What’s the 21st Century incarnation of the “Coke sign”? 10 years from now, are trade spend dollars still going to be spent on glass, aluminum, glue, paper and shipping costs? Or will they be spent on the instantaneous exchange of virtual ad content across a digital network? Increasingly, the omnipresent trade spend is going towards pixels displayed on-site, at the retailer where the supplier’s goods and services are sold.

Trade spend and co-marketing have been around for a long time. Recent technologies are making it easier than ever for companies of all sizes to take advantage of the positive network effects of this co-marketing approach.

What’s Trade Spend?

Trade Spend is an industry term that describes incentive programs offered by manufacturers to the distributors and retailers that sell their products. These incentives are offered to motivate them to promote the manufacturer’s products to consumers at the retail level. The various forms of trade spend are also known as co-marketing, shopper marketing and trade promotion.

“Things go better with Coke”

Although trade spend might seem like an industry insider phenomenon of little general interest, it pops up in surprisingly common places. Some examples of trade spend are so commonplace, we may hardly even notice them. We’ve seen these examples all our lives, and we recognize them as the norm for small retail businesses. Whether it be “Henry’s Grocery” or “Ragahavendra Stores”, the local mom & pop name happily sandwiched between slick Coca-Cola logos is a familiar sight right across the globe.

How did the “Coke sign” program work? Throughout the 20th century, distributors of Coca-Cola offered these signs to small retailers at heavily discounted rates, with the understanding that the Coke logo would sit next to the store’s name. The signs became ubiquitous, part of the common culture, because the model that put them in place worked for everyone involved. They were effective in informing consumers on where to buy their favourite drink. They highlighted the international Coca-Cola brand front and centre wherever that product was sold. They increased sales for regional distributors, and presented a means of keeping their retailers loyal to the Coca-Cola family. Meanwhile, the local store operator slashed his signage costs. All brought to you by the friendly neighbourhood trade spend budget of The Coca-Cola Company.

This is Big Business

While cozy images of soda pop at the corner grocery may seem homespun, trade spending is big business. Procter & Gamble alone, according to the company’s financial statements, “invests at least 500 million dollars in shopper marketing each year“.

Manufacturers of all stripes long ago recognized that the majority of consumer buying decisions were being made at the point of sale. A great TV commercial might cement their brand image, but to beat the competition they needed to influence the consumer at that crucial moment of decision in the retail aisle. A strong marketing presence at the retailer level became essential. It’s now estimated that the resulting trade promotion spend “can be 10-30% of a consumer packaged goods company’s gross sales“.

The next incarnation of the “Coke sign”

Today, forward thinking manufacturers like Castrol are channelling their trade spend dollars toward Internet solutions that culminate on site in the real world. Through distributors like Wakefield Canada, car dealerships, lube shops and retailers where Castrol branded products are sold are offered a ScreenScape-powered digital display free of charge. The Internet connected panel carries the local retailers messaging (i.e. “Henry’s Grocery”) alongside the latest Castrol campaign ads. Other international brands, like Bauer Performance Sports, are offering similar enticements to consumer retailers like Source for Sports to highlight their products at street level.

New technologies allow organizations to share space on the same digital sign

The key to the success of these co-marketing initiatives are new Internet technologies that allow multiple separate organizations (e.g. manufacturers, distributors, and retailers) to collaborate and share space on the same digital sign. In the language of the Internet, it’s the advent of business-to-business Social Networking. For the manufacturing industry, it’s just the latest incarnation of the “Coke sign”; a new form of co-marketing through trade spend.

The Long Tail of Trade Spending

While historically “trade spend” and “co-marketing” have been sophisticated disciplines reserved for large industry, that trend is changing. Small and medium sized manufacturers may have smaller distribution networks, but in aggregate their marketing budgets make up a significant portion of the overall market. At the other end of the distribution chain, small retailers still dominate. For example, in India a whopping “95% of all consumer products are sold through mom-and-pop outfits” like Ragahavendra Stores in the image above.

Diffuse co-marketing dollars and even more diffuse retailer networks; how do you capture all that low density trade spend? For a marketing solution that can successfully marry these two wide-spread “long tails”, the growth potential is huge.

Companies like ScreenScape are capturing trade spend at the point of sale

The introduction of tools like Adwords and AdSense successfully took sophisticated Internet marketing to the online masses. Google captured the “long tail” of Internet marketing spend and website publishing. As a result, it’s commonplace for small businesses to seamlessly carry the ads of their global “partners” on their websites, alongside their own messaging.

Similar to the online marketing revolution, companies like ScreenScape are now capturing trade spend at the point of sale. Small retail outlets are co-marketing their localized message alongside international brands, through digital signage programs introduced by their established distribution networks.

What’s the 21st Century incarnation of the “Coke sign”? 10 years from now, are trade spend dollars still going to be spent on glass, aluminum, glue, paper and shipping costs? Or will they be spent on the instantaneous exchange of virtual ad content across a digital network? Increasingly, the omnipresent trade spend is going towards pixels displayed on-site, at the retailer where the supplier’s goods and services are sold.