Sales Promotions Copyright 2010 SAGE Publications, Inc. 8-1.

Sales Promotions

Copyright 2010 SAGE Publications, Inc.8-1

KraftJ.L. Kraft, 19031928, acquired Phoenix Cheese

Company1989, Kraft and General Foods mergedMultiple powerful brandsPromotional offers to consumersVariety of distribution systemsEmphasis on being good global citizenRevamping for sustained growth

Copyright 2010 SAGE Publications, Inc.

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PromotionsConsumer promotions

Directed toward end-usersPull products through channel

Trade promotionsDirected toward channel membersPush products through channel



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Objectives of Consumer andTrade Promotions

Managing Consumer PromotionsAdvertising

Creates awarenessSparks interestProduces excitement

Consumer promotionsEncourages switching brandsEncourages sampling new brandKeeps current customersGenerate store trafficBoost sales



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Factors to ConsiderWhen Choosing aConsumerPromotion


ConsumeConsumer r

PromotioPromotionsns

Bonus Packs

Price-offs

Refunds and RebatesSampling

Contests and Sweepstakes

Premiums

Coupons

CouponsPrice reduction offerIn United States

323 billion distributed annually3 billion redeemed (0.93%)80% of households use coupons

80% of coupons issued by manufacturers

Majority distributed in print mediaFSIs (Free standing inserts)



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Coupon Goal


Instant redemption

Bounce back

Scanner-delivered

Cross-ruffing

Trial purchase

Repeat purchase

Brand switching

Additional product

CouponsAdvantages

Stimulate salesMatch competing offerAdditional purchases

DisadvantagesMisredemptionCounterfeitingTend to be used by current customers


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PremiumsPrize, gift or special offer with purchaseAdvantages

Pay full priceCan boost salesAcquire new customersCan create buzz

DisadvantagesNot good for stimulating sales or attracting

customersCosts



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Contests and SweepstakesContests

Normally require some type of activityWinner selected on performanceMay require purchase (not legal in some states)

SweepstakesNo purchase requiredChances of winning must be published


Contests and SweepstakesMajor goal is to collect

dataIntrinsic valueExtrinsic valueInstant rewards


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Contests and SweepstakesAdvantages

Create interest, excitement, and buzzIncrease brand awareness and brand loyaltyCreate a positive image

DisadvantagesMay not impact salesLack of intrinsic and extrinsic value


Refunds and RebatesRefund – soft goodsRebate – hard goodsConsumer pays full priceManufacturer mails refundInconvenient for consumersOnly 30% redeemedRebate over $50, 65% redeemed


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Refunds and RebatesAdvantages

Creates interest in brands with rebateCounter competitive effortsMaintain customer base without lowering priceAttractive to retailersEncourages cooperation between manufacturers and

retailersCan lead to point of purchase brand switching

DisadvantagesLoss of revenueCosts of record keeping and mailing rebatesCustomers expect and will not purchase without rebate



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SamplingDelivery of good or service for trial useAnother promotional offer may be used with

samplingUsed in consumer and business marketsTargeted sampling due to costsAdvantages

Stimulates trial usageExcellent for new product introductions

DisadvantagesHigh costs


Bonus PacksOffer additional product in special packageBonus packs range from 20% to 100% of normal package

30% bonus pack most commonAdvantages

Encourages greater use of a product Preempt customer from buying competing brand May attract non-loyal customers Can attract price sensitive consumers

Disadvantages Delays next purchase through stockpiling Costs of new package and reduced price Not best method of acquiring new customers



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Price-OffsTemporary reduction in priceUsed in both consumer and business marketsAdvantages

Ability to attract new customers Stimulate sales Encourage switching of brands Encourage stockpiling

Disadvantages Lost revenue per item Reduced profits Customers not willing not willing to pay full price


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Types of CustomersPromotion pronePrice sensitiveBrand loyalPreferred brand

Best group to targetConsumers vary by across products


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Trade PromotionsIncentives to channel membersPush product through the channel70% of manufacturer’s marketing budget17.4% of gross sales of manufacturersPrimary categories of trade promotions

Trade allowancesTrade incentivesTrade shows


Trade AllowancesFinancial incentivesMost common is off-invoice allowance

Accounts for 35% of all trade incentivesExtremely popular because reduces priceAllows retailers to charge less or earn greater

profitsEncourages two activities by retailers

Forward buyingDiversion

Slotting feesCopyright 2010 SAGE Publications, Inc.

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Trade IncentivesChannel member agrees to perform some marketing

functionCooperative merchandising Agreement (CMA)

Popular with manufacturersCan lead to calendar promotions by retailers

Premium or bonus packCooperative (co-op) advertising

Most popular trade incentiveAllows retailers to use manufacturers’ dollars to advertiseAllows manufacturers to gain additional exposure at lower

costs


Trade ShowsAllows buyers and sellers to meetUsed extensively in b-to-b marketsOpportunity to locate potential customers and

vendorsInvestigate activities of competitorsCan strengthen brand name and imageIn United States, few deals are finalized at trade

showsInternational attendees want to finalize deals


Implicationsfor

Marketing Managers

Pay structure encourages use of trade promotionsQuickest way to boost salesOnly way to reduce trade dollars is strong brand nameCompetitive market encourages consumer incentives to push

brandCosts passed on to consumers


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• Observational skills• Determine type of visitor at booth• Develop strategies for dealing with each type

• Sales and presentation skills• Practice and learn to greet, listen, and ask

• Networking skills• Develop network of prospects and associates• Learn methods of networking

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Do customers use the wrong coupons? Is it intentional or not intentional? Does it make a differenceInsert

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How do you handle the employees? Should they be punished for misredemptions? Should you develop a reward system? How should you handle angry customers? If you were Andy’s boss, how would you handle Andy’s role in correcting redemptions?

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1. What types of consumer promotions should Barney’s offer?For books?For the coffee shop?

2. What type of trade promotions should Barney’s seek?3. What features could Barney’s emphasize to create a unique

shopping and buying experience?

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