Chapter 12 Sales Promotion. Chapter 12 : Sales Promotion Chapter Objectives To understand the role...

Chapter 12

Sales Promotion

Chapter 12 : Sales Promotion

Chapter Objectives

• To understand the role of sales promotions in a company’s integrated marketing communications program and to examine why it is increasingly important

• To examine the objectives, strategy, and tactical components of a sales promotion plan


Chapter Objectives

• To examine the consumer and trade sales promotion strategy options and the factors to consider in using them

• To understand key IMC issues related to sales-promotion decisions


Characteristics and Types of Sales Promotion

• A direct inducement that offers an extra value or incentive to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.

• An acceleration tool, designed to speed up the selling process and maximizes sales volume.

• Can be targeted to different parties in the marketing channel.


Growth of Sales Promotion

• The growing power of retailers– New developments have transferred power from

manufacturers to retailers• E.g.: Optical checkout scanners, in-store computers

• Declining brand loyalty– Loyal coupon users will look for deals instead of buying

the same brand

• Increased promotional sensitivity– Consumers respond favourably to the incentives new

marketing programs are providing



• Brand proliferation.– Saturated markets depend on sale promotions to attract

consumers to new products.

• Fragmentation of the consumer market.– Promotions are being tailored to specific regional

market.

• Short-term focus.– Used to reach quarterly or yearly sales targets.

• Increased accountability.– Ways to relate promotional expenditures to sales and

profitability.



• Competition.– Development of account-specific marketing.

• Clutter.– Promotion has to be able to catch consumers attention.

• Reaching a specific target audience.– Certain sales promotion tools reach specific geographic,

demographic, and psychographic markets.


Objectives of Consumer Sales Promotion

• Trial purchase– Important in new brand strategies– Attract users of a competing brand

• Repeat purchase– Incentives such as coupons encourage repeat purchase

after trial


Objectives of Consumer Sales Promotion

• Increasing consumption– Incentives can create interest to help defend against

competitors

• Support IMC program/build brand equity– Draw attention to advertisements– Builds relationships with consumers


Consumer Sales Promotion Strategy Decisions

• Sales promotion strategy options– Franchise-building Characteristic

• Communicate distinctive brand attributes and contribute to the development and reinforcement of brand identity

– Nonfranchise-building characteristic• Designed to accelerate the purchase decision process and

generate an immediate increase in sales

– Incentive characteristic• The incentive the consumer receives can either be immediate

or delayed


Consumer Sales Promotion Strategy Decisions

• Application across product lines– The degree to which each sales promotion tool is

applied to the range of sizes, varieties, models or products

– 3 important product decisions:• Should the sales promotion be run on the entire line or on

individual items?• If selective applications (individual items) which items?• Should the sales promotion be run on “regular” stock or some

other special version?

• Application across geographic markets– National or select markets


Consumer Sales Promotion Tactics Decisions

• Value of incentive– Economic

• Price premium• Discount

– Non-economic• Collectables• Limited edition items

• Timing• Distribution


Sampling

• Sampling involves a variety of procedures whereby consumers are given some quantity of a product for no charge to induce trial.

• Criteria for an effective sampling program:– Products are of relatively low unit value– Products are divisible– Purchase cycle is relatively short


Strengths and Limitations of Sampling

• Strengths:– Excellent way to induce a prospective buyer to try a

product or service.– Consumers experience the brand directly, gaining a

greater appreciation for its benefits.

• Limitations:– The brand must have some unique or superior benefits

for a sampling program to be worthwhile.– The benefits of some products are difficult to gauge

immediately and large affordable samples may be required to encourage appreciation of the brand


Sampling Methods

• Door-to-door sampling• Sampling through media• Sampling through the mail• In-store sampling• On-package sampling• Event sampling• Direct sampling• Location sampling• The Internet• Creative approaches


Coupons

• The oldest, most widely used, most popular and most effective sales promotion tool

• Coupons have been around since 1895

• In recent years they have become increasingly popular


Strengths of Coupons

• Coupons make it possible to offer a price reduction to consumers who are price-sensitive.

• Coupons make it possible to reduce the retail price of a product without relying on retailers for cooperation.

• Coupons reduce the consumer’s perceived risk and encourage repurchase after initial trial.

• Encourage nonusers to try a brand, repeat purchase among current users, and promote new, improved product versions.


Limitations of Coupons

• It can be difficult to estimate how many consumers will use a coupon and when.

• It is difficult to prevent coupons from being used by consumers who already use a brand when using the coupons to attract new users.

• Low redemption rates.• High costs.• Coupon misrepresentation or fraud.


Coupon Fraud

• Redemption of coupon by consumers for a product or size not specified on the coupon.

• Redemption of coupons by salesclerks in exchange for cash.

• Gathering and redemption of coupons by store managers or owners without the accompanying sales of the product.

• Gathering or printing of coupons by criminals who sell them to unethical merchants, who redeem them.


Coupon Distribution

• Distribution through newspaper– freestanding inserts (FSI)

• Direct mail• Newspapers/magazines as couponing vehicles• Inside or outside of package

– bounce-back coupon– cross-ruff coupon– instant coupon

• In-store couponing


Premiums

• A premium is an offer of an item of merchandise or service either free or at a low price that is an extra incentive for purchasers.– Free premiums

• Usually small gifts or merchandise included in the product package or sent to consumers who mail in a request along with a proof of purchase.

– Self-liquidating premiums• Require the consumer to pay some or all of the costs of the

premium plus handling and mailing costs.


Contests and Sweepstakes

• A contest is a promotion where consumers compete for prizes or money on the basis of skills or ability. The company determines winners based on predetermined criteria and a purchase incentive is usually provided.

• A sweepstakes is a promotion where winners are determined purely by chance; it cannot require a proof of purchase or purchase incentive as a condition for entry.


Limitations of Contests and Sweepstakes

• Many sweepstakes and/or contest promotions do little to contribute to consumer building and may even detract from it.

• The sweepstakes or contest often become the dominant focus rather than the brand.

• Numerous legal considerations affect the design and administration of contests and sweepstakes.

• Participation by professionals or hobbyists who submit many entries but have no intention of purchasing the product or service.


Refunds and Rebates

• Offers by the manufacturer to return a portion of the product purchase price, usually after the consumer supplies some proof of purchase.

• Consumers are usually very responsive to these offers, particularly as the size of the savings increase.


Strengths and Limitations of Refunds and Rebates

• Strengths:– Help create new users– Encourage brand switching or repeat purchases

• Limitations:– Many consumers are not motivated by a refund offer

because of delay and effort– Consumers perceive manufacturers as offering rebates

to sell products that are not faring well– When small refunds are being offered, marketers may

find other promotional incentives more effective


Bonus Packs

• Bonus packs offer the consumer an extra amount of a product at the regular price by providing larger containers or extra units.

• Bonus packs result in a lower cost per unit for the consumer and provide extra value as well as more product for the money.


Price-Off Deals

• The price-off deal reduces the price of the brand.

• Typically offered right on the package through specially marked price packs.

• Can encourage consumers to purchase larger quantities, preempting competitors’ promotions and leading to greater trade support.


Frequency Programs

• Continuity or loyalty programs.

• Commonplace in a number of product and service categories, particularly travel and hospitality, as well as among retailers.

• Viewed by marketers as a way to develop strong consumer loyalty.


Event Marketing

• Event marketing is a type of promotion where a company or brand is linked to an event or where a themed activity is developed for the purpose of creating experiences for the consumers and promoting a product or service.– An event sponsorship is an integrated marketing

communications activity where a company develops actual sponsorship relations with a particular event and provides financial support in return for the right to display a brand name, logo or advertising message and be identified as a supporter of the event.


Objectives of Trade Sales Promotion

• Obtain Distribution of New Products– trial purchase objective

• Maintain Trade Support for Established Products– repeat purchase objective.

• Build Retail Inventories– repeat purchase objective.

• Encourage Retailers to Display Established Brands– consumer sales promotion objective.


Trade Sales Promotion Strategy Options

• Contests and Incentives• Trade Allowances

– Buying, Promotional, Slotting

• Displays and Point-of-Purchase Materials• Sales Training Programs• Trade Shows• Cooperative Advertising

– Horizontal, Ingredient-sponsored, Vertical


IMC Issues Related to Sales Promotion Decisions

• Budget Allocation

• Creative Themes

• Media Support

• Strategic Role


The Shifting Role of the Promotion Agency

• Figure 12-7


The Sales Promotion Trap

• Figure 12-8

Chapter 12 Sales Promotion. Chapter 12 : Sales Promotion Chapter Objectives To understand the role...

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