Sales PromotionsSales Promotions

ObjectiveObjective: Introducing sales promotions for : Introducing sales promotions for tourism and hospitality. In the end of this week, tourism and hospitality. In the end of this week, students will understand how sales promotions students will understand how sales promotions work and various methods of sales promotions work and various methods of sales promotions

available for tourism and hospitality.available for tourism and hospitality.

Sales PromotionsSales Promotions

Are short-term incentives to encourage Are short-term incentives to encourage to purchase or sale of a product or to purchase or sale of a product or service.service.

Include a variety of tools designed to Include a variety of tools designed to simulate market response. simulate market response.

Ratio in the overall marketing Ratio in the overall marketing expendexpenditituurres increased in recent years. es increased in recent years. Often account for 60 – 70% of the Often account for 60 – 70% of the marketing expenditures. marketing expenditures.

Most effective when used with Most effective when used with advertising or personal selling. advertising or personal selling.

Many promotional messages are Many promotional messages are delivered through advertising. delivered through advertising.

However, there is a major difference However, there is a major difference between sales promotions and between sales promotions and advertising. advertising.

Advertising is used to increase sales with Advertising is used to increase sales with the help of a specific promotion available the help of a specific promotion available for a limited time and increase brand for a limited time and increase brand awareness at the same time. awareness at the same time.

Sales promotions are used with other Sales promotions are used with other communications to raise awareness of communications to raise awareness of the brand or the product, to launch a the brand or the product, to launch a new product.new product.

How Sales Promotions How Sales Promotions WorkWork

Must provide an incentive often in the Must provide an incentive often in the form of a price discount, reward or form of a price discount, reward or upgrade. upgrade.

Since they are short-term, consumers must Since they are short-term, consumers must act quickly to take advantage. act quickly to take advantage.

Delivered in a communication message; in Delivered in a communication message; in this way, awareness is raised, interest is this way, awareness is raised, interest is created and sales are increased. created and sales are increased.

Can be targeted towards customers or Can be targeted towards customers or members of staff or agents in the members of staff or agents in the distribution network. distribution network.

AdvantagesAdvantages

generating immediate purchase in a generating immediate purchase in a large extentlarge extent

ability to provide quick feedbackability to provide quick feedback ability to add excitement to a service ability to add excitement to a service

or productor product flexible timingflexible timing efficiencyefficiency

DisadvantagesDisadvantages

short-term benefitsshort-term benefits ineffective in building long-term ineffective in building long-term

loyalty for company or “brand”loyalty for company or “brand” inability to be used on its own in the inability to be used on its own in the

long term without other promotional long term without other promotional mix elementsmix elements

often misused for just short-term often misused for just short-term benefitsbenefits

Profiles of Major Sales Profiles of Major Sales PromotionsPromotions

Consumer-Promotion ToolsConsumer-Promotion Tools CouponingCouponing: attract potential guests with a : attract potential guests with a

special offer such as a free night’s lodging special offer such as a free night’s lodging after a special number of credits. They can after a special number of credits. They can be given out personally, included in direct be given out personally, included in direct mail advertising or printed in newspapers mail advertising or printed in newspapers and magazines. They can increase off-season and magazines. They can increase off-season business with other sales promotions such as business with other sales promotions such as bonus offers or discounting.bonus offers or discounting.

Product SamplingProduct Sampling: introduces new products : introduces new products to the guests, some are free, most effective toto the guests, some are free, most effective to

introduce a product but most expensive as introduce a product but most expensive as well, determines whether guests like a new well, determines whether guests like a new product and encourages them to order the product and encourages them to order the item.item.

ContestsContests: give consumers a chance to win : give consumers a chance to win something such as cash, trips, goods by luck something such as cash, trips, goods by luck or through extra effort, can increase sales, or through extra effort, can increase sales, should be cost effective - increased sales should be cost effective - increased sales should offset the cost of contest promotions should offset the cost of contest promotions and prizes. E.g. Coca-Cola New Year’s prize (a and prizes. E.g. Coca-Cola New Year’s prize (a BMW) will be one of the customers who sent BMW) will be one of the customers who sent the correct amount of Coca-Cola lid.the correct amount of Coca-Cola lid.

