The sticky Sales Promotion Strategy

By Akhil SuleBITS Pilani Goa

What is Boots ?

Best known and respected brand in UK for making beauty and health

products

These are the products that Boots makes

Started by John Boot in 1849 in Nottingham

Jesse Boot, son of John Boot established it as “Boot and Company Limited” in 1883

The Expansion

New store in Sheffiel

d in 1884

Cosmetic manufact

uring factory

opened in Scotland in 1949

New powerhouse and printing

works in 1953

New pharmace

utical research

building in 1959

These are the globally differentiated brands that Boots owned

They have also expanded in areas like

Boots for men

Boots internet services

Now in Boots we have somewhat of a

This guy is Dave Robinson. He is the one who decides what sales promotion strategies to implement

He has options

Of which he has to chose

With the aim of securing the position of

And

And

Lets take a look at the hair care market in UK.

UK market was dominated by brands like

In 2000 there were more than 60 brands with none more than 9 percent market share

But Boots saw the opportunity to be retail hair care expert and entered the market with celebrity hairdresser endorsed products

Hairdressers got access to customers through 1300 Boots stores

Yet Boots had a lot of

Procter and Gamble

100+ products 8.4 percent market share

Alberto Culver

2000+ store locations

Hair care, skin care, home care

L'Oréal

500+ brands 2000+ products

Superdrug

700 stores 10,000 products

The major retailors in market are

1800+ stores

700 stores

400 stores

Consumers

• Mostly women aged 20 -35

• Not very brand loyal

• Choice depends upon brand name, but also

packaging, advertising, price,

ingredients, consistency and

fragrance

Now for the situation we have, there arise two questions

Which strategy is best to increase volume of sales ?How will the brand equity be maintained or increased?

Evaluating the options

3 for 2

• Advantages1. Customers can buy any 3 items with the least expensive

item free2. Most competitors didn’t have technology to imitate this offer3. Sales estimation during the promotional period was 300

percent.4. 60 percent of the sales would come from new customers

3 for 2• Disadvantages

1. This strategy totally looks like a stock clearing strategy which might repel some customers.

2. The company will have to bear the cost of the free product3. Premium products may lose their brand value

Gift with purchase• Advantages

1. Customers will get a product sample with a purchase2. Estimated sales during promotion will be 170 percent of the

pre promotion sales3. 40 percent of the sales would come from new customers

Gift with purchase• Disadvantages

1. The additional cost of the gift will be bared by the company2. Competitors can imitate the strategy

50p coupon• Advantages

1. Customers would be able to redeem the coupon during their current store visit

2. Robinson estimated that sales would increase to 150 per cent of non-promotion sales

3. 50 percent of sales would come from new customers

50p coupon• Disadvantages

1. This is a very common strategy2. It might result in decrease in brand equity3. Least sales from this option4. Very conservative approach

Lets look at it quantitatively • For “3 for 2”:• Lets consider average promotional price of 3.99 pounds• Without promotion revenue per day is 399 pounds• Estimated sale for a day is 300 bottles which gives revenue of 1197

pounds minus cost of 100 free bottles which gives actual revenue 798pounds• Profit is 399 pounds

For gift with purchase• Without promotion revenue per day is 399 pounds• With this offer extra cost of 0.93 pound is incurred but 170 bottles are

sold• Therefore with new cost of 3.06 total revenue is 520.2• Profit is 121.2 pounds

For 50p coupon• Revenue of 100 bottles without promotion is 399 pounds• New cost of bottle becomes 3.49 and sales become 150• Therefore net revenue is 523.5 pounds• Profit is 124

Hence best strategy would be to chose the option “3 for 2”