Types of PromotionPage 404READING GUIDEBefore You Read

Connect What promotional tie-ins or loyalty programs have you participated in?

Objectives Define sales promotion. Explain the use of promotional tie-ins, trade sales promotions, and loyalty marketing programs.

The Main Idea

Sales promotion includes different techniques to increase sales and inform customers about a company's products.

VocabularyContent Vocabulary

sales promotions trade promotions consumer promotions coupons premiums incentives promotional tie-ins loyalty marketing

programs kiosks

Academic VocabularyYou will find these words in your reading and on your tests. Make sure you know their meanings.

distribution register

Graphic Organizer

Draw or print this chart to list examples for different types of sales promotions.

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Print this graphic organizer.

STANDARDS

ACADEMICEnglish Language ArtsNCTE 1 Read texts to acquire new information.NCTE 3 Apply strategies to interpret texts.NCSS National Council for the Social StudiesNCTE National Council of Teachers of EnglishNCTM National Council of Teachers of MathematicsNSES National Science Education Standards

Common Core Reading Interpret words and phrases as they are used in a text, including determining technical, connotative, and figurative meanings, and analyze how specific word choices shape meaning or tone.MARKETING CORE FUNCTION

Promotion

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SALES PROMOTIONSales promotions are incentives that encourage customers to buy products or services. Sales promotions build brand awareness, encourage customers to try a new product, increase purchases by current customers, or reward customer loyalty. Sales promotions are usually supported by advertising activities that include trade promotions and consumer promotions.

As You Read

Consider How might you promote a product that you like?

Trade promotions

Trade promotions are sales promotion activities designed to get support for a product from manufacturers, wholesalers, and retailers. More money is actually spent on promoting to businesses than to consumers. Major trade promotions include promotional allowances, cooperative advertising, slotting allowances, sales force promotions, and trade shows and conventions. Good business ethics require that trade promotional payments and awards be offered in a uniform manner. It also requires that terms be clearly spelled out and that no one is penalized for not achieving the goals. These requirements ensure that trade promotions are conducted fairly.

Trade PromotionsAllowances QuotasAdvertising Trade Shows

PROMOTIONAL ALLOWANCES

Promotional allowances represent cash payments or discounts given by manufacturers to wholesalers or retailers for performing activities to encourage sales. For example, promotional allowances are sometimes used to encourage wholesalers or retailers to stock a large quantity of a product. The cash payment or price discount gives wholesalers and retailers an incentive to sell, so they are more likely to promote the product.

“Sales promotions may be either business-to-business (B2B) or business-to-consumer(B2C) activities.”COOPERATIVE ADVERTISING

A manufacturer supports the retailer by helping to pay for the cost of advertising its product locally. This practice is known as cooperative advertising.

SLOTTING ALLOWANCES

A slotting allowance is a cash premium paid by a manufacturer to a retailer to help the retailer cover the costs of placing the manufacturer's product on the shelves. Slotting allowances can range from a few thousand dollars to several million dollars per product. In addition to buying space in the store, slotting allowances also pay for a retailer's discount specials on a product, charges for store shelves, penalties for poor sales, store advertising, and display costs.

Page 406Career Chatroom

Corey Ann SherwoodAccount CoordinatorPublic Relations Firm

What do you do at work?

I identify and secure sponsorship opportunities in events and entertainment. This includes market research and preparation for presentations. After our team creates a presentation, we propose ideas to the client. If the client accepts, we plan the event, market the product or company, and position the brand in a positive, exciting light. I've collaborated on athletic events, film festivals, and more.

What is your key to success?

I try to be honest and look at myself with an unbiased eye. I like to be aware of my strengths and weaknesses. I seek out constructive criticism and learn from my experiences.

What skills are most important to you?

Interpersonal and networking skills are extremely important. Hard work is a given, but going that extra mile sets you apart. Find something you are passionate about, and translate your excitement into dedication and perseverance.

glencoe.comRead more about this career and get a Career Exploration Activity.SALES FORCE PROMOTIONS

Sales force promotions are awards given to dealers and employees who successfully meet or exceed a sales quota. Such quotas can apply to a specific period of time, such as a month, one day, or a year, or for a product or line of products.

