Sales Promotion Management

Last Session 7th October

2010

MANUFACTURER’S PROMOTION

PLANNING PROCESS

The Manufacturer’s Planning Process1. Corporate and Division objectives2. Situation Analysis3. Corporate and Division Policy/Philosophy4. Marketing objectives and Strategy, Sales

Promotion and Strategy5. Promotion Tactics6. Performance Criteria7. Implementation8. Evaluation9. Budgeting

Corporate and Division Objectives

Often stated in very specific numerical terms involveing sales, market share, profit or ROI.

At some level, these goals must be divided up among the firm’s several brands.

Situation Analysis

Areas to be reviewed include brand performance, competitive performanceconsumer behavior particularly w.r.t. consumer response to promotions and competitive

activitiesSpecific examples of data :

historical competitive activity can provide cluesas to the competition’s future plans as well as how competitors react

Corporate and Division Policy/Philosophy

Sales promotions • are a necessary evil

• a cost of doing business that should be decreased if possible

• to be used as defensive measure for protecting one’s market share

• should extend and reinforce the brand’s advertising and positioning, whenever possible

• should be developed as campaigns, not as single, unrelated events

• are built upon sound strategic planning

Marketing Objectives, and Strategy, Sales Promotion Objectives and Strategy

In general,Objectives are goals, often numerical, specific, measurable, clear and concise, practical and realistic, affordable and attainableStrategies are general approaches to achieving goals

Marketing strategies and objectives pertain to the marketing mix as a whole, whilePromotion objectives and strategies pertain just to that aspect of the marketing mix

Examples of Marketing and Promotion

I II III

Marketing objectives

Increase market share from 5% to 7%

Increase sales by 20%

Increase profit by 20%

Marketing strategy

Promotion will push the product, while advertising will pull it

Increase purchase rate of product

Decrease marketing expenditures while holding sales as high as possible

Promotion objectives

Gain 90% distribution for the product

Decrease inter-purchase time from 10 to 8

Maintain distribution at 90%

Promotion strategy

Use trade deals especially in low distribution areas

Use trade dealing to encourage frequent price cuts. Use consumer promotions to encourage faster use rate

Cut consumer promotions that do not pay out. Use trade deals only to extent necessary to maintain distributions

Three Examples of Marketing and Promotion Objectives and Strategies

Examples of Marketing and Promotion

Marketing objectives

Increase market share by 50% over the past three years

Marketing strategy

Initiate and establish habit using promotion; reinforce using advertising

Promotion objectives

Yr. 1 : Increase % ever tried from 50% to 75%

Yr. 2: induce 50% repeat rate among your new triers

Yr. 3: Maintain 40% repeat rate among new triers

Promotion strategy

Yr. 1 and 2 : Use direct mail couponing and sampling to attract new Use in-pack coupons to stimulate repeat purchase

Yr. 3 : Gradually phase out in-pack coupons and use limited FSI coupon distribution

Marketing and Promotion Objectives and Strategies - Long Term Plan

Promotion Tactics

Are the specific tools for executing a particular strategy.

The output of the tactics plan is a promotion calendar showing when each promotional event will occur and separate description of the events.

The best way to specify promotion tactics is through a process of generating and screening alternatives

Generating Alternatives

The easiest and most common way to generate alternatives by consulting a list

The use of lists often gets the planner in the ball park of what type of promotion to use, but there are still details to be worked out

Screening AlternativesInvolves evaluating them on the criteria of consistency with strategy and achievement of objectives.Evaluating consistency with strategy can often be made on a judgmental basisThere are four methods for determining whether a given alternative will achieve quantifiable objectives :1. Judgment based on experience2. Pretesting3. Market tests4. Decision models

Generating Promotion Alternatives for Packaged Goods :A List Cross-referenced by Promotional Objectives

TechniquePrimary Impact

Brand Awareness

Attract New Customers

Increase Sales to Present Customers

Bonus Packs Y

Cash refunds

Single purchase Y

Multiple purchase Y

Contest/Sweepstakes Y

Couponing

Media/mail Y

In/on pack Y

Multiple Y

Premiums

Single purchase Y

Multiple purchase Y

Price-off Y

Sampling Y

Generating Promotion Alternatives for Durable Goods : A List Cross-referenced by Product types

Price Lower Ticket (Disposables) Higher Ticket (Serviceables)Product Type Item System Item System

Cascaded Demand

Example

No Yes No Yes No Yes No Yes

Iron Camera Tyres Skis Refri-gerator

Auto-mobile

Home Security System

PC

Rebates * * * * * * * *Price/quality promo *Coupons *Sweepstakes * *Accessories/premiums * * *Testers/Samples * *Tie-in promotions * * *Trade-in allowances * * * * *Financing incentives * * *Service contracts * * *Finders fees *

Performance CriteriaThe “bottom line” performance criteria for a promotion should relate directly to the objectives of the promotion

However, intermediate measures are also useful, e.g.,Performance criterion : 90% distributionIntermediate criterion, say:• % of retailers participating in the trade promotion

are also important• % display and features achieved at retail• % coupon redemption rates

Implementation

Can be a very painstaking task, especially when several different components need to be coordinated.

Evaluation

It does appear that formal evaluations are undertaken, but the quality and actual usage of these reviews may be suspect.

There are three fundamental issues regarding evaluations :1. Are formal evaluations undertaken?2. Are the evaluations high quality?3. Are the results used for future planning?

Budgeting

The promotion planning process consists of three levels of budgeting decisions :1. The total marketing budget2. The allocation of that budge to promotion versus

advertising and other marketing mix elements3. Preparation of individual promotion budgets