Sales PromotionSales Promotion

16

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Sales Promotion

An extra incentive to buy

An extra incentive to buy

A tool to speed up sales

A tool to speed up sales

Targeted to different parties

Targeted to different parties

“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.”

Sales Promotion Vehicles

SamplesSamples

CouponsCoupons

PremiumsPremiums

Contests/sweepstakesContests/sweepstakes

Refunds/rebatesRefunds/rebates

Bonus PacksBonus Packs

Price-off dealsPrice-off deals

Frequency programsFrequency programs

Cooperative advertisingCooperative advertising

Trade allowancesTrade allowances

Training programsTraining programs

Contests, incentivesContests, incentives

Point-of-purchase displaysPoint-of-purchase displays

Trade showsTrade shows

Consumer-Oriented Trade-Oriented

Event marketingEvent marketing

• Consumer promotion $350 Billion• Trade promotion $150 Billion• 60 to 75% of budget on sales

promotion• Trade promotion 50% of package

goods 27% to consumer promotion

San Diego Padres Boost Attendance

*Click outside of the video screen to advance to the next slide

Long-Term Budget Allocations

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

‘94 ‘95 ‘96 ‘97 '98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05

Consumer Promotions

Media Advertising

Trade Promotions

% of Total Promotional Dollars, 3-yr Moving Average

Media Often Delivers a Promotion Message

Sales Promotion Increases

Declining brand loyaltyDeclining brand loyalty

Increased promotional sensitivityIncreased promotional sensitivity

Brand proliferationBrand proliferation

Fragmentation of consumer marketsFragmentation of consumer markets

Short-term focus of marketersShort-term focus of marketers

Increased accountabilityIncreased accountability

CompetitionCompetition

ClutterClutter

ReasonsReasons

Growing power of retailersGrowing power of retailers

Consumer Franchise-Building Promotions

Communicate distinctive brand

attributes

Communicate distinctive brand

attributesBuild long-term

brand preferenceBuild long-term

brand preferenceDevelop and

reinforce brand identity

Develop and reinforce brand

identity

“Frequency” programs encourage

repeat purchase

“Frequency” programs encourage

repeat purchase

Sweepstakes & contests to build equity, increase

involvement

Sweepstakes & contests to build equity, increase

involvement

Promotional ObjectivesPromotional Objectives

Techniques and Practices

Techniques and Practices

Premium offers that reinforce the brand image and help build equity

Premium offers that reinforce the brand image and help build equity

Nonfranchise-Building Promotions

Accelerate the purchase decision

process

Accelerate the purchase decision

process

Generate an immediate sales

increase

Generate an immediate sales

increase

ObjectivesObjectives

Do not identify unique brand

features

Do not identify unique brand

features

Do not contribute to brand identity or

image

Do not contribute to brand identity or

image

LimitationsLimitations

Contests Can Build Brand Equity

Nonfranchise-Building Promotions

Price-off dealsPrice-off deals Rebates or refunds

Rebates or refundsBonus packsBonus packs

May Include . . .May Include . . .

Shortcomings Shortcomings

Trade promotions

benefits may not reach customers

Trade promotions

benefits may not reach customers

If they do, they may lead only to price reductions

If they do, they may lead only to price reductions

Customers may “buy price” rather than

brand equity

Customers may “buy price” rather than

brand equity

Objectives of Consumer-Oriented Promotions

To increase consumption of an established

brand

To increase consumption of an established

brand

To target a specific segment

To target a specific segment

Enhance IMC efforts and build

brand equity

Enhance IMC efforts and build

brand equity

To defend (maintain)

current customers

To defend (maintain)

current customers

To obtain trial and purchaseTo obtain trial and purchase ObjectivesObjectives

Sampling

The products are of relatively low unit value

The products are of relatively low unit value

The product can be broken into a

small piece or size that reflects the full features and

benefits

The product can be broken into a

small piece or size that reflects the full features and

benefits

The purchase cycle is

relatively short

The purchase cycle is

relatively short

Sampling Works Best WhenSampling Works Best When

Sampling Methods

Door-to-doorDoor-to-door

Direct mailDirect mail

In-storeIn-store

On packageOn package

Event Event

Newspaper/magazine insertNewspaper/magazine insert

Internet sitesInternet sites

MethodsMethods

Distributing Samples With Newspapers

Armor All Uses On-Package Samples

Couponing

Nearly 240 billion

distributed each year in the US

The oldest and

most widely used sales promotion tool

85% of consumers

use coupons; 21% use them regularly

Pros and Cons of Coupons

Advantages Disadvantages

Appeals to price sensitive consumer

Appeals to price sensitive consumer

Can offer price break without retailers co-opCan offer price break

without retailers co-op

Effective way to induce trial of products

Effective way to induce trial of products

Can be way to defend market share and

encourage repurchase

Can be way to defend market share and

encourage repurchase

Often used by loyal consumers who may

purchase anyway

Often used by loyal consumers who may

purchase anyway

Misredemption and fraudMisredemption and fraud

Hard to tell how many consumers use them and

when

Hard to tell how many consumers use them and

when

Declining redemption rates and high costs of

couponing

Declining redemption rates and high costs of

couponing

Coupons are Most Often Used With…

DisposableDiapers

DisposableDiapers CerealCereal Laundry

SoapLaundry

Soap

Coupon Distribution

OtherMagazinesIn / On PackDirect MailNewspaper CoopNewspaper ROPFreestanding Inserts

The Most Popular Coupons are FSIs

Coupon Redemption Rates

Valpak Enhances Value of Coupons

Types of Coupons

In/on-packIn/on-pack

Bounce-backBounce-back

Cross-ruffCross-ruff

InstantInstant

Tear-off padsTear-off pads

In-storeIn-store

HandoutsHandouts

DispensersDispensers

Register printoutRegister printout

Coupons are Available Electronically

Premiums

An offer of an item, merchandise, or service, free or at a low cost, that is

an extra incentive for customers

An offer of an item, merchandise, or service, free or at a low cost, that is

an extra incentive for customers

Types of PremiumsTypes of Premiums

Free: Only requires purchase of the product

Free: Only requires purchase of the product

Self-liquidating: consumer required to pay some or all of the cost of the premium

Self-liquidating: consumer required to pay some or all of the cost of the premium

Airline Miles are a Popular Incentive

More Consumer-Oriented Promotions

Contests and sweepstakesContests and sweepstakes

Refunds and rebates

Refunds and rebates

Bonus packsBonus packs

Price-off DealsPrice-off Deals

Loyalty programsLoyalty programs

Event marketingEvent marketing

Trade Oriented Promotions

Maintain support for established brandsMaintain support for established brands

Encourage display of productsEncourage display of products

Build retail inventoriesBuild retail inventories

Obtain distribution for new productsObtain distribution for new products

ObjectivesObjectives

Types of Trade Oriented Promotions

BuyingBuying

PromotionalPromotional

SlottingSlotting

POP displaysPOP displays

Sales trainingSales training

Trade showsTrade shows

Contests and incentivesContests and incentives

Trade allowancesTrade allowances

Co-op AdvertisingCo-op AdvertisingTypesTypes

Coordinating Sales, Advertising, IMC Tools

Budget allocation

Coordination of themes

Media support and timing

Problems With Sales Promotion

Aspects of Consumer Promotions

EconomicEconomic

InformativeInformative AffectiveAffective