Sales force promotions vary, but they may include cash bonuses or prizes such as merchandise or travel awards.

TRADE SHOWS AND CONVENTIONS

Trade shows and conventions showcase a particular line of products. One of the largest trade shows is the annual Consumer Electronics Show in Las Vegas, which attracts more than 190,000 manufacturers, retailers, product engineers, and developers. Many participating companies invest millions of dollars in their display booths. Trade shows provide businesses with opportunities to introduce new products, encourage increased sales of existing products, meet customers and partners in thedistribution chain, and gain continued company and product support.

Reading Check

Analyze Why are trade promotions effective?

CONSUMER PROMOTIONS

Consumer promotions are sales strategies that encourage customers and prospects to buy a product or service. Consumer promotions support advertising, personal selling, and public relations efforts. Major consumer sales promotion devices include coupons, premiums, deals, incentives, product samples, sponsorships, promotional tie-ins, product placement, loyalty marketing programs, and point-of-purchase displays.

COUPONS

Coupons are certificates that entitle customers to cash discounts on goods or services. Manufacturers use coupons to introduce new products, to enhance the sales of existing products, and to encourage retailers to stock and display both. Coupons are placed on or inside product packages, in newspapers, and magazines.

Increasingly, companies use strategies to drive consumers to download and print online coupons. For example, a food manufacturer runs a summer online coupon program in partnership with supermarkets. Printed or online coupons are available for a limited time, and their value expires after a certain date.

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Stores that accept coupons send them to the manufacturers' headquarters or to a clearinghouse to be sorted and passed along to redemption centers. The centers, in turn, reimburse the stores for the face value of each coupon plus a handling charge of about eight cents per coupon. The centers then bill the manufacturers.

Coupons Starting in 2008, Groupon offered deal-of-the-day coupons for certain stores if enough customers in one city signed up to use them.

PREMIUMS

Premiums or giveaways are low-cost items given to consumers at a discount or for free. They are designed to increase sales by building product loyalty and attracting new customers. They can also persuade nonusers to switch brands.

The fundamental concept behind premium marketing is that people will be more motivated to buy a product when they are offered an added-value gift in exchange. Three types of popular consumer premiums are factory packs, traffic builders, and coupon plans.

Factory packs, or in-packs, are free gifts placed in product packages or as a container premium. This form of premium is especially popular with cereal manufacturers. Toy companies can cross-market or cross-sell their products with cereal companies. Children who eat the cereal and play with the toys will have a positive impression of both companies

Traffic builders are low-cost premiums, such as pens, key chains, pocket calendars, and coffee mugs. They are given away to consumers for visiting a new store or attending a special event.

Each time a customer uses the premium, he or she is reminded of the company and the experience. This practice can foster positive feelings for the company. Some of these premiums also feature contact information for the company so it is easier for the customer to get in touch.

Trade promotion is an important type of promotion. How do trade shows and conventions help businesses promote their products?

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Coupon plans are ongoing programs offering a variety of premiums in exchange for labels or coupons obtained from a product. A customer might send a manufacturer three soup-can labels in exchange for a recipe book. This exchange tells the company not only that their customers want recipes but also which products they purchase. If a soup company never received labels in the mail for one of its products, it would know not to market these products in association with this promotion.

One drawback to using premiums is that customers may think they are disposable. It is important for a company to not flood customers with too many premiums. This practice increases the chances that the premiums will be discarded.

DEALS

Deals or price packs offer short-term price reductions that are marked directly on the label or package, such as a retailer selling T-shirts for $10.50 each for one or $6 each for two or more. A deal might also “bundle” two-related products together, such as a free wing chair with a purchase of a discounted sofa.

INCENTIVES

Incentives are generally higher-priced products, awards, or gift cards that are earned and given away through contests, sweepstakes, special offers, and rebates. Businesses use incentives to promote many products because they create customer excitement and increase sales.

