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.”
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
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
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
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).