Economic Factors Are Essential to Intermediate Buyers
If intermediate buyers are involved prior to products reaching the end user, influences other than customer demographics and lifestyle factors are likely to be important. For example, grocery buyers of consumer packaged goods may have strict profit margin guidelines (e.g., minimum 25 percent on discount retail price programs), and minimum discount thresholds that they will accept (e.g., at least 10 percent off invoice). Buyers are also heavily influenced by brand advertising and promotion support programs (e.g., coupons in local newspapers on the promoted brand). For new products, cash payments to the stores for each new item (e.g., $500 to over $25,000 per item) and free case goods on each new item for each store are common for larger chains. Some of the more important factors include:
Profitability of the item. The higher the margin and dollar profit per item vs. competitive category products, the more likely the trade will accept it, regardless of product quality.
Availability of discounts. Discounts can increase margin, volume, and velocity of the item. For example, 10 percent to 25 percent off invoice each quarter for all purchases during the period are typical discounts for grocery and drug retailers.
Advertising and promotion support programs. Multimedia TV, radio, print and PR support, plus heavy consumer couponing, sweepstakes, and contests are typical consumer packaged goods programs that may be run one to four times a year.
Slotting fee allowances. New item "slotting fees" are the subject of controversy and frustration for many manufacturers supplying grocery, drug, and mass merchandiser retailers. Slotting fees are cash payments and/or free goods that are not refundable, even if the products are dropped after six months by the retailer. Slotting fees range from a few hundred dollars to over $50,000 per item in some chains.
Availability of free samples. Allowing the intermediate purchaser...