Contests are games or activities that require the participant to demonstrate a skill. Contest winners win such prizes as scholarships, vacations, and money. Many companies, such as McDonald's®, Kellogg's®, Kraft® Foods, and General Mills® have product promotions in the form of Internet games. Incentives are often offered to collect points in exchange for other games or gifts.

Sweepstakes are games of chance. (By law in most states, no purchase is necessary in order to enter a contest or sweepstakes.)

Special offers and rebates are discounts offered by businesses to customers who purchase an item during a given time period. Manufacturers and retail stores frequently use special offers and rebates to encourage customers to buy their products. Increasingly, a traditional marketer will offer an incentive for consumers to go online and registerto make a purchase or receive a discount from a marketer.

Product samples are especially important when promoting new products.Can you think of some products that make good product samples?

Page 409PRODUCT SAMPLES

Another form of consumer sales promotion is the product sample. A product sample is a free trial size of a product sent through the mail, distributed door-to-door, or given away at retail stores and trade shows. Detergents, toothpastes, shampoos, deodorants, and colognes are frequently promoted this way. Samples are especially important in promoting new products. Drug manufacturers frequently give samples to doctors and dentists so their patients can try new products.

SPONSORSHIP

Sponsors often negotiate the right to use their logos and names on retail products to enhance their corporate image. The sponsoring company pays a fee for rights to promote itself, its products or services at an event (such as a concert), with a group (such as a NASCAR® car racing team), with a person (such as a well-known basketball player), or at a physical site (such as a stadium).

Obtaining naming rights at a particular location is a high-profile promotional effort. A title sponsor is an organization that pays to have its name incorporated into the name of the sponsored location, such as The Home Depot® Center or a U.S. Olympic Training site on the publically owned campus of California State University. Sponsorship deals must be able to withstand public and media scrutiny. The effectiveness of the particular sponsorship is measured by the response of those who actually view the title or logo.

PROMOTIONAL TIE-INS, CROSS-PROMOTION, CROSS-SELLING

Promotional tie-ins, also known as cross-promotion and cross-selling campaigns, are activities that involve sales promotions between one or more retailers or manufacturers.

Partners combine their advertising and sales promotional activities to conduct a promotion that will create additional sales for each partner. Promotional tie-ins can be complex and involve several companies. For example, Jack in the Box® teamed with Dr. Pepper® on a promotional tie-in directed at video gamers. Customers who bought combo meals received game pieces on drinks for prizes including GameStop® gift cards, Xbox 360® consoles, and several game rooms equipped with home theaters and recliners.

Another good example of promotional tie-ins can be found in breakfast cereals and at fast-food restaurants. When a blockbuster animated feature is about to hit theaters, a movie studio often cross-promotes the film by offering ticket discounts in cereal boxes or toys with kids' meals.

Green PremiumsAt many eco-friendly companies, promotional premiums have been dropped in favor of clever, environmentally friendly alternatives. Popular eco-premiums range from organic-cotton tote bags and recycled-paper notepads to biodegradable golf tees and mouse pads that are crafted from old tires. Some companies even donate to a choice of charities instead of offering flashy and expensive premiums to high-profile clients. Green premiums both promote a company and give it a positive image.MathematicsCalculate Assume the cost of a traditional premium is $0.75 per premium and the cost of an eco-friendly premium is $1.10 per premium. Calculate the difference in price for 12,000 units of each premium as a dollar amount and as a percentage. Which option would you choose to promote your company?NCTM Number and Operations Compute fluently and make reasonable estimates.

glencoe.comGet an activity on green marketing.

Page 410PRODUCT PLACEMENT

Product placement is a consumer promotion that involves the verbal mention or appearance of a brand-name product in a television series, movie, or sporting event. It can even happen in a commercial for another product. For example, on the American Idol television series, the Ford Focus® was shown and the Sprint Nextel® phone was used as a prop. Product placement has increased on television shows because technology allows viewers to fast forward through paid commercials. One example of product placement in a movie took place in the Tom Hanks' movie Cast Away where FedEx® packaging and a Wilson® soccer ball were prominently featured. Both companies received international exposure.

