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Sales promotions

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Sales Promotions Sales promotion spurs action and must complement advertising
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Page 1: Sales promotions

Sales Promotions

Sales promotion spurs action and must complement advertising

Page 2: Sales promotions

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.”

Page 3: Sales promotions

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

Page 4: Sales promotions

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)

Page 5: Sales promotions

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

Page 6: Sales promotions

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

Page 7: Sales promotions

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

Page 8: Sales promotions

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

Page 9: Sales promotions

Coupon Fraud

Consumers redeem without purchase

Clerks and staff exchange for cash

Managers/owners redeem without sale

Criminals collect or counterfeit and sell

Page 10: Sales promotions

Coupon TrendsMajor companies cutting back on use

of coupons

Searching for more effective coupon techniques

More use of internet for distribution

Page 11: Sales promotions

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

Page 12: Sales promotions

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

Page 13: Sales promotions

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

Page 14: Sales promotions

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

Page 15: Sales promotions

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

Page 16: Sales promotions

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

Page 17: Sales promotions

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

Page 18: Sales promotions

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

Page 19: Sales promotions

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

Page 20: Sales promotions

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

Page 21: Sales promotions

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

Page 22: Sales promotions

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

Page 23: Sales promotions

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

Page 24: Sales promotions

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

Page 25: Sales promotions

Types of Cooperative Advertising

Horizontal cooperate advertising

Ingredient-sponsored cooperative advertising

Vertical cooperative advertising

Page 26: Sales promotions

Retailer’s promotion’s

Consumer Promotions used by retailers to –– clear inventory – out of style, slow moving,

shelf-unstable products

Page 27: Sales promotions

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

Page 28: Sales promotions

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

Page 29: Sales promotions

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

Page 30: Sales promotions

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

Page 31: Sales promotions

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

Page 32: Sales promotions

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:


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