Chapter 18 Sales Promotion

2006 Thomson/South-Western

Sales promotion plays a key strategic role in the channel of distribution

Power Struggles and Sales Promotion

Big name brands need to supported with sales promotion and POP in order to get the support of retailers through self space allocation. The top 10 retailers control 43 percent of all packaged goods sales so they are in a position to dictate which brands get how much shelf space. Brand marketers are spending heavily--$30 billion a yearon sales promotion and POP to gain favored retailer treatment and provide incentives to household consumers and business buyers.

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Ch 18: Sales Promotion 2

Sales Promotion
Using incentives to create a perception of greater brand value
Consumer Market
Induce household consumers to purchase a firms brand

Trade-Market
Motivate distributors, wholesalers, and retailers to stock and feature a brand

Business Buyer
Cultivate buyers in large corporations who make purchase decisions
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Sales Promotion Examples

Coupons Gift Cards Incentives Premiums Trade Shows Allowances Sampling Contests Sweepstakes Price-off deals

Brand placements

Loyalty Programs
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Sales Promotion vs. Advertising

Short term demand vs. long term demand Encourage brand switching vs. brand loyalty Induce trial use vs. encourage repeat purchase Promote price vs. promote image Immediate results vs. long term effects Measurable results vs. difficult to measure

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Importance of Sales Promotion

$107 billion in 2003 Growth rate: 4-8 percent Reasons for growth:

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Demand for accountability Short-term orientation Consumer response to promotions Proliferation of brands Increased power of retailers Media clutter
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Objectives for ConsumerMarket Sales Promotion

1. Stimulate trial purchase 2. Stimulate repeat purchases 3. Stimulate larger purchases 4. Introduce a new brand 5. Combat or disrupt competitors 6. Contribute to IMC
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Consumer-Market Sales Promotion Techniques

1. Coupons 3. Premiums 5. Samples & trials 2. Price-off deals 4. Contests/sweeps 6. Phone gift cards

7. Brand placements 8. Rebates 9. Frequency programs 10.Event sponsorship

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Coupons
Entitles a buyer to a price reduction for a product or service Advantages
Give a discount to price sensitive consumer while selling product at full price to others Induce brand switching Timing and distribution can be controlled Stimulates repeat purchases Gets regular users to trade up within a brand array
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Coupons
Disadvantages
Time of redemption cannot be controlled No way to prevent current customers from redeeming coupons Coupon programs require costly administration Fraud is a serious, chronic problem

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Price-Off Deals
Offers consumer reduced price at point of purchase through specially marked packages Advantages
Controllable by manufacturer Can effect positive price comparisons Consumers believe it increases value of a known brand

Disadvantage
Retailers believe it creates inventory and pricing problems
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Premiums and Advertising Specialties

Premiums: free or at a reduced price with another purchase Free premiums provide item at no cost Self-liquidating premiums require consumers to pay most of the cost of the item Advertising specialties:
A message placed on a free, useful item
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Contests and Sweepstakes

Contests: consumers compete for prizes based on skill or ability. Sweepstakes: winners picked by chance Both create excitement and interest But . . .
Legal and regulatory requirements are complex Consumers may focus on the game rather than the brand Difficult to get an IBP message across in a game
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Samples and Trial Offers

Sampling: Giving consumer an opportunity to use a brand on a trial basis with little or no risk Types of sampling
In-store Door-to-door Mail Newspaper On-package Mobile

Trial offers
Used for more expensive items Consumer tries product for a fixed time
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Phone and Gift Cards

Manufacturers offer either for free or for purchase debit cards
with phone time or preset spending limits

Examples include offers from Lexus, Oldsmobile, and The Gap.

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Rebates
Money back offer requiring the buyer to mail a request for money back from the manufacturer Often tied to multiple purchases Many consumers fail to bother sending the request

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Frequency Programs
Also known as continuity programs Offers customers discounts or free products for repeat patronage Common in airline, travel, and restaurant businesses

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Objectives for Promotions in the Trade Market

Objectives:Use a push strategy: Push the product into the distribution channel to the consumer
Obtain initial distribution Increase order size Encourage cooperation with consumer market sales promotions Increase store traffic

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Trade-Market Sales Promotion Techniques

Incentives: Push money Allowances: Merchandise allowances, slotting fees, billback allowances, off-invoice allowances

Sales Training Programs Cooperative (Co-Op) Advertising

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Business Market Sales Promotion Techniques

Trade Shows Business gifts Premiums and advertising specialties Trial offers Frequency programs

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Trial offers are very effective in the business market. Why?

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Sales Promotion, the Internet, and New Media

Sampling removes risk associated with consumer trial Internet firms use incentives to make Web sites sticky Internet is used to implement sales promotions and distribute coupons
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Risks of Sales Promotion

Create a price orientation Borrow from future sales Alienate consumers Time and expense Legal considerations

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P-O-P Advertising
1. Materials used in the retail setting to attract shoppers attention to a brand, to convey primary product benefits, or highlight pricing information. 2. Objectives for Point-of-Purchase Advertising Draw consumers attention to a brand in the retail setting. Maintain purchase loyalty among brand loyal users. Stimulate increased or varied usage of the brand. Stimulate trial use by users of competitive brands.
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P-O-P Advertising and the Trade and Business Markets

Product displays and information sheets encourage retailers to support one distributor or manufacturers brand over another. p-o-p promotions can help win precious shelf space and exposure in a retail setting. A p-o-p display should be designed to draw attention to a brand, increase turnover, and possibly distribute coupons or sweepstakes entry forms. To combat losing business to online shopping, retailers are trying to enliven the retail environment, and point-of-purchase displays are one strategy.
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Coordination Challenge
Message coordination Media coordination Research conclusions
-Short term effects can be dramatic -Short term effects are often not profitable -Rare for long-term effects to occur -Most power effects result from advertising and sales promotion being used together
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Ch 18: Sales Promotion 26