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What is Sales Promotion?

Sales promotion consists of a collectionof incentive tools, mostly short term,designed to stimulate quicker or greaterpurchase of particular products orservices by consumers or the trade.

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The Nature of Sales Promotion

o Sales Promotion

Is any incentive that is additional to the basic benefits provided by the brand and temporarilychanges its perceived price or value

Is short-term oriented and capable of influencing behavior because it offers buyers superior value and can make them feel better about the buying experience

The Nature of Sales Promotion

o Purposes of Sales Promotion

To induce the trade (wholesalers and retailers) or consumers to buy a brand

To encourage the manufacturer’s sales force to sell a brand aggressively

To encourage immediate, desired shopping and purchasing behaviors from their consumers

To encourage people to increase their donations to nonprofits now rather than later

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Developments Underlying the Growth in Promotions

• Shift in manufacturer versus retailer balance of power

• Increased brand parity and price sensitivity

• Reduced brand loyalty

• Reduced media effectiveness

• Emphasis on short-term results in corporate reward structures

• Increase in responsiveness of consumers to promotion

Using Sales Promotions

o Establish objectives

o Select tools

o Develop program

o Pretest

o Implement and control

o Evaluate results

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Consumer-Directed Sales Promotion Tactics

• Samples

• Coupons

• Cash refund offers

• Price offs

• Premiums

• Prizes

• Patronage rewards

• Free trials

• Tie-in promotions

Brand-Level Promotion Targets

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Major Consumer-Oriented Promotions

Sampling

o Sampling

Any method used to deliver an actual- or trial-sized product to consumers

o Why Sampling Is Effective

It gives consumers an opportunity to experience a new brand personally

It allows an active, hands-on interaction rather than a passive encounter, as is the case with the receipt of promotional techniques such as coupons

It is almost a necessity when introducing truly new products that can afford this form of promotion

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Sampling Methods and Media

Direct Mail • Mailed directly to households targeted by

demographic characteristics or

geodemographics

Newspapers

and Magazines

• Samples included in magazines and

newspapers represent cost-efficient forms of

sampling for reaching a mass audience

Door-to-Door

Distribution

• Allows considerable targeting and has

advantages of lower cost and short lead times

between a sampling request and when the

samples are delivered to targeted households

On- or In-pack

Sampling

• Uses the package of another product to serve

as the sample carrier

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Sampling Methods and MediaHigh-Traffic

Locations

• Shopping centers, movie theaters, airports, and

special events offer valuable forums for sample

distribution

In-Store

Sampling

• Providing samples in grocery stores and other

retail outlets for trial while consumers are

shopping

Internet

Sampling

• Distributing samples online through the services

of companies that specialize in online sample

delivery

Couponing

o Coupon

A promotional device that rewards consumers for purchasing the coupon-offering brand by providing cents-off savings

• Instant coupons

• Mail- or media-delivered coupons

o Couponing Background

Nearly 280 billion coupons are distributed annually in the United States.

Cost to U.S. marketers is about $7 billion a year

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Coupon Distribution Methods

o Freestanding Inserts (FSIs)

o Handouts in stores

o Direct Mail

o Magazines

o Newspapers

o In- and On-Package

o Internet

Illustration of Cents-Off Coupon Offers

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Premiums

Free-with-

Purchase

Premiums

• Delayed reward to consumers primarily

designed to generate trial purchases

• Perceived value of a premium item, or gift,

depends on the value of brand offering gift

Mail-In Offers • Delayed reward to consumers primarily

designed to generate trial purchases.

• Few consumers exposed to free mail-in offers

take advantage of the opportunities

In-, On-, and

Near-Pack

Premiums

• Offer a free item of immediate value inside or

attached

• Provide the retail trade with premium item that

retailers then give to consumers

• Are less expensive due to no additional

packaging

Illustration of a Mail-in Premium

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Premiums“Buy X, Get 1

Free” Offers

• Represents an immediate reward to

consumers, and, for manufacturers

• Rewards a brand’s loyal customers or

encourages trial from purchasers of

competitive brands who are willing

to switch in order to save money

Self Liquidating • Consumer mails in proof-of-purchase with

sufficient money to receive the premium item

• Premium should be appealing and represent

a value

Phone Cards • Repeat-purchasing objective

• Delayed reward

• Preset amount of calling time

Bonus Packs

o Bonus Packs

Are extra quantities of a product that are offered for the same price

Offer an alternative to price-off deals

Will be purchased by regular customers who would have purchased the brand anyway

Load current users; thereby removing them from the market

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Games

o Promotional Games

Provide an instant reward

Create excitement, stimulate brand interest, and reinforce brand loyalty

Rebates and Refunds

o Rebate (also Refund)

Refers to the practice in which manufacturers give cash discounts or reimbursements to consumers who submit proofs of purchase

Offers consumers delayed rather than immediate value, since the consumer must wait to receive the reimbursement

Can attract switchers from competitive brands who avail themselves of attractive discount offers

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Illustration of a Rebate Offer

Sweepstakes

o Sweepstakes (Sweeps)A promotion in which winners are determined purely

on the basis of chance

o Sweepstakes as a Promotional ToolAre relatively inexpensive and simple to execute

Reinforce brand positioning and image

Attract attention to advertisements

Promote increase brand distribution at retail

Foster sales force enthusiasm

Can reach special groups

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Illustration of a Sweepstakes Offer

Illustration of another Sweepstakes Offer

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Contests

o ContestsA promotion in which participants must act according

to the rules of the contest and may or may not be required to submit proofs-of-purchase

o Online Sweeps and ContestsAre growing in importance

Direct consumers to register online to participate in sweeps or contests

Create brand awareness, build consumer interaction with a brand, and enable expansion of a brand’s opt-in e-mail database

Illustration of a Promotional Contest

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Continuity Promotions

o Continuity Promotions

Reward consumers’ repeat purchasing behaviors

• Loyalty programs

• Point programs

Serve to cement a long-term relationship with the consumer

Turkish Airlines-Miles & Smiles

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Overlay and Tie-In Promotions

o Overlay (Combination) Program

Is the simultaneous use of multiple promotion tools to promote a brand or to promote brands cooperatively from different firms

• Printed coupon with an mail-in entry contest form

Increases the likelihood that consumers will attend a promotional message that cuts through clutter

Overlay and Tie-In Promotions (cont’d)

o Tie-in (Group) Promotion

Is the simultaneous promotion of multiple brands in a single intracompany or intercompany (joint) promotional effort

• Branded pizza and branded soft drink combination offers

Is cost-effective, but lead time is lengthened

Should reinforce partners’ images of each other

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Illustration of an Intercompany Tie-In

Illustration of an Intercompany Tie-In

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Illustration of an Intracompany Tie-In

Tasks That Promotions Can and Cannot Accomplish

oSales Promotions Can

• Stimulate sales force enthusiasm for a new, improved, or mature product

• Invigorate sales of a mature brand

• Facilitate the introduction of new products to the trade

• Increase on- and off-shelf merchandising space

• Neutralize competitive advertising and sales promotions

• Obtain trial purchases from consumers

• Hold current users by encouraging repeat purchases

• Increase product usage by loading consumers

• Preempt competition by loading consumers

• Reinforce advertising

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Tasks That Promotions Can and Cannot Accomplish

oSales Promotions Cannot

•Compensate for a poorly trained sales force or for a lack of advertising

•Give the trade or consumers any compelling long-term reason to continue purchasing a brand

•Permanently stop an established brand’s declining sales trend or change the basic nonacceptance of an undesired product

The Role of Trade Promotions

o Trade Promotions’ Scope and Objectives

1. Introducing new or revised products

2. Increasing distribution of new packages or sizes

3. Building retail inventories

4. Maintaining or increasing manufacturer’s share of shelf space

5. Obtaining displays outside normal shelf locations

6. Reducing excess inventories and increasing turnover

7. Achieving product features in retailers’ advertisements

8. Countering competitive activity

9. Selling as much as possible to final consumers

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Trade-Directed Sales Promotion Tactics

• Price offs

• Allowances

• Free goods

• Sales contests

• Spiffs

• Trade shows

• Specialty advertising

Trade Allowances

o Trade Allowances

Are used because manufacturers hope to increase purchases of the manufacturer’s brand by wholesalers and/or retailers

Augment consumers’ purchases of the manufacturers’ brand from retailers

Foster the expectation that retailers will pass along their savings to consumers

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Major Forms of Trade AllowancesOff-Invoice

Allowances

• Most frequently used form

• Deals offered to trade that permit wholesalers and

retailers to deduct a fixed amount from the invoice

• Retailers may not pass along discounts to consumers

Bill-Back

Allowances

• Retailers receive allowances for featuring the

manufacturer’s brand in advertisements or for providing

special displays

Slotting

Allowances

• Fees that manufacturers pay retailers for access to the

slot, or location

• Fees paid by a manufacturer to get its new brand

accepted by retailers—a form of bribery? or legitimate

cost of doing business?

Exit Fees

(Deslotting

Allowances)

• If brand does not meet an average weekly sales volume,

the retailer can assess a deslotting charge for removing

the item from its distribution center,

Trade Promotion Activities

Everyday Low Pricing

(EDLP) or Value Pricing

• When a retailer charges the same price for

a particular brand day in and day out

EDLP(M) • A form of pricing whereby a manufacturer

charges retailers the same price for a

particular brand day in and day out.

Pay-for-Performance

Programs

• Reward retailers for selling the brands

supported with trade allowances rather

than merely buying these brands.

• Produce win-win-win situations

• Provide incentives to the retailer only for

the items that are sold to consumers

during the agreed-upon time period

• Benefit all parties: consumers, retailers,

and manufacturers

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1. Temporary retail price reductions substantially increase sales.

2. The greater the frequency of deals, the lower the height of the deal spike.

3. The frequency of deals changes the consumer’s reference price.

4. Retailers pass through less than 100 percent of trade deals.

5. Higher-market-share brands are less deal elastic.

6. Advertised promotions can result in increased store traffic.

7. Feature advertising and displays operate synergistically to influence sales of discounted brands.

8. Promotions in one product category affect sales of brands in complementary and competitive categories.

9. The effects of promoting higher- and lower-quality brands are asymmetric.

Nine Empirical Generalizations about Promotions