Sales Promotion

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SALES PROMOTION

Why sales promotion? • Advertising alone is not always enough to move products off store shelves to consumers • Marketers use variety of sales promotion methods targeted at both consumers and wholesalers, retailers that distribute their products, to stimulate demand

Advertising & Sales promotion • Advertising appeals to the mind and emotions to give the consumer a reason to buy • Sales promotion appeals more to the pocket and provides an incentive to purchasing a brand
Sales promotion attempts to maximize sales volume by motivating customers who have not responded to advertising

IMC programs Companies‟ IMC programs include

consumer
coordinated

and
with

trade
their

promotions
advertising,

direct

marketing,

publicity/

publications and online/Web-related

marketing as well as their personal
selling efforts

Incentives to wholesalers & retailers
Sales promotion provides an inducement to marketing intermediaries such as wholesalers and retailers:

•Trade allowance or discount gives retailers a financial incentive to stock and promote a manufacturer‟s products •Trade contest directed to wholesalers or retailers gives them an extra incentive to meet sales goals

Sales Promotion
“A direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.”

An extra incentive to buy

A tool to speed up sales

Targeted to different parties

Sales Promotion Vehicles
Consumer-Oriented
Promotional pull strategy Samples Coupons Premiums Contests/sweepstakes Refunds/rebates Bonus Packs Price-off deals Frequency programs Event marketing

Promotional push strategy

Trade-Oriented

Contests, incentives
Trade allowances Point-of-purchase displays Training programs Trade shows Cooperative advertising

Long-Term Budget Allocations – consumer packaged goods companies
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% „94 „95 „96 „97 '98 „99 „00 „01 „02 „03 „04 „05

Consumer Promotions Media Advertising Trade Promotions

% of Total Promotional spending

Increase in Sales Promotion
Growing power of retailers

Reasons

Declining brand loyalty
Increased promotional sensitivity Brand proliferation Fragmentation of consumer markets Short-term focus of marketers

Increased accountability
Competition Clutter

Reasons for shift in allocations of budget
• Growing power of retailers
– Initially manufacturers had power and influence; retailers were just passive distributors of their products
– Transfer of power from manufacturers to retailers • Growth in technology gave retailers access to data on product turnover, which sales promotions are working, which products make money • Retailers use this info to analyze sales, demand discounts and promotional support from manufacturers of lagging brands • Consolidation of grocery store industry

Reasons for shift in allocations of budget
• Declining brand loyalty Consumers switch back and forth among a set of brands they view as equal • Increased promotional sensitivity Consumers want to save money and promotions provide them the opportunity to do so • Brand proliferation Market saturated with new brands that lack any significant advantages that can be used as basis of advertising campaign – depend on sales promotion to encourage customers to try the brand

Reasons for shift in allocations of budget • Fragmentation of consumer markets
– Makes traditional mass-media based advertising less effective, marketers turning to highly targeted approach – Promotional offers used to build databases in direct marketing

• Short-term focus Sales promotion is seen as a way of generating an immediate increase in sales

Reasons for shift in allocations of budget • Short-term focus Brand managers use sales promotion routinely to meet quarterly or yearly sales and market share goals

• Increased accountability
– Results from sales promotion programs are generally easier to measure than those from advertising – Part of pay managers receive depends on sales generated through promotions

Reasons for shift in allocations of budget • Competition Promotions are seen as way to gain a competitive advantage as markets for many products are mature and stagnant • Clutter Promotional offers can break through the clutter and attract attention

Concerns • Advertising informs consumers of a brand‟s features and benefits, creates an image helps build and maintain brand loyalty

• Brands may lose the equity that advertising helped create if forced to compete primarily on the basis of price

Sales Promotion types
• Consumer franchise-building promotions – Sales promotion activities that communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity
– Designed to build long-term brand preference and help company achieve ultimate goal of full-price purchases that do not depend on promotional offers
E.g. loyalty programs that encourage repeat purchases/long-term patronage

Sales Promotion types
•Consumer nonfranchise-building promotions – Designed to accelerate the purchase decision process and generate an immediate increase in sales

– Do not communicate brand‟s unique features or the benefits of using it E.g. price-off deals, bonus packs, rebates

Consumer Franchise-Building Promotions
Promotional Objectives
Communicate distinctive brand attributes Develop and reinforce brand identity Build long-term brand preference

Techniques and Practices
“Frequency” programs encourage repeat purchase Sweepstakes & contests to build equity, increase involvement Premium offers that reinforce the brand image and help build equity

Nonfranchise-Building Promotions

Objectives Accelerate the purchase decision process Generate an immediate sales increase

Limitations Do not identify unique brand features Do not contribute to brand identity or image

Nonfranchise-Building Promotions
May Include . . .
Price-off deals

Bonus packs

Rebates or refunds

Shortcomings
Customers may “buy price” rather than brand equity

Trade promotions benefits may not reach customers

If they do, they may lead only to price reductions

Problems With Sales Promotion

Objectives of Consumer-Oriented Promotions
To increase consumption of an established brand To obtain trial and purchase To defend (maintain) current customers

Objectives

Enhance IMC efforts and build brand equity

To target a specific segment

Techniques • Sampling • Couponing • Premium • Contests and sweepstakes • Refunds and rebates • Bonus packs • Price-off deals

Sampling
Giving the consumer some quantity of the product at no charge to induce trial

Sampling Works Best When

The products are of relatively low unit value

The product can be broken into a small piece or size that reflects the full features and benefits

The purchase cycle is relatively short

Sampling Methods
How the sample will be distributed to consumers

Door-to-door

Methods

Direct mail In-store On package Event

Newspaper/magazine insert
Internet sites

Pros and Cons of Coupons
Advantages
Appeals to price sensitive consumer Can offer price break without retailers co-op Effective way to induce trial of products

Disadvantages
Hard to tell how many consumers use them and when Often used by loyal consumers who may purchase anyway Declining redemption rates and high costs of couponing Misredemption and fraud

Can defend market share and encourage repurchase

Premiums

An offer of an item, merchandise, or service, free or at a low cost, that is an extra incentive for customers

Types of Premiums
Free: Only requires purchase of the product
(Free toys with McDonald‟s Happy meals)

Self-liquidating: Consumer required to pay some or all of the cost of the premium

More Consumer-Oriented Promotions
Price-off Deals Contests and sweepstakes Refunds and rebates (proof) Loyalty programs

Bonus packs

Event marketing

Trade Oriented Promotions

Objectives

Obtain distribution for new products
Maintain support for established brands Encourage display of products Build retail inventories

Types of Trade Oriented Promotions
Contests and incentives Types

Co-op Advertising
Trade allowances

POP displays
Sales training

Buying Promotional
Slotting
(introductory allowance)

Trade shows

Effective tools • Consumer and trade promotions can be an effective tool for generating short-term increases in sales. • This is an easier route to profitability than is building the brand‟s image over time. • When sales promotions become over used, they can be detrimental to a brand.

Concerns
Example: •An over-promoted brand may lose perceived value.

•Consumers who consistently purchase a brand because of a coupon of price-off deal may attribute their behavior to the promotional incentive, rather than to a (Attribution theory).
•If a promotion is successful, competitors may copy it. Once everyone is using the sales promotion, profit margins fall, hard for any one firm to stop promotions (sales promotion trap).

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