Promotion allowance involves the factors that are required to familiar the product with customers. Advertisement and promotional programs are the examples of promotion. Advertisement is the most important tool which is an option to make the product available for customers (Srinivasan, Pauwels, Hanssens & Dekimpe, 2004). Promotion is most important part for the sale of the product as it provides awareness to the customers. According to Boykin, promotional allowances are the reductions in the prices of the product that is offered by the suppliers to their trade partners to carry out the additional promotional activities as in support of their products.  Promotional allowances are actually the payments that are given to the retailers by the suppliers in order to promote their products. These allowances have been in the industry since the early 20th century. Firstly these allowances were put in the pace by the Warner Brothers in order to provide additional incentives to the retailers for their additional advertising efforts. Marketers generally agree upon the fact that support of the strong trade partners is very essential while establishing the critical and appropriate link between the shoppers and products when the buying decisions are to be made. To boost the morale and for encouragement, suppliers provides promotional allowances to their trade partners so that they conduct various varieties of promotional actives in their part (Kaikati & Kaikati, 2006). 

In the category of the vendor allowance and in other sort of trade allowances, promotional allowances are also included by the Internal Revenue Service. Vendor’s allowances are considered as the normal part of the firm’s marketing activities but they attain keen interest of Internal Revenue Service as for the purpose of tax and the Federal Trade Commission for the purpose of trade and these allowances help the company in order to have co-op advertise programs and bill back programs. The Federal Trade Commission provides with the list of the activities that are recognized by them which are not allowed for the violation. Such activities involve cooperative advertising, catalogs, in store demonstration and displays, special packaging, contests or package sizes etc. most of the time trainings are provided to the sales people that are retailer and wholesaler to have an effective performance (Kaikati & Kaikati, 2006). An example for such type of allowance is that there is a household product that a company provides to the retail store as a case of the promotional activity to place their new detergent in the special display of the aisle. This strategy is also called as push money.

Promotional activities performed by the company in case by providing the promotional allowances to the retailers increase the revenues of the company. These allowances increase the earning before income, taxes as well as depreciation of the companies. At the early stages the promotional allowance was taken as accrual based. Promotional activities involves the various factors of attributes that are provided to the retailers and whole sellers in order to maintain their position in each aspect like as contests, dealer incentives, trade allowances, point of purchase displays, training programs, trade shows and cooperative advertising etc (Srinivasan, Pauwels, Hanssens & Dekimpe, 2004).

References

• Boykin, G. What is promotional allowance?. Demand Media

• Kaikati, J.G & Kaikati, A.M (2006) “Slotting and promotional allowances: red flags in the supply chain”, Supply Chain Management: An International Journal, Vol. 11 Iss: 2, pp.140 – 147

• Srinivasan, S., Pauwels, K. Hanssens, D.M. & Dekimpe, M.G. (2004). Do promotions benefits manufacturers, retailers, or both? Management Science, 50 (5), 617-629.