Specialty Food Maker 101: Promotion Terms to Know

The food industry has a specific lingo with which startups should become familiar. Here is a glossary of terms related to promotional activities.

Promotions are activities that encourage the trade and consumers to purchase products. Trade promotions, specifically, are offers made by suppliers to encourage their customers to help increase sales velocity. Trade promotions are designed to influence consumers, obtain initial distribution, stimulate the market on a regular basis, or support specific activity.

The following glossary is excerpted from The Basics: The Business of Specialty Foods, SFA’s intensive workshop where a team of veteran makers help new companies learn the fundamentals of the market and best practices to get their business off the ground.

Advertising Allowance: A trade promotion offering agreed-upon payment (a fixed amount or percentage of sales) in return for a fixed or specific amount of retailer advertising activity.

BOGO: The retailer is going to offer the consumer the chance to Buy One and Get One Free; this offer is almost always funded by the supplier, usually by a payment method that takes the agreed upon discount off invoice.

Buy-Out: A trade promotion that pays for the removal of goods to clear shelf space for your products. Typically offered in addition to other introductory allowances.

Coupon: A printed offer from the producer to the consumer for a reduced price when presented at the time of purchase. Delivered to the consumer though publications, direct mail, on packages, retailer ads, internet, etc. Retailer receives reimbursement (plus handling) by submitting to producer through clearinghouse.

Demonstrations (Demos): Sampling conducted by suppliers to encourage consumer trial. Often conducted in high-traffic areas. When conducted within a retail store, referred to as In Store Demonstration. In-store sampling usually conducted with supplier support. Personnel offer samples to encourage consumer purchases. Some retailers have in-house or preferred demonstrators for this purpose.

Free Goods: A trade promotion offering a specific number of cases supplied to the purchaser at no cost to secure initial authorization and/or shelf stocking. This practice has been generally replaced by a Free-Fill allowance.

Free-Fill: Trade promotion usually offered by a supplier during new product introduction or if a retailer is not stocking a particular item. Supplier agrees to provide a specific amount of product free (usually offered at a rate of one free case per store). Mostly used when a product will be serviced through a distributor. When the item will be sold through the chain’s own warehouse the term “slotting allowance” is used, paying for the creation of a slot in the chain’s warehouse and the amounts involved are larger/paid for in cash, not free goods.

Loyalty Card: Promotional program aimed at encouraging repeat sales by rewarding customers who buy frequently or on a regular basis. The device is used by retailers to identify customers, record their purchases, create target consumer offers, and produce data to assist in operating decisions.

Manufacturer Coupon: A printed offer by the brand owner allowing the consumer a specified discount at the retail point of sale. All expenses, including fee from coupon handling house, will be charged to the brand owner.

Performance Allowance: A trade promotion offer requiring the retailer and/or distributor to undertake one or more specific activities, such as Temporary Price Reduction, ad support, display, in-ad coupon, retailer coupon, scan down, etc. The amount earned is based on product purchased during the offer period and requires the purchaser to submit proof of performance.

Retailer Coupon: A retailer agrees to insert a coupon for a supplier’s product in the retailer’s normal print advertising media. To be self-redeemed by the retailer but supported by an offer from the supplier.

Sampling Allowance: A trade promotion offering an allowance (specific amount of free product) to retailers for sampling the product.

Sampling: Activities allowing consumers to experience product without purchasing. Can be delivered via mail, publication inserts, and inside packages of other consumable products. Also occurs via store sampling stations (with or without supplier participation), and during demonstrations arranged and supported by supplier payments.

Scan Down: A trade promotion offering retailers a specific amount per consumer unit sold during a specified time period based on movement, as recorded from the checkout scanner reports. Retailer is required to reduce the regular shelf price by an agreed upon amount. Retailer and distributor may also receive a handling allowance. Also viewed as a consumer promotion, as it influences the purchasing decision at point of sale.

Shipper Display Allowances: A trade promotion allowance offered on shipper displays. Besides the promotional allowance, an additional amount is offered as a handling allowance to cover costs to the retailer or distributor as it relates to the special shipping unit.

Shipper Display: A combined shipping and in-store display piece usually containing a higher unit count than the standard case pack, sometimes containing a mix of different items. Comes with a sales message and compelling graphics. Intended to be placed on the floor or counter away from the usual shelf location.

Show Participation Allowance: Amount a brand owner would pay to a distributor to be displayed in the distributor’s booth at a trade show.

Temporary Price Reduction (TPR): A temporary shelf price reduction offered to consumers. Usually funded by the manufacturer.

The SFA’s upcoming Basics online course is taking place October 6-7. Find more information about the event here.