Date post: | 01-Dec-2014 |
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Sales Promotions
Sales promotion spurs action and must complement advertising
Sales Promotion
An extra incentive to buy
An acceleration tool
Targeted to different parties
An inducement to intermediaries
“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.”
“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.”
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)
Frequency programs
Sales Promotion VehiclesConsumer-Oriented
Samples
Coupons
Premiums
Contests/sweepstakes
Refunds/rebates
Bonus packs
Price-off deals
Event marketing
Trade-Oriented
Contests, dealer incentives
Trade allowances
Point-of-purchase displays
Training programs
Trade shows
Cooperative advertising
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:• Appeal to price
sensitive consumer
• Can offer price break
without retailers coop
• Can be effective way
to induce trial of new of existing products
• Can be a way to defend
market share and
encourage repurchase
Disadvantages• Difficult to determine how
many consumers will use coupons and when
• Coupons are often used by loyal consumers who may purchase anyway
• Declining redemption rates and high costs of couponing
• Misredemption and fraud
Distribution of CouponsThrough ads, DM / press / on-pack and also by the scanner to
competitive brand usersCoupon 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 TrendsMajor companies cutting back on use
of coupons
Searching for more effective coupon techniques
More use of internet for distribution
Sampling
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)
Providing consumer with some quantity of a product for no charge to induce trial
Sampling Methods
Door-to-doorDirect mailIn-store samplingCross-product samplingWith newspaper or magazineThrough the internet
Sampling is more effective after an introductory set of ads giving a toll free number to call for samples
Premiums
• 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
Premium – an offer of an item of merchandise or service either free or at a low cost that is an extra incentive for customers
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 SalesPromotion Tools
• Price packs – offer lower price than usual or greater quantity than usualBonus Packs – For value enhancing items – ‘more
quantity’ packs are better than price-offs promotionsPrice-off deals - Induces switching and reinforces
loyalty Refunds and Rebates Event marketing Frequency/loyalty programs Subsidised financing / Reduced EMI
– incentive for durables
CFB Promotional ObjectivesCommunicate distinctive brand attributesDevelop and reinforce brand identity that is consistent
with the image of the brandBuild long-term brand preferenceEncourage repeat purchase and long-term patronageEngage active consumer involvement
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
Nonfranchise-Building (non-FB) Promotions
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
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
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 AllowancesMarketers 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
CFB Promotional ObjectivesCommunicate distinctive brand attributesDevelop and reinforce brand identity that is consistent
with the image of the brandBuild long-term brand preferenceEncourage repeat purchase and long-term patronageEngage active consumer involvement
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
Nonfranchise-Building(non-FB) Promotions
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
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
All
Oth
ers
MaintainPromotions
MaintainPromotions
Cut BackPromotions
Cut BackPromotions
Our Firm
We losemarket share
Same market share, profits
stay low
Higher profitsfor everyone
We gain inmarket share
The Sales Promotion Dilemma
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
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
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: