McGraw-Hill/Irwin 16-2Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion

•An extra incentive to buy

•An inducement to intermediaries

•Targeted to different parties

“A direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the ultimate consumer with the primary objective of creating an immediate sale.”

McGraw-Hill/Irwin 16-3Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion Vehicles

Consumer-Oriented

Samples

Coupons

Premiums

Contests/sweepstakes

Refunds/rebates

Bonus packs

Price-offs

Event sponsorship

Trade-Oriented

Contests, dealer incentives

Trade allowances

Point-of-purchase displays

Trading programs

Trade shows

Cooperative advertising

McGraw-Hill/Irwin 16-4Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Long-Term Allocations to Advertising, Trade Promotions and Consumer Promotions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97

Consumer Promotions

Media Advertising

Trade Promotions

Percent of total promotional dollars, 3-year moving average.

McGraw-Hill/Irwin 16-5Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Reasons for Increase inSales Promotion

•Growing Power of Retailers•Declining Brand Loyalty• Increased Promotional Sensitivity•Brand Proliferation•Fragmentation of Consumer Markets•Short-Term Focus• Increased Accountability•Competition•Clutter

McGraw-Hill/Irwin 16-6Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion Uses

• Introduce new products•Get existing customers to buy more•Attract new customers•Combat competition•Maintain sales in off season• Increase retail inventories•Tie in advertising and personal selling•Enhance personal selling efforts

McGraw-Hill/Irwin 16-7Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

• CFB Promotional Objectives• Communicate distinctive brand attributes• Develop and reinforce brand identity• Build long-term brand preference

• CFB Techniques and Practices• “Frequency” programs encourage repeat purchase• “Frequency” programs encourage patronage loyalty• Offers consistent with brand or store image . . .

• Reinforce brand or store identity• Define store or brand “personality”• Reveal brand or service attributes or benefits• Engage participants though active involvement

Consumer Franchise-Building(CFB) Promotions

McGraw-Hill/Irwin 16-8Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Nonfranchise-Building(non-FB) Promotions

• Non-FB Promotional Objectives• Accelerate the purchase decision process• Generate an immediate sales increase

• Non-FB Promotions . . .• Do not identify unique brand features• Do not contribute to brand identity or 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• If they do, they may lead only to price reductions• Customers may “buy price” rather than brand equity

McGraw-Hill/Irwin 16-9Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Objectives of Consumer-Oriented Sales Promotion

•To Obtain Trial and Purchase

•To Increase Consumption of an Established Brand

•To Defend (Maintain) Current Customers

•To Target a Specific Segment

McGraw-Hill/Irwin 16-10Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Percentage of Promotions Vehicles Used by Package Goods Manufacturers, 1997

0%

25%

50%

75%

100%

Mon

ey b

ack

offe

rs/o

ther

ref

unds

Cou

poni

ng c

onsu

mer

dire

ct

Cen

ts-o

ff p

rom

otio

ns

Cou

poni

ng in

ret

aile

rs' a

ds

Cou

poni

ng in

sto

re

Sam

plin

g ne

w p

rodu

cts

Sam

plin

g es

tabl

ishe

d pr

oduc

ts

Pre

miu

m o

ffer

s

Ele

ctro

nic

reta

il pr

omot

ions

Sw

eeps

take

s

Inte

rnet

pro

mot

ions

Con

test

s

Pre

pric

ing

on p

acka

ge

Oth

er

McGraw-Hill/Irwin 16-11Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Percentage of Promotions Vehicles Used by Package Goods Manufacturers, 1997

0%

25%

50%

75%

100%

Mon

ey b

ack

offe

rs/o

ther

ref

unds

Cou

poni

ng c

onsu

mer

dire

ct

Cen

ts-o

ff p

rom

otio

ns

Cou

poni

ng in

ret

aile

rs' a

ds

Cou

poni

ng in

sto

re

Sam

plin

g ne

w p

rodu

cts

Sam

plin

g es

tabl

ishe

d pr

oduc

ts

Pre

miu

m o

ffer

s

Ele

ctro

nic

reta

il pr

omot

ions

Sw

eeps

take

s

Inte

rnet

pro

mot

ions

Con

test

s

Pre

pric

ing

on p

acka

ge

Oth

er

McGraw-Hill/Irwin 16-12Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Eight Sampling Media

•Door-to-door•Direct mail•Central location• In-store sample pack•Cross-product sampling•Co-op package distribution•With newspaper / magazine•Any of above with coupon

McGraw-Hill/Irwin 16-13Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

OtherMagazinesIn / On PackDirect MailNewspaper CoopNewspaper ROPFreestanding

Coupon Distribution

McGraw-Hill/Irwin 16-14Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

43%

35%

29%

25%

24%

20%

12%

11%

8%

7%

2%Gum

Candy

Carbonated Beverages

Adult Cold Remedies

Pet Food

Coffee

Sanitary Protection

Deodorants

Liquid Detergents

Ready-to-Eat Cereal

Disposable Diapers

Percent of Sales Boughtwith Coupons

McGraw-Hill/Irwin 16-15Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Coupon Fraud

•Consumers redeem without purchase

•Clerks and staff exchange for cash

•Managers/owners redeem without sale

•Criminals collect or counterfeit and sell

McGraw-Hill/Irwin 16-16Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Trade-Oriented SalesPromo Objectives

•Obtain Distribution of New Products•Maintain Trade Support for Existing

Products•Encourage Retailers to Display

Existing Brands•Build Retail Inventories

McGraw-Hill/Irwin 16-17Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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

McGraw-Hill/Irwin 16-18Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion Agencies

THEN• Created tactics• Do single project• Hired for specialty• Single agency contact• Inferior to ad agency• Indirect accountability

NOW• Creates strategy• Continuing service• One full-service firm• Agency team contact• Equal to ad agency• Directly accountable

McGraw-Hill/Irwin 16-19Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

All

Oth

ers

MaintainPromotions

MaintainPromotions

Cut BackPromotions

Cut BackPromotions

Our Firm

We loosemarket share

Same market share, profits

stay low

Higher profitsfor everyone

We gain inmarket share

The Sales Promotion Dilemma

McGraw-Hill/Irwin 16-20Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Promotion Targeted toReseller Salespeople

• Product or program sales e.g. . . .• Selling a specific number of cases• Selling a specific number of units• Selling a specific number of promotional programs

• New account placements e.g. . . .• Number of new accounts opened• Number of new accounts ordering a minimum amount• Promotional programs placed in new accounts

• Merchandising Efforts e.g. . . .• Establishing promotional programs• Placing display racks, counter displays, etc.

McGraw-Hill/Irwin 16-21Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

Shifting Role of thePromotion Agency

1. Used to develop long- and short-term promotional strategies as well as tactics

1. Primarily used to develop short-term tactics or concepts

3. Many promotion agencies used a mix—each one hired for best task and/or specialty

2. Hired/compensated on a project-by-project basis

4. One or two contact people from agency

5. Promotion agency never equal to ad agency—doesn’t work up front in annual planning process

6. Not directly accountable for results

3. One or two exclusive promotion agencies for each division or brand group

2. Contracted on annual retainer following formal agency reviews

4. Full team or core group on the account

5. Promotion agency works on equal basis with ad agency—sits at planning table up front

6. Very much accountable—goes through a rigorous evaluation process

Traditional New and Improved