Sales Promotion

PERSONAL SELLING

ADVERTISING

PUBLICITY

SALES PROMOTION

Sales Promotion Importance

Growth in United States
Exceeds $250 billion dollars a year Increasing percentage of promotional dollars Consumer goods companies spend more on sales promotions than advertising

Sales Promotion
Definition: any activity or material used as a direct inducement to purchase Objective: Bolster/complement other
promotional mix elements during a specific time period

Targeted toward:
Sales force Wholesalers and retailers Consumers

Sales Promotion Methods for Consumers

Product sampling, demonstrations Coupons, refunds Rebates, cents-offContests, games & sweepstakes

Sales Promotion Methods for Consumers

Premiums Multiple purchase offers, Frequent-user incentives P-O-P material

Product placements/tie-ins

Classifying Types of Sales Promotion

Promotional pricing
Price reductions Free goods Tied offers Money off next purchase Loss leader pricing Cheap credit

NonNon-price promotions

Sampling

Most effective in Contests the early stages of a new product launch Free gifts Self-supporting offers (#1 use for coupons) Multi-brand promos s Important for food products Guarantees and added Very expensive services

Rebates: A Consumer Information Source

Buyers fill out rebate forms with names, addresses and household data about customers - directly targets price cuts to customers - 5-10% are redeemed (A Phantom discount)

Pepsi offers a $5 rebate on the Home Alone video

Rebates are often effective at changing purchase probabilities, even for big-ticket items

Coupons, too, can be effective at getting consumers to purchase specific products

Number of Coupons Redeemed Per (International) Household in 1992

Europeans lag in coupon redemption
90 80

70

60

50

40

30

20

10

0 Series1

U.S. 80.9

Canada 32.7

Belgium 18.5

U.K 15.9

Italy 4.3

Spain 1.5

France 1.4

USA Coupon Redemption

1990 1992 1993 1994 1995 279 310 300 310 292 7.1% 7.7 6.8 6.2 5.8%

Distribution Redeemed

Snapple Yard Sale Refreshes Sales Drive

The idea is about brand loyalty, getting more people to buy bottles, collect caps and buy stuff at the Snappleton yard sale, an online town on Snapple.com Ms. Bernstein, Senior V.P. Involvement: Collecting bottle caps. Silver cap (16 oz.)- ice tea products Yellow caps (Lemonade products) White caps (20-32 oz. bottles.)
Source: Direct Mktg News, 2004

Snappleton Yard Sale

Unique merchandise like Quicksilver apparel, Lite-Bright, Nintendo Game Boy Advance and Piaggio Scooter.

Objectives: Increase users aged -15 to 24. Use the internet to pique curiosity in a competitive U.S. beverage market, (Coca-Cola Co. and Pepsi Co.)

Snapple operates off a really low budget , doing more with less.

Sales Promotion Methods for the Trade

Trade shows Contests, free merchandise Display equipment, P-O-P materials Cooperative advertising & promotions
Vertical - channel members Horizontal - group of retailers

Allowances (buying vol., buy-back, scan-back, merchandise) Premium or push money, slotting allowances

Trade Shows
Selling objectives Non-selling objectives NonCurrent customers
Maintain relationship Transmit messages to key accounts Remedy problems AddAdd-on sales Contact prospects Determine needs Transmit messages Commit to call back or sale Maintain image Test products Gather competitive intelligence Widen exposure Contact prospects Foster image building Test products Gather competitive intelligence

Potential customers

Proportion of Promotional Expenditures

60% 50% 40% 30% 20% 10% 0% 1985 1987 1989 1991 1993 1995

Trade sales promotion Advertising

Consumer sales promotion

Sales Promotion, Pro and Con

Advantages:
Motivation method for special efforts Short-term sales increase Defined target audience Defined role/objectives Indirect roles (e.g., wider distribution)

Disadvantages:
Only short-term Hidden costs Confusion Price cutting -Brand image Postponement effect Significant government regulation Lack of effectiveness sometimes (learning effect)

A Benefit Congruency Framework of Sales Promotion Effectiveness

Are monetary savings the only explanation for consumer response to sales promotions? If not, how do the different consumer benefits of sales promotion influence its effectiveness? Six Benefits Savings Quality Convenience Value expression Exploration Entertainment
JrlMktg,Oct.2000

Positioning Map

Sales Promotions Benefit Matrix

High
*

Free Gifts Free Product Offers * * Sweepstakes * Coupons

Hedonic

* *Price Reductions Rebates

Low Low Utilitarian High

Study #4: Design and Procedure

2P d c ro uts

1Hd nc eo i

1U ria tilita n

N o P mtio ro o n

Mn ta o e ry L Bn /E ra d

Nn o e ry o mn ta L Bn /E ra d

Mn ta o e ry H Bn /E ra d

Nn o e ry o mn ta H Bn /E ra d

Study #4, Conclusions

1. Monetary saving is not the only consumer benefit 2. Consumers distinguish six benefits 3. Six benefits grouped between Utilitarian and Hedonic 4. All six (except quality) are significant predictors of overall evaluation 5. Monetary promos provide more Utilitarian benefits than Hedonic benefits

Study #5: Benefit Congruency Effect Design and Procedure

2 High End Products 1 Hedonic and 1 Utilitarian

Nonmonetary Promotions

Monetary Promotions

2 Free Gif

2 Sweepstakes

2 Coupons

2 Rebates

Study #5, Conclusions

1.Sales promos provide benefits beyond monetary savings 2.Nonmonetary promos provide more Hedonic benefits 3.For High End brands, sales promos are more effective 4.Monetary promos can destroy market share when offered with incongruent high equity hedonic brands competing against low-priced brands

Discussion of Studies 4 and 5

 Proof of congruency between needs of products and monetary promotions  Negative effects of some promotion were due to lack of relevance

Role of The Promotion Mix

Promotion is an organizations unique set of communications (stimuli) designed to influence (inform, persuade & remind) selected target audiences into desirable responses. Who says what to whom, in what setting , by which channels, with what purposes. Promotion facilitates (efficient) exchange