PackagesPackages: offer consumers savings off the : offer consumers savings off the regular price of a product, have discount price regular price of a product, have discount price to attract new guests and increase sales. E.g. to attract new guests and increase sales. E.g. aa

holiday package including lodging, holiday package including lodging, transportation, and food and beverage transportation, and food and beverage with awith a reasonable price. reasonable price.

PremiumsPremiums: they are given to guests who : they are given to guests who pay the regular prices for certain pay the regular prices for certain products or services. E.g. an upgraded products or services. E.g. an upgraded room might be provided or free movie room might be provided or free movie tickets for the restaurant guests. Pizza tickets for the restaurant guests. Pizza Hut’s free drinks when a large pizza is Hut’s free drinks when a large pizza is ordered. Or when a customer buys one ordered. Or when a customer buys one shampoo, he gets the third one free.shampoo, he gets the third one free.

Gifts or Gift CertificatesGifts or Gift Certificates: free gifts or : free gifts or cash offers, are used by chains or cash offers, are used by chains or exclusive properties to increase sales. exclusive properties to increase sales. E.g. key chains, T-Shirts…E.g. key chains, T-Shirts…

DiscountingDiscounting: straight reduction from the : straight reduction from the list price of a product during a stated list price of a product during a stated period of time, are used to attract more period of time, are used to attract more guests and increase total sales. E.g. one guests and increase total sales. E.g. one dinner on the menu might be reduced to dinner on the menu might be reduced to 50%. Benetton reduces its prices by 20% 50%. Benetton reduces its prices by 20% during the low season. during the low season.

Bonus OffersBonus Offers: the consumer buys a product : the consumer buys a product or service at the regular price and then or service at the regular price and then receives a bonus, generally directed to the receives a bonus, generally directed to the regular users, E.g. guest buys three dinners regular users, E.g. guest buys three dinners at a regular price and the fourth one at a regular price and the fourth one becomes free. Or when the customer uses becomes free. Or when the customer uses his credit card, each time he gets credits, his credit card, each time he gets credits, and when he reaches a certain creditand when he reaches a certain credit

point, he is entitled to get free gifts such as point, he is entitled to get free gifts such as toasters, hair dryers... toasters, hair dryers...

Trade-Promotion ToolsTrade-Promotion Tools DiscountingDiscounting: straight reduction from the list : straight reduction from the list

price on purchases during a stated period price on purchases during a stated period of time, encourages dealers to buy in of time, encourages dealers to buy in quantity or to carry a new item; dealers can quantity or to carry a new item; dealers can use the discount for immediate profit, for use the discount for immediate profit, for advertising, or for price reductions to their advertising, or for price reductions to their customers.customers.

AllowanceAllowance: promotional money paid by : promotional money paid by manufacturers to retailers who agree to manufacturers to retailers who agree to help promote the manufacturer’s products help promote the manufacturer’s products in some way. E.g. an advertising allowance in some way. E.g. an advertising allowance compensates retailers for advertising thecompensates retailers for advertising the

product. A display allowance product. A display allowance compensates them for using special compensates them for using special displays.displays.

Free goods or push moneyFree goods or push money: cash or : cash or gifts to dealers or their sales force to gifts to dealers or their sales force to “push” the manufacturer’s goods. “push” the manufacturer’s goods.

Specialty advertising itemsSpecialty advertising items: they : they carry the company’s name, such as carry the company’s name, such as pens, pencils, calendars, pens, pencils, calendars, paperweights, memo pads, ashtrays...paperweights, memo pads, ashtrays...

Steps in Using Sales Steps in Using Sales PromotionsPromotions

Setting objectivesSetting objectives Selecting the right toolsSelecting the right tools Developing the best programDeveloping the best program Pretesting and implementing itPretesting and implementing it Evaluating the resultsEvaluating the results

Setting sales promotion Setting sales promotion objectivesobjectives

Consumer promotions can be used to;Consumer promotions can be used to; increase short-term sales increase short-term sales help build long-term market sharehelp build long-term market share encourage consumers to try a new productencourage consumers to try a new product lure consumers away from competitorslure consumers away from competitors hold or reward loyal customershold or reward loyal customers

Trade (sales force) promotions can be Trade (sales force) promotions can be used to;used to; build stronger customer relationsbuild stronger customer relations obtain new accountsobtain new accounts

Selecting sales promotion Selecting sales promotion toolstools

Considering the type of market, the Considering the type of market, the sales promotion objectives, the sales promotion objectives, the competition, the costs and competition, the costs and effectiveness of each tool, managers effectiveness of each tool, managers choose one or more of the sales choose one or more of the sales promotions tools outlined before. promotions tools outlined before.

