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CHAPTER 18

Sales promotion
SUE PEATTIE and KEN PEATTIE

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Introduction Sales promotion defined

In 1697 Jonathon Holder, a London haber- Sales promotion is frequently defined in terms
dasher, decided to offer customers spending of what it is not, typically as those marketing
over a guinea in his shop a free stock and price communications activities which do not fall
list. His pioneering decision to offer his custom- into the categories of advertising, selling or
ers ‘something extra’ was not universally wel- public relations. This is not very helpful, but
comed. The newspapers of the day condemned definitions trying to explain what this encom-
this sales promotion as ‘a dangerous innova- passes are often flawed, by failing to embrace
tion’ and one which, ‘would be destructive to all of the marketing tools regarded as sales
trade, if shopkeepers lavished so much of their promotions in practice. We can define sales
capital on printing useless bills’. Over 300 years promotions as ‘marketing activities usually
later, trade still flourishes and so do sales specific to a time period, place or customer
promotions, which now account for more ‘capi- group, which encourage a direct response from
tal’ than any element of marketing communica- consumers or marketing intermediaries,
tions except selling. During 2000, promotional through the offer of additional benefits’.
expenditure in the USA (excluding discounting
programmes) exceeded $100 billion for the first The three key elements of this definition
time, according to industry figures. Despite are that sales promotions are:
sales promotion’s growing importance, some-
thing of the scepticism that Mr Holder encoun- 1 Non-standard. Promotions are usually
tered lives on. In the study and practice of
temporary, and may be limited to certain
marketing, sales promotion has always been
customer groups (such as airline frequent flier
overshadowed by the more glamourous world
schemes) or specific to a particular distribution
of advertising. This situation is now changing,
channel (as in ‘tailor-made’ promotions
with sales promotion beginning to attract the
involving a producer and a single retailer).
academic study and practitioner scrutiny that
its cost and increasingly strategic role surely 2 Response orientated. Promotions seek a direct
demands. response from customers, or those who deal
with customers on the producer’s behalf (see
Figure 18.1). The direct response sought is not

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Sales promotion 459

TRADE PRODUCER
PROMOTIONS INTERNAL
PROMOTIONS
'PUSH'
'ENCOURAGE'

JOINT
PROMOTIONS SALES
DISTRIBUTOR FORCE
DIRECT
PROMOTIONS

'PULL'

CONSUMER

Figure 18.1 Sales promotion targets

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necessarily a sale. Promotions may encourage writing in Marketing Week, expressed it, ‘the
consumers to send for a brochure, visit a sector suffers largely from a poor definition – a
dealer or consume a sample. The ultimate aim price promotion is not the same as a value-
is always sales, but this is true of marketing added promotion but the two are often lumped
generally. together ’. Coupons and discounts are among
the most widely used promotions, and research
3 Benefit orientated. Promotions offer their
evidence and practical experience from such
targets additional benefits, beyond the
price-based promotions dominates the litera-
‘standard’ marketing mix. The enhanced mix
ture. This has encouraged:
could include extra product, a reduced price
or an added item, service or opportunity.
A limited view of what promotions can
The everyday vocabulary of marketing promo- achieve.
tions is full of inconsistencies. For simplicity An overly rational– economic view of their
and brevity, the word ‘promotion’ will be used effects on consumers.
in this chapter to refer to a sales promotion, A tactical and short-term view of promotion,
rather than its broader context of marketing since economic incentives are only effective
promotion. while they are on offer.
A negative perception about the impact that
promotions may have on brands and brand
positioning.
Understanding sales promotion
– a tale of price and prejudice All of these negative perceptions of sales
promotion, and more, were encapsulated in
Sales promotion is a catch-all term covering a Jones’ (1990) Harvard Business Review article
multiplicity of marketing activities. In the past, ‘The Double Jeopardy of Sales Promotion’. He
our understanding of promotions has been concludes that companies, faced with saturated
hampered by a tendency to bundle all the markets, have been misguidedly channelling
different types together for study and discus- money away from above-the-line advertising
sion (Peattie and Peattie, 1993). As Flack (1999), and ‘fighting with fury for market share; using

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460 The Marketing Book

promotions (generally a high cost activity) as unpackaged draught beers require special price
the main tactical weapon’. evenings, gamecard competitions and
SuchChapter
indictments, extract
published in leading promotional merchandise catalogues.
journals, have helped to prejudice many man- Promotions also var y in their popularity and
agement academics and some practitioners suitability internationally between countries
To buy the full chapter, and for copyright
against promotions. However, it is worth
remembering that many of the most outspoken
(Huff and Alden, 1998). In Japan, redeeming
coupons at point-of-sale is considered
information, click here
critics (Jones included) are former top advertis-
ing practitioners. Advertising Hall of Fame
embarrassing, and so competitions are the
most popular promotional tool there.
member David Ogilvy’s view is that: ‘The
4 Consumer appeal. Consumers like extra
manufacturer who finds himself up the creek is
the short-sighted opportunist who siphons off benefits. In the USA, 70 per cent of consumers
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now hold at least one retailer loyalty card, and
all his advertising dollars for short-term pro-
motions’ (Ogilvy, 1985). It is also worth noting over 80 per cent use coupons. However,
that much of the criticism, including Jones’s, is different types of promotion appeal to different
based on an assumption that ‘in most circum- people. Research by Gallup and numerous
stances, promotions mean price reductions’. sales promotions agencies suggests that our
age, sex, nationality, socio-economic grouping
and ethnic origin can all influence which
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The reality is that sales promotion needs to
promotions we prefer.
be understood for what it is – a diverse and
versatile marketing toolkit, in which the major- 5 Marketing capabilities. Free samples are
ity of tools emphasize creativity over simple obviously useful for encouraging product trial,
economics. The different promotional tools while a prize draw can provide a mailing list
vary in terms of: for future promotions.
6 Implementation priorities. While printing security
1 Their targets (see Figure 18.1). ‘Push’ is important for gamecards, accurate
promotions target marketing intermediaries, redemption forecasting is vital for coupons and
supporting the selling effort to get products giveaways, and anticipating competitor reaction
onto retailers’ shelves, while ‘pull’ promotions is important in price promotions.
target consumers and complement advertising
in persuading them to pick products off the Space constraints prevent a detailed discussion
shelves again. of each technique, but Table 18.1 provides
2 Type of benefits offered. One fundamental examples and notes on some of the most
distinction is between value-increasing and popular forms of consumer promotions.
value-adding promotions. Value-increasing Academic research to develop a clearer
promotions alter the product/price equation understanding of promotion has taken time to
by increasing the product quantity or quality, emerge. Between 1965 and 1983 there were only
or decreasing its price. Value-adding around 40 academic studies published about
promotions leave the basic product and price promotion (Blattberg and Neslin, 1990). This
intact, and offer something different in terms compares to over 200 studies of promotion
of premiums (free or self-liquidating), published between the mid-1980s and the mid-
information or opportunities. The benefits can 1990s (Chandon, 1995). Despite the increase in
be instant (scratch-and-win competitions), the amount of research, nearly all of it has
delayed (postal premiums) or cumulative remained focused on value-increasing tech-
(loyalty programmes). niques such as couponing. There have been
relatively few studies, such as those by Chan-
3 Product/market suitability. While canned beers don et al. (2000) or Peattie et al. (1997), of value-
favour ‘13 detailed
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