Sales Promotion

MKT 846

Professor West

Agenda

Thinking beyond creating awareness, interest, and an image for your brand

Providing incentives to purchase

Battling for shoppers in the aisle

Sales Promotions

Advertising has a long and colorful history Many of the images created by advertisers have become

cultural icons The Marlboro Man, Ronald McDonald, Pillsbury

Doughboy, Energizer Bunny, AFLAC duck...

Sales Promotions

Sales promotion also has a very rich history Coupons have been around since 1895 when C.W. Post

began using penny-off coupons to sell Grape Nuts P&G began using coupons in 1920 good for discounts or

BOGOF. In 1912 Cracker Jack began offering a prize in every box Oscar Mayer introduced the first “Wienermobile” in 1936,

eight still cruise the highways playing versions of the jingle. Pepsi launched their “Pepsi Challenge” in 1975 as one of

the most successful promotions ever used to attract users of a competing brand

Sales Promotions

Sales promotion also has a very rich history Pillsbury launched its first “Bake-off” in 1949, it has since

become an institution and the nation’s most prestigious cooking competition

In 1981 American Airlines AAdvantage frequent flier program was launched and created a new currency for travelers

Sales Promotion

Sales promotion is used to provide a direct inducement that offers extra value to the sales force, distributor, retailer, or end consumer with the primary objective of boosting sales.

While advertising appeals to the minds and hearts to give consumers a reason to buy, promotions appeal to the pocketbook and provide an incentive to buy.

Sales Promotion

Consumer-Oriented Coupons & Rebates Samples Bonus packs Price-offs Contests &

Sweepstakes Frequency programs Event marketing

Trade-Oriented Dealer incentives Contests Trade Allowances POP displays Training programs Trade shows Co-op advertising

Trends

Consumer sales promotion increased from $56 billion in 1991 to nearly $100 billion in 2001. An additional $150 billion is targeted to retailers and wholesalers.

Starting in the late ’80s a shift in marketing budgets has boosted sales promotion sharply. Currently, marketers spend between 60 and 75 percent of their budget on sales promotion, with the remainder allocated to media advertising. Seventeen percent of advertising is devoted to promotional messages.

Reasons for Growth

Mature industry and increased accountability… manager’s pay depends on sales relative to cost

Growing power of retailers (optical scanners, consolidation)

Market saturation (nearly 30,000 products are launched each year compared to 2,700 on 1980)

Advertising clutter & fragmentation (regional efforts and targeted markets are better suited to promotions)

Short-term Focus …it generates immediate and measurable results

Slippery slope…

Increased promotional sensitivity Forty-two percent of package-good volume was

purchased on promotion. Twenty-four percent involved the use of a coupon.

More than seventy percent of purchase decisions are made in the store, where people are likely to respond to POP offers. (1999 study by Promotion Decisions Inc. tracked 33,000 consumers)

Slippery slope…

Declining brand loyalty Consumers tend to have more than one brand in

their “repertoire” and have been conditioned to switch when deals are offered.

What is this doing to the brand equity companies have paid so dearly to build?

Prisoner’s Dilemma

Our Firm

All Other

Firms

Cut Back Promotions

Maintain Promotions

Cut Back

Promotions

Higher Profits

for all

Market share goes to out firm

Maintain

Promotions

Market share

goes to other firms

Market share stays constant, profits

stay low

Non-franchise Building Promotions

Price oriented “deals,” such as coupons, samples, bonus packs, and discounts are useful mechanisms for encouraging trial and acquiring new customers…

However, you run the risk of eroding profits and increasing consumer price sensitivity Price discounts don’t allow you to discriminate

between price sensitive and insensitive buyers Coupons allow you to price discriminate, but they

tend to be used by your loyal consumers Consumers tend to forward buy, or stockpile when

deals are offered

Franchise Building Promotions

Rather than using a one-time offer, many companies are developing frequency programs that encourage repeat purchase and long-term patronage In order for this to be effective you have to make sure that

the rewards are meaningful and are actually generating additional revenue

Franchise-Building Promotions

Contests are used to energize the brand Trade promotions can be used to create win-win

opportunities

“Brawny Man” contest took the Reggie

Despite over 90% awareness, Georgia-Pacific recognized that the Brawny Man icon no longer seemed relevant to consumers, and it needed to work out a new regimen to increase sales

They launched a summertime contest that asked women to send in photos and 150-word descriptions explaining why their guy is as rugged as the product.

One dozen semi-finalists traveled to New York City for photo sessions, and the grand-prize winner got a Dodge Durango and a limited run as the packaging model. Dedicated TV spots, print ads in USA Today and People magazine, and an eight-market mobile tour supported.

Results

During the promotion period (May-October), brand volume grew more than 12.3%, five times more than the entire category

Brand share increased from 10.5% to 11.5% during these months

At the campaign's peak in June 2002, brand volume was up 31% vs. the year before and Brawny had its highest monthly dollar (13.2%) and unit (12.8%) share for the year.

Profits for Brawny increased $5 million as a direct result of the promotion.

Nike at the Finish Line

Choose to play campaign… Target Market: 19 year-old action addicted college

students who are role models for teenagers and adults wistfully recalling their college days.

Objectives: To support Nike brand as a leader in exciting, stylish,

innovative and high performance footwear and apparel among 65 percent of Finish Line customers.

Create a competitive advantage for Finish Line and the destination for Nike products among 85 percent of target consumers.

Nike at the Finish Line

Choose to play campaign… Objectives:

Increase retail store traffic and web traffic by 20 percent

Increase sale of Nike brand products through Finish Line by 15 percent in one year.

Other Elements

Finish Line “Magalog” featured articles on athletes such as MJ, Mia Hamm, and Derek Jeter

Training of sales associates using Nike’s “Ekins” Direct mail and winner’s circle frequency program

Results

Overall sales of Nike brand through Finish Line increased by 20 percent

Calls to Finish Line store locator increased by 200 percent following the first run of print advertising

Retail traffic increased by 17 percent FL customer tracking study showed that the

percentage of customers viewing FL as the best destination for Nike increased from 20 to 62 percent after one year.

Battling for shoppers in the aisles

Marketers make their products “shout” at consumers from the store shelves

The Portable Shopping System is being issued to consumers upon entering the store Upload shopping lists via the internet Lets you know when your prescriptions, photos, and deli

orders are ready Floor mat ads make audio announcements when

people step on them

Battling for shoppers in the aisles

Stores are trying to reduce the clutter of marketing messages (shopping spam) delivered in the stores.

Supermarkets are being designed more around the consumer’s mind-set rather than the traditional warehouse. Trader Joes & Central Market

Battling for shoppers in the aisles

Retailer’s new mantra is to brand the shopping experience so customers are aware of where they’re shopping.

Next Week…

Dr. Osei Appiah will be here on Monday to talk about advertising research and copy testing methods

Ken Levy will be here to talk about measuring advertising effectiveness and return on investment