Sales Promotions

Sales promotion spurs action and

must complement advertising
 Sales Promotion
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incentive for the
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thesales
sales force,
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 An extra incentive to buy

 An acceleration tool
 Targeted to different parties
 An inducement to intermediaries
 Reasons for Increase in Sales
Promotion
 Growing Power of Retailers
 Declining Brand Loyalty
 Increased Promotional Sensitivity
 Brand Proliferation
 Fragmentation of Consumer Markets
 Short-Term Focus
 Increased Accountability
 Competition
 Clutter
 Sales Promotion Uses
 Introduce new products by encouraging trial and
repurchase
 Get existing customers to buy more
 Attract new customers
 Defend current customers
 Maintain sales in off season
 Target a specific market segment
 Enhance IMC efforts and build brand equity (brand can
cheapen if SP is not designed to reinforce the brand
positioning)
If advertising spends are reduced to increase Sales Promotions
it can erode brand franchise and image– (commodity /
parity product image)
Sales Promotion Vehicles
Consumer-Oriented Trade-Oriented

Samples Contests, dealer incentives

Coupons Trade allowances

Premiums Point-of-purchase displays

Contests/sweepstakes Training programs

Refunds/rebates Trade shows

Bonus packs Cooperative advertising

Price-off deals

Frequency programs

Event marketing
Objectives of Consumer-Oriented
Sales Promotion
 To Obtain Trial and Repurchase
 To Increase Consumption of an Established
Brand
 To Defend (Maintain) Current Customers
 To Target a Specific Segment
 Enhance IMC programs and build brand
equity
 Advantages and Limitations of
Coupons
Advantages: Disadvantages
• Appeal to price • Difficult to determine how
sensitive consumer many consumers will use
• Can offer price break coupons and when
without retailers coop • Coupons are often used by
• Can be effective way loyal consumers who may
purchase anyway
to induce trial of new of
• Declining redemption rates
existing products
and high costs of couponing
• Can be a way to defend
• Misredemption and fraud
market share and
encourage repurchase
 Distribution of Coupons
Through ads, DM / press / on-pack and also by the scanner to
competitive brand users
Coupon ads should -
– Reinforce the positioning - highlight brand strength and key benefits
emphasised in the ad
– Be convenient to clip, show package prominently and have the
mandatory legal copy
• Placed in /on pack to build repeat purchase & loyalty
• Placed on other products ‘Cross-ruff’ to attract new customers
• DM coupons are more targeted, have higher redemption
• Scanner dispensed coupons attract other brand users
• Cash rebates (on durables) – on proof of purchase
 Coupon Fraud
 Consumers redeem without purchase
 Clerks and staff exchange for cash
 Managers/owners redeem without sale
 Criminals collect or counterfeit and
sell
 Coupon Trends
 Major companies cutting back on use
of coupons
 Searching for more effective coupon
techniques
 More use of internet for distribution
 Sampling
Providing consumer with some quantity of a
product for no charge to induce trial

Sampling works best when:

 The products are of relatively low unit value, so samples
don’t cost much
 The purchase cycle is relatively short so the consumer
can purchase in a relatively short time period
 The products are divisible and can be broken into small
sizes that can reflect the products features and benefits
 There is enough quantity for the consumer to try a
product, (but keep packaging & mailing expenses down)
 Sampling Methods
 Door-to-door
Direct mail
In-store sampling
Cross-product sampling
With newspaper or magazine
Through the internet
Sampling is more effective after an introductory set of
ads giving a toll free number to call for samples
 Premiums
Premium – an offer of an item of merchandise
or service either free or at a low cost that
is an extra incentive for customers
• Two types of premiums: (in pack / mailed on proof
of purchase at no cost)
 Free premiums -
only require purchase of the product
 Self-liquidating premiums -
require consumer to pay some or all of the cost of the premium
• Reinforces brand image
• Builds repeat purchase / brand loyalty
 Contests and Sweepstakes

Contest – a promotion where consumers compete for

prizes or money on the basis of skills or ability. Winners
are determined by judging entries or ascertaining which
entry comes closes to some predetermined criteria

Sweepstakes/games – a promotion where winners are

determined purely by chance and cannot require a proof of
purchase as a condition for entry. Winners are determined
by random selection from the pool of entries or generation
of a number to match those held by game entrants.
Can reinforce brand’s advertising platform if appropriately designed
 Other Popular Consumer Sales
Promotion Tools
• Price packs – offer lower price than usual or greater
quantity than usual
 Bonus Packs – For value enhancing items – ‘more
quantity’ packs are better than price-offs promotions
 Price-off deals - Induces switching and reinforces loyalty
 Refunds and Rebates
 Event marketing
 Frequency/loyalty programs
 Subsidised financing / Reduced EMI
– incentive for durables
 Consumer Franchise-Building
(CFB) Promotions
Consumer Franchise Building Promotions – Communicate
distinctive brand attributes and contribute to the development
and reinforcement of brand identity and image

CFB Promotional Objectives

 Communicate distinctive brand attributes
 Develop and reinforce brand identity that is consistent
with the image of the brand
 Build long-term brand preference
 Encourage repeat purchase and long-term patronage
 Engage active consumer involvement
 Nonfranchise-Building (non-FB)
Promotions
Nonfranchise-building promotions - Accelerate the purchase
decision process and generate an immediate sales increase but do
not contribute to the building of brand identify and image

Non-FB Promotions May Include

 Price-off deals
 Bonus packs
 Rebates or refunds
Non-FB Promotions shortcomings
 Trade promotions benefits may not reach customers
 Customers may “buy on the basis of price rather than brand equity
 Do not encourage the development of brand loyalty
 Trade-Oriented Sales Promotion
Objectives
 Obtain Distribution of New Products
 Maintain Trade Support for Existing Products
 Encourage Retailers to Display and Promote Existing Brand
 Build Retail Inventories
• Stock and buy more stocks
• Move goods from warehouse to shelf

Can erode brand franchise & image if advertising spends are reduced
– (commodity / parity product image) or is not brand enhancing
Types of Trade-Oriented Promotions
 Contests and Incentives
 Trade Allowances
• Buying Allowances
• Promotional Allowances
• Slotting Allowances
 Point-of-Purchase Displays
 Sales Training Programs
 Trade Shows
 Cooperative Advertising
 Trade Allowances
• Off-invoice / buying allowance
• Count-recount allowances
• Billback allowances
• Display allowances in-ad grocer coupon
• Slotting and facing allowances
• Trade inventory financing and delayed billing
• Sweepstakes, contests, etc for retail sales people
 Trade Allowances
• Off-invoice or buying allowance - % price-cut applied to
volumes purchased during promotional period. (Free
goods may be offered instead)
– Applies ‘Push’ pressure to sell stocks picked-up
• Count-recount allowances – for shifting the stocks from
the warehouse to the shelf
– Pressure to pass the price cut to the consumer
• Billback allowances – allowance paid if certain
performance criteria is met
– For Displays Ads in retailer publications etc
• Display allowances - to display products prominently
– Time pressed customers pick up brands made salient this way
 Trade Allowances

• In-ad grocer coupon - in the retailer’s circular. Co

pays for coupon face-value & handling costs
• Slotting & facing allowances – one time fee paid to
place new brand on shelf – to cover cost of space,
admn. & risk
• Trade inventory financing & delayed billing - used
for durables – reduced rate financing / delayed billing
• Sweepstakes, contests – for retail sales people. Timed
to run along with sales promos
Problems with Trade Allowances
Marketers expect that the savings will be passed on to
the consumer in the form of lower prices. However,
the trade members often pocket discounts
• Two practices that are particularly bothersome
– forward buying
– and diverting
• To deal with these trade problems, companies have
adopted a policy of
– Everyday Low Pricing (EDLP) the list price is lowered
and trade promotional allowances are reduced / eliminated
 Promotion Targeted to Reseller
Salespeople
Product or program sales
 Selling a specific number of cases
 Selling a specific number of units
 Selling a specific number of promotional programs

New account placements

 Number of new accounts opened
 Number of new accounts ordering a minimum amount
 Promotional programs placed in new accounts

Merchandising efforts
 Establishing promotional programs
 Placing display racks, counter and other p-o-p displays
 Types of Cooperative Advertising
 Horizontal cooperate advertising

 Ingredient-sponsored cooperative
advertising

 Vertical cooperative advertising

 Retailer’s promotion’s

Consumer Promotions used by retailers to –

– clear inventory – out of style, slow moving,
shelf-unstable products
 Consumer Franchise-Building
(CFB) Promotions
Consumer Franchise Building Promotions – Communicate
distinctive brand attributes and contribute to the development
and reinforcement of brand identity and image

CFB Promotional Objectives

 Communicate distinctive brand attributes
 Develop and reinforce brand identity that is consistent
with the image of the brand
 Build long-term brand preference
 Encourage repeat purchase and long-term patronage
 Engage active consumer involvement
 Nonfranchise-Building(non-FB)
Promotions
Nonfranchise-building promotions - Accelerate the purchase
decision process and generate an immediate sales increase but do
not contribute to the building of brand identify and image

Non-FB Promotions May Include

 Price-off deals
 Bonus packs
 Rebates or refunds
Non-FB Promotions shortcomings
 Trade promotions benefits may not reach customers
 Customers may “buy on the basis of price rather than brand
equity
 Do not encourage the development of brand loyalty
The Sales Promotion Dilemma
Our Firm
Cut Back Maintain
Promotions Promotions

Same market
Maintain We lose
share, profits
Promotions market share
stay low
All Others

Cut Back Higher profits We gain in

Promotions for everyone market share
 Evaluation and Risks
Consumer Promotions
• Advtg and SP play a complementary role and
when run in tandem they yield powerful synergies
– Delivers additional brand value and
– Induces trial & repeat purchase
– Breaks through clutter
• SP can hurt the image of the brand equity
– if run in isolation of advertising
– if poorly designed
– if protracted - particularly true for highly involvement,
image & feeling products
 Evaluation-Risks
Trade Promotions
– Advtg. Campaign, Consumer SP and TP if run in
tandem yield powerful synergies

– TP erode brand franchise and image leading to

less leverage with the trade
• Because of less ad spend
• If promos are not brand enhancing
 Coordinating Sales Promotion With
Other IMC Elements
Various IMC elements such as advertising, direct marketing,
Internet and personal selling efforts need to be coordinated with
sales promotion to create a synergistic effect. Must consider:

 Budget allocation - It depends on

– the promotional objectives of the campaign
– the market and competitive situation
– the brand’s stage in its life cycle
 Media support and timing
 Coordination of ad and promotion themes
 Measuring effectiveness