Developing the sales Developing the sales promotion programpromotion program

At this stage, managers need to define At this stage, managers need to define the full sales promotion program. This the full sales promotion program. This requires them to decide;requires them to decide; on the size of the incentive; they must also on the size of the incentive; they must also

set conditions, incentives can be offered to set conditions, incentives can be offered to everyone or selected groups. everyone or selected groups.

how to promote and distribute the how to promote and distribute the promotion program (e.g. coupons can be promotion program (e.g. coupons can be distribute by mail) distribute by mail)

on the sales-promotion budgeton the sales-promotion budget

Pretesting and Pretesting and implementing the planimplementing the plan

Sales promotion tolls should be Sales promotion tolls should be pretested to determine whether they pretested to determine whether they are appropriate and of the right size. are appropriate and of the right size.

However, most companies do not However, most companies do not pretest their sales promotions. pretest their sales promotions.

Researchers can ask consumers to Researchers can ask consumers to rate or rank different promotions. rate or rank different promotions. They can also be tested in a limited They can also be tested in a limited area. area.

Evaluating the resultsEvaluating the results

Many evaluation methods are available. Many evaluation methods are available. Most common includes sales comparisons Most common includes sales comparisons before, during and after a promotion. before, during and after a promotion.

Research also can show who responded Research also can show who responded to the promotion, their postpromotion to the promotion, their postpromotion buying behavior, how many recall the buying behavior, how many recall the promotion, what they thought of it, how promotion, what they thought of it, how many accepted it, how it affected their many accepted it, how it affected their buying patterns. buying patterns.

Unfortunately, most companies do not Unfortunately, most companies do not evaluate their promotions. evaluate their promotions.

Creative ideas from the Creative ideas from the industryindustry

The Ritz-Carlton, Powerscourt, The Ritz-Carlton, Powerscourt, Ireland; “Enliven the Senses”; Ireland; “Enliven the Senses”; puts together a two-night getaway puts together a two-night getaway

package that create value for the guests package that create value for the guests and receive more per night from them. and receive more per night from them.

included two nights deluxe included two nights deluxe accommodation, breakfast, dinner for accommodation, breakfast, dinner for two at the upscale restaurant, one-hour two at the upscale restaurant, one-hour aromatherapy massage. aromatherapy massage.

Four Seasons Hotel Cairo; “The Best Four Seasons Hotel Cairo; “The Best of France”;of France”; Their French Chef created dishes from Their French Chef created dishes from

his home country Provence, two-weeks his home country Provence, two-weeks event included dining at the upscale event included dining at the upscale restaurant of the hotel with French restaurant of the hotel with French music, flowers and art along with oyster music, flowers and art along with oyster and champagne bar to provide the and champagne bar to provide the perfect ambience. perfect ambience.

SourcesSources

McCabe, S. (2009). Marketing McCabe, S. (2009). Marketing Communications in Tourism and Hospitality: Communications in Tourism and Hospitality: Concepts, Strategies and Cases. Butterworth-Concepts, Strategies and Cases. Butterworth-Heinemann: Oxford. Heinemann: Oxford.

Kotler, P.; Bowen, J. and Makens, J. (1999). Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality and Tourism (2nd Marketing for Hospitality and Tourism (2nd ed.). Prentice Halled.). Prentice Hall: New Jersey.: New Jersey.

Kotler, P.; Bowen, J. and Makens, J. (Kotler, P.; Bowen, J. and Makens, J. (20102010). ). Marketing for Hospitality and Tourism (Marketing for Hospitality and Tourism (5th5th ed.). Prentice Halled.). Prentice Hall: New Jersey.: New Jersey.

Kotler, P. and Armstrong, G. (20Kotler, P. and Armstrong, G. (201010) Principles ) Principles of Marketing (1of Marketing (133th ed.). Prentice Hallth ed.). Prentice Hall: New : New Jersey.Jersey.