Chapter Objectives
1. What are the two main categories of sales promotions and how do they differ?
2. What are the advantages and disadvantages of the various types of consumer promotions?
3. What are the major categories of trade promotions and how are they used?
4. How can a marketing team tie consumer promotions to trade promotions and other elements of the promotional mix?
5. What are the potential limitations when sales promotions programs are being developed for international customers?
Chapter Overview
Consumer promotions
Individuals that use product
Trade promotions (read on your own)
Directed to channel members
Possible erosion of brand equity
Can differentiate a brand
Use varies – product life cycle
Promotions
O Sales promotion is any
initiative undertaken by an
organization to promote an
increase in sales, usage or
trial of a product or service
O Sales promotions are
varied.
PromotionsO Special short-term techniques
to persuade members of a target market to respond or undertake certain activity.
O As a reward, marketers offer something of value to those responding O generally in the form of lower
cost of ownership for a purchased product (e.g., lower purchase price, money back) or the inclusion of additional value-added material (e.g., something more for the same price).
Consumer Promotions
Coupons
Premiums
Contests and sweepstakes
Refunds and rebates
Sampling
Bonus packs
Price-offs
Three Steps to Effective Sales Promotions
O When done correctly,
promotions get
customers out of a
holding pattern by
giving them an
incentive to take
action before a
limited-time offer
expires.
1. Target your Efforts -- What do you want customers to do?
O Purchase more frequently
O Buy in greater volume
O Be attracted to new or different offerings
O Lure new customers into your business?
O Lapsed customers to give your business
another try?
O Boost business during slow hours, weekdays
or particular seasons?
2. Plan Your Incentive
O Price savings, including discounts,
coupons or added value offers
O Samples or trial offers to provide a
low-risk way to try new products or
services
O Events or experiences to generate
crowds, enthusiasm, sales, publicity
3. Know what you want to Achieve
O Set the number of sales you want to
ring up, dollars you want to bring in,
customer names you want to collect,
buying patterns you want to change,
or any other objective you want your
promotion to achieve.
O Then determine what your desired
change will mean financially to your
business.
Coupons
323 billion distributed
3 billion redeemed (0.93%)
Average value was 89 cents
Savings of $3.47 billion
Coupon usage 78% of households use
64% willing to switch brands
Coupons O A coupon is a ticket or document that
can be exchanged for a financial
discount or rebate when purchasing a
product.
O Issued by manufacturers of consumer
packaged goods or by retailers, to be
used in retail stores as a part of sales
promotions.
O They are often widely distributed
through mail, coupon envelopes,
magazines, newspapers, the Internet
(social media, email newsletter),
directly from the retailer, and mobile
devices such as cell phones.
Coupon Distribution Print media (90%)
FSI (88%)
Direct mail
On- or in-package
In-store
Sampling
Scanner-delivered
Cross-ruffing
Response offer
Internet
Fax
Sales staff
Problems with Coupons
Reduced revenuesUsed by brand preference consumers
(80%)
“Necessary evil”
$500 million illegally redeemedMass cuttingCounterfeiting
Misredemption
Premium Promotions
O Sales promotion technique in which two or more
complementary products are sold together
(bundling) at a price lower than their combined
price.
O Simply stated, consumer premium promotions
use merchandise to get buyers to sample,
purchase, or remain loyal to a brand or product.
Consumers get a value-added offer in one of
several promotional vehicles.
Keys to Successful Premiums
Match premium to target market
Carefully select the premium
Pick premium that reinforces
product and image
Integrate premium with other IMC
tools
Don’t use premiums to increase
short-term profits
Sweepstakes
O Promotional scheme in which prizes are given to winners selected only by chance (at random) from the entries received.
O Sweepstakes do not require a purchase (consideration) otherwise they would become a lottery (which requires a license to operate).
Refunds and Rebates
12-30
Refunds – soft goods
Rebates – hard goods
Hassle to redeem
Now expected by consumers
Redemption rates30% overall
65% for rebates over $50
Sampling
In-store distribution
Direct sampling
Response sampling
Cross-ruffing sampling
Media sampling
Professional sampling
Selective sampling
Benefits of Sampling
Introduce new products
Generate interest
Generate leads
Collect information
Internet sampling
Boost sales
Sampling Programs
Problems
Cost
Distribution
Effective sampling
Component of IMC plan
Stimulate trial usage
Target audience of sample
Bonus Packs
Increase usage of product
Match or preempt competition
Stockpiling of product
Develop customer loyalty
Attract new users
Encourage brand switching
12-36
Price-Offs
12-39
Temporary price reduction
Stimulating sales
Reduces financial risk
Brand switching
Stockpiling
Price-offs
Proven to be successfulAppeal of monetary savings
Reward is immediate
ProblemsCan have a negative impact on
profit
Encourages consumers to become
more price-sensitive
Potential image on brand image
Planning Consumer Promotions
Types of consumers
Promotion prone
Brand loyal
Price sensitive
Retailer incentives
Increase store traffic
Increase store sales
Attract new customers
Increase basket size
IMC Plan
Trade Promotions
Types of trade promotions
Trade allowances
Trade contests
Trade incentives
Trade shows
For manufacturers, trade promotions
Accounts for 70% of marketing budget
Often 2nd largest expense
Accounts for 17.4% of gross sales
Slotting Fees
Retailer justification
Cost to add new products to inventory
Requires shelf space
Simplifies decision about new products
Adds to bottom line
Manufacturer objections
Form of extortion
Divert money from advertising and marketing
Detrimental to small manufacturers
Trade AllowanceComplications
Failure to pass allowances on to retail customersOnly occurs 52% of the time
Retailers like only one brand on-deal at a time
Retailers can schedule and promote on-deal brands
Forward buyingPass savings on or pocket higher margin
Additional carrying costs
DiversionPass savings on or pocket higher margin
Additional shipping costs
Trade Contests
Used to achieve sales targets.
Funds known as “spiff money.”
Rewards can be prizes or cash.
Can be designed for various channel members.
Some organizations do not allow trade contests because of possible conflict of interests.
Trade Incentives
Cooperative merchandising agreement
Premium or bonus pack
Co-op advertising programs
Cooperative Merchandising Agreement
Formal agreement
Popular with manufacturers Retailer must perform marketing functions
Manufacturer maintains control
Longer-term commitments
Benefit retailers Schedule calendar promotions
Cooperative Advertising
Manufacturer pays part of retailer’s ad costs
Retailer must follow specific guidelines
No competing brands
Retailers accrue monies
Amount is based on sales
Allows retailers to expand advertising
Manufacturers gain exposure in local markets
Trade Shows
Few deals finalized at trade showInternational attendees want to make dealsIncrease in international trade showsNational shows being replaced by regional
and niche showsNiche shows
Provide better prospectsLower costs
Trade Show Attendees
Education seekers
Reinforcement seekers
Solution seekers
Buying teams
Power buyers