going to fix that. We're going to talk about how to know the value of your promotions so you can reduce wasted spending, explode the impact of promotions that do work, improve your brand valuation, give retailers a strong reason to say yes to your recommendations. This is the lesson you can do most to extend your runway while boosting sales and profitability, if you learn this well. Let me explain. Why trade marketing feels like a black hole. Trade marketing, broadly defined, is everything required to get your product into the shopper's hands. Most people think trade equals discounts plus promotion.

1:13That's part of it, but it also includes placement fees, billbacks and deductions, display and features, end-store merchandising support, temporary price reductions, free fills and programs. The problem is that most brands throw money at promotions because that's what you're supposed to do. Measure success only by the spike during the promotion week. Assume more promotions equal more sales. And then when sales slow down, the first instinct is to cut staff, cut costs, cut investment. The second instinct is to run another promotion and hope. Neither of these get you to the root issue. The real question you should be asking is which promotions actually create long-term profitable growth and which ones are just burning cash.

1:58That's what we're solving today. The real purpose of a promotion, yet no one tells you. Most brands use promotions to drive volume, hit quarterly numbers, make the buyer happy. But the primary focus of a promotion should be to introduce your product to a new customer and convert them into loyal repeat shoppers, period. Consider this. If I'm already a committed loyal fan of your brand, I'm going to buy your product whether it's our deal or not. That's the goal, right? So when you deeply discount to reward me, you're giving away margin unnecessarily, training me to wait for promotions, shrinking your runway, reducing funds available for innovation and growth.

2:38Those dollars could be much better spent, reaching new households, finding strategic displays, supporting new store launches, building long-term awareness and innovating. This is where the intent behind your promotion matters as much as the mechanics. There are better and more cost-effective ways to reward existing customers that we'll cover in future episodes. This is called subsidized volume. Why we start with one item, one retailer, and one promotion? Trade marketing feels overwhelming because it's complex. Multiple SKUs, multiple retailers, different calendars, different margins, different expectations.

3:16So let's simplify. For now, I want you to think in terms of one item, one retailer, one promotion, and one window. because if you can't evaluate one promotion clearly, adding complexity will only make this worse. On that single promotion ask, how much product did we need on the shelf, in the back room, in the distribution center? Did we have out of stocks during the promotion, during weekdays, over the weekend, on feature days? What did the pricing look like? Was it deep enough to be noticed? Was it so deep that we threw margin away? What happened after the promotion? Did base sales grow? Did they return to the exact same level?

3:57Did they actually decline? Here's why that matters. Base sales versus promotion spikes, the metric that actually matters. When you run a promotion, your sales are usually spike or increase. That's expected. It's called lift. But there are two critical questions. What is your base sale level before the promotion? What was your base sale level after the promotion? Note, base sales are the sales in the absence of a promotion. This is the benchmark you use to measure everything. The goal is to increase base sales after the promotion ends. If sales spike during the promotion, then drop right back to where they were, then you did not grow your business.

4:35You rented volume. Retailers love the spike in the moment. But if there's no sustained increase in base sales, there's no incremental shopper. There's no long-term category lift, then much of that spend was wasted. Now go back to the retailer's perspective. What retailers want is more traffic. sustainable, profitable growth, a competitive advantage in their market. Promotions that deliver only a sugar high and win with no base sales do not help them win in the long term. This is your opportunity. If you can design promotions that build base sales rather than just spikes, you become far more valuable than brands that just chase short-term volume.

5:12That especially includes brands at deep discount and pull profitable dollars out of the category. Why a double downer in trade marketing? Let me take you behind the curtain for a moment. Trade marketing is where you can make the biggest impact on your bottom line and extend your runway. I made it my mission to become an expert in trade marketing throughout my career, and I want to share that playbook with you. Founders are always wondering how to raise more money, how to pitch investors, how to survive the next round. I decided to niche down in a very different way. I asked where can I help brands recover the most money and create the most runway using the skills the rest of the industry is overlooking the answer was clear trade marketing it's one of the biggest line items on your P &L it's one of the least understood areas for brands of all sizes it's where the most waste is it's where you leak the most cash and it's one of the easiest places to recover profit if you know what you're doing so I launched a free weekly webinar series folks are trade marketing fundamentals how to evaluate promotions how to stop bleeding cash through deductions how to use promotions strategically instead of reactively and i built my trade marketing essentials course as a soup to nuts roadmap to mastering the skill why am i telling you this because this isn't just theory for me these are the same tools and strategies i use to help brands reclaim margin grow base sales and dramatically improve their valuations trade promotion ROI calculator you knew best friend to make this practical I created a free trade promotion ROI calculator it's available on my website retail solve calm it designed to help you plan a promotion how much it will cost what lift do you need to break even what outcome do you need to justify the expense evaluate a promotion after runs what actually happened did you make money or lose money did base sales increase game out scenarios what if I promoted less frequently but more strategically.

7:12What have I adjusted depth? The tool does the math for you, lets you email yourself the results, creates a record you can review over time and then compare it with other scenarios. Here's why that's important. When you can walk into a retailer and say we've analyzed the last three promotions, here's what worked and here's what didn't. Here's a smarter strategy that will grow both profit and our base sales. You immediately separate yourself from the 90 % of brands that they work with. Why software alone won't save you. You might be thinking, we're already using trade promotion software. Aren't we covered?

7:46Most TPM tools are like QuickBooks for trade marketing. They track what you spent. They organize deductions, accruals in your budget. All that is helpful. Keep using it. But they rarely teach you how to design effective promotions, help you understand what promotion levers drive the greatest impact. Imagine the opportunity for you if you can even get 10 to 20 % better at this than your competitors. Day 21 action item. Put one promotion under the microscope. Here's what I want you to do. Pick one SKU at one retailer and then add one promotion. Calculate trade spend all in. Incremental volume during promotion.

8:24Base left before and after. Ask, did my base sales grow after the promotion? Did we actually make money? Did we attract new shoppers or just subsidize existing ones? If the answer isn't clear, then that's your signal. You don't have a trade spending problem. You have a trade understanding problem, and that's fixable. In closing, turn trade marketing into a strategic weapon. Promotion should never feel like a black hole. They should be one of the sharpest tools for you to extend your runway, fund innovation, improving your valuation to investors, attract investors on your terms, giving retailers a clear fact-based reason to say yes.

9:02When you know the value of promotions, you stop guessing. You become the founder who can say, here's how we make your category more profitable. Here's how we convert your shopper into loyal buyers. Here's how we can grow your base sales and not just promotion spikes. That's incredibly attractive to retailers. It's also incredibly attractive to investors. In upcoming episodes, we'll go deeper into deduction management, promotion planning and how to align your trade strategy with your overall business plan so that every dollar has a job and a measurable result. Make sure you're subscribed, share this episode with a founder who's drowning in trade spend and check out the free trade promotion calculator and the resources I built to help support you.

9:43Remember every wasted promotion shortens your runway, every smart promotion extends it. Let's make sure your next one gives you the edge that you deserve. This is how you build a retail execution system that guarantees performance at show. The nuts and bolts that will ensure you never lose sales again due to poor execution. Download the free series guide to go deeper into these strategies. For additional inspiration, listen to the following podcast episodes. Episode 155. What is trade marketing maximizing revenues? With Kurt with Bellagio Trade. Explore what trade marketing is and see why it's critical for brands to optimize their trade spending to enhance revenue.

10:23Trade marketing is crucial for your brand growth and sustainability. Effective trade marketing strategies can significantly impact a brand's bottom line and longevity. And then listen to episode 200, trade promotion review strategies, enhance your profits. Unlock effective trade promotion review strategies, where to begin, and what to focus on for better brand growth and profit. This podcast episode focuses on trade marketing, specifically the cost associated with getting your product on store shelves and into the hands of shoppers. And then watch the free webinar recording, Trade Marketing Essentials to Grow and Scale Your Brand at RetailSolve.com slash Trade Strategies.

11:03This is one of my most popular webinars. There are several additional trade marketing focused webinars on the events tab on my website. You'll want to check them out. Tip of the day. The best way to reduce wasted spending and explode sales is to maximize your promotional effectiveness. us. Get more runway to grow and scale, better valuations, and give retailers a reason to say yes to your recommendations. Thank you for listening. This episode has accompanied video with illustrations and additional information that I can't share in an audio podcast. You can watch it at retailsolved.com size 30 day challenge.

11:37You can get the show notes for this episode by going to retailsolved.com size session 293. Tomorrow's episode is maximize productivity, Prioritize important tasks. This episode will build on today's conversation.

12:17valuations, better terms when negotiating with investors, fuel for more innovation, greater support for mission-based causes, and much more. Thanks for joining us today. Please reach out and share your most pressing questions, and I'll do my best to get you the answers that you need on future episodes, including expert advice from CEOs and industry thought leaders. Comment, leave your questions, and get this week's free downloadable guide and the show notes at retailsolve.com slash session 293.