LOYALTY MARKETING PROGRAMS

Loyalty marketing programs, also known as frequent buyer, reward, or frequent shopper programs, reward customers by offering incentives for repeat purchases.

The airline industry instituted one of the first such promotions, the frequent flyer program. These programs reward customers with free air travel once they have accumulated a designated amount of travel miles. Hotel industry chains, such as Hilton®, Hyatt®, and Marriott®, have adopted frequent guest programs in which consumers can earn free lodging by spending a designated dollar amount on lodging.

Customer loyalty means that customers are so satisfied with a brand or retailer that they continue to buy that brand or patronize that business even when they have others from which to choose. Most loyalty marketing programs do not cost anything for participation. However, large warehouse chains, such as Costco®, BJ's®, and Sam's Club®, require a membership fee for their loyalty cards that entitle the customer to large discounts.

Large and small businesses in many industries have adopted loyalty marketing programs. Hallmark®, a greeting card and gift chain, has Crown Rewards®. Customers can earn points for dollars spent and trade them for certificates on future purchases. Many local restaurants use simple loyalty cards that entitle frequent users to a free meal after a set number of purchases.

Grocery chains have also implemented loyalty programs. Customers who sign up for a frequent shopper card can accumulate points for every purchase. These points can then be applied to discounts on future shopping trips, or for stores that have gas stations, savings on fuel purchases.

Kiosks allow customers to obtain product information.How do kiosks help businesses interact with customers?

Page 411ONLINE LOYALTY MARKETING PROGRAMS

Online versions of loyalty programs have also become popular. The Internet search engine Yahoo! awards points to users who buy from certain retailers or visit certain Web sites. Yahoo! also negotiated

with the airline industry to allow consumers to convert their points into frequent flyer miles. This arrangement benefits both Yahoo! and the airlines.

Companies can also use email to notify loyal customers of exclusive sales. They may also be directed to special online-only discounts or given a chance to try new products first.

POINT-OF-PURCHASE DISPLAYS

Point-of-purchase displays are displays designed primarily by manufacturers to hold and display their products. They are usually placed in high-traffic areas and promote impulse purchases. By exposing potential customers firsthand to a company's products, point-of-purchase displays stimulate sales and serve as in-store advertising.

Kiosks are point-of-purchase displays that are stand-alone structures. Web-based or display-screen kiosks disseminate information to customers. Store kiosks offer new ways to interact with the sales staff, provide opportunities for cross-selling, and improve customer service.

After You Read Section 17.2Review Key Concepts

1. Contrast trade promotions and consumer sales promotions.2. Contrast contests, sweepstakes, special offers, and rebates.3. Explain why a business would want product placement in entertainment media.

Practice AcademicsEnglish Language Arts

4. Conduct research to identify advantages and disadvantages for companies that seek naming rights for publically financed or owned buildings such as stadiums, hospitals, or schools. Identify and label the advantages and disadvantages in a two-column table and share this information with your class.

Mathematics5. Promotional discounts are given to stores by manufacturers to place their products in preferred

locations in the store and to display their products in store windows. A ski manufacturer sells a local ski shop 35 pairs of their new skis for $7,000, which is a discount of $2,625. What is the percentage of the discount given to the store? (Round your answer to the nearest whole percent.)

 Number and Operations A decimal can be multiplied by 100 to be represented by a percentage.Starting Hints To solve this problem, subtract the discount amount from the purchase amount of each item to determine the net cost. For each item, divide the discount dollar amount by the purchase amount to get a decimal. Multiply each decimal by 100 to get the percent discount.

NCTE 1 Read texts to acquire new information.NCTE 3 Apply strategies to interpret texts.NCTM Number and Operations Understand numbers, ways of representing numbers, relationships among numbers, and number systems.