Topic 8aOther Methods of Short-term Demand Stimulation

Other methods of short-term demand stimulation

Product managers and brand managers are often devising ways of stimulating demand [I gotta get the boss off my back…!]

Possible tactics and devices are– Consumer price-related promotions (already covered)– Trade promotions (especially price-related)

– Sampling (in-store or out of store)– Coupons (not so much for supermarket grocery in

Aus., but many other things e.g. fast food)– Competitions (for customers - or for staff)– Special offers (buy one get one free, extra product /

larger sizes)– Displays (eg end of aisle - or general in-store)– Participation at ‘events’ (trade shows, exhibitions

etc.)

Promotions generally

Range of objectives: (Roderick White, Admap July 2002)

– Ensure the brand is adequately stocked and displayed

– Encourage trial (more for new brands, not established brands …and for new line items)

– Counter or pre-empt competitive threats

(how well does this work ??)

Example

Nestle “Best of Hollywood” promotion Mail-in offer to consumers Proof of purchase of $20 worth of Nestle product

for $9 of movie tickets Plus chance to win five day holiday to the Academy

Awards “While the trip and Movie Cash tempt consumers,

the promo is also meant to lure retailers to promote multiple Nestle brands. To receive the POP material… retailers must agree to discount and display [8 Nestle brands]” Brandweek vol 40, 1999

The point being - don’t just give value away, make as much of it as you can - get as much leverage as you can

Trade promotions

Generally done as “off invoice” Often based on what they (the trade)

buy, not what they sell

The big issues: Whether the trade passes on any extra

value to consumers Buying ahead May disrupt production and logistics Diverting

Trade promotions

A move toward ‘scanback’

Rewards the retailer for what they sell of the promoted product, not what they buy of it.

Trade promotions

May use tie-ins with customer staff For example, rewards to channel

salespeople Little published evidence but anecdotal

evidence suggests can be very effective Personal rewards for client staff raise an

ethics issue

Trade promotions - a case example

A B2B supplier who ran a promotion to the trade resellers

Prizes - one big prize, many minor ones

Win was based on increasing orders Respondent feedback about the

promotion:

Case findings

– Perceived as unfair - main prize goes to store owner, and more likely someone who owned multiple stores would win

– Promotions that require recommending one brand over another seen as less worthwhile

– Respondents received ‘tickets’ as a draw in the promotion but were unsure what they had done to get them

– In many cases, they could not increase their orders with the promoting company

– In some cases, the local reps left, so no support– The main prize (an expensive motorcycle) did get good

‘cut through’ with the trade staff– But targets set too high

General recommendations for trade promotions (that involve incentives for trade staff)

Make it simple to understand - what do I do to win ?

Make it seem fair

Make it achievable for people to possibly win

Now sampling

For new or existing products, a way to get non-users to trial

Example - Bristol-Myers Squibb - a web page for ‘Excedrin’tablets. Register for a free sample

Sampling paired with a tax lodgment software (‘tax headache ??’) - a gimmick

“Besides adding to their database, Bristol Myers Squibb hopes that customers who normally wouldn’t try Excedrin will be happy with the sample and switch brands”

Drug Store News 4/7/97 Vol 19

So - the big issue is whether non-users try and later re-buy

Sampling do’s and don’ts

Ensure the samples are well presented and are not spoiled by any preparation (e.g. make sure the staff doing the trialling are well rehearsed)

Make sure there is distribution in place

Make sure there is stock to sell !

Make sure packaging can stand the journey

(commonsense points once you are aware of them ….)

Sampling

Limited evidence as to the degree of conversion. One study in NZ[McGuiness, Gendall & Mathew IJA 1992]

Toothpaste

ShampooDishwashing

Liquid

% trying the sample

77% 85% 71%

% purchasing after trial

32% 36% 20%

% becomes their main brand

17% 10% 6%

Couponing

A credit voucher entitling the consumer to a discount

Cashbacks are a specific form of coupon Research indicates redemption rates of

around 10% for coupons delivered via direct mail. Lower for those delivered via newspapers etc.

Problem: Coupons are usually redeemed by current

users

Sampling and couponing

Samples may work better when accompanied by a coupon

May encourage trial, knowing first purchase will be cheaper

Sounds logical …. But no evidence on the effect of this A study by researchers at Massey

University ..

Sampling & couponing: the massey study

Four ‘treatments’ to a sample of consumers– Sample with discount coupon– Sample only– Discount coupon only– Nothing (control group)

– Three product types - coffee, detergent, toothpaste

– Method - deliver samples and follow up with phone survey

Results

Measure of effectiveness - the proportion of recipients who then go on and purchase

Samples resulted in about double the purchase rate compared to coupons

Purchase rates of 10% coffee, 18% detergent, 22% toothpaste.

Only marginally better results for sample + coupon, which is different to previous studies where they performed 20% better

Suggests sampling can be a very useful method to induce non users to purchase. And discount coupon not necessary.

What about ‘in-store’ sampling ?

A study in New Zealand Examined six products that had a sampling promotion

in a NZ supermarket. Immediate sales went up between 70%-400% But the financial analysis showed it was not

profitable, at least for the short term - cost of the sampling company, and product cost

And ….in the 4 following weeks, sales of the biscuit and bread product fell

Could not quantify longer term effects So => in-store sampling may work to boost sales but

impact on profit doubtful

Other forms of short term value add

Such as “buy one get one free” etc– Evaluated in light of whether one can ‘stock up’– Ways in which this can be framed:– buy one get one free, or … buy two at 50% off– A recent study* found subjects were more

favourable to the “buy one get one free” framing

* [Sinha & Smith - Psychology & Marketing March 2000]

Effects of ‘sale signs’

We all see or receive ‘catalogues’ In many cases, much or all of the

contents is ‘on sale’

Question: are sale signs more effective when more products have them ?

Evidence on the effects of ‘sale signs’

A recent study (Anderson & Simester, Marketing Science Vol 20, 2, 2001)

Examination of historical data: showed “sale signs are less effective when more products have them”

………. Then an experiment - Two versions of a clothing catalogue mailed to

people in the US - Varied the incidence of ‘sale’ claims - three dresses

on sale in one, and eight in another. – Prices held constant– The catalogues were more successful when not all the

dresses were marked as ‘on special’

Effects of sale signs - rationale

Placing a sale sign on something reduces the perceived likelihood it will be available at a lower price in the future

But this effect is smaller when more items have sale signs

Implication: if you use catalogues to generate sales, don’t have everything listed as “on sale” !

Other methods not covered already

Displays / Exhibitions / Trade Shows

Participation in an event that is intended to be a showcase for people interested in certain categories

Trade shows and exhibitions are huge

Trade shows: “reduce selling expenses to generate a given level of sales; & increase purchase interest among buyers -

accelerates a customers progression through the sales cycle”.

Smith, Gopalakrishnan and Smith IJRM 2004

Displays / trade shows

At worst … Bored salespeople

manning a booth Product samples

and giveaways (clutter)

Spending time with ‘tire kickers’ or existing good clients

At best … An opportunity to reach

some real potential buyers They can see / handle

product and talk to your people

Acquire information on them and begin dialogue

(like selling, but they come to you) Can be the basis for further

publicity / exposure

Do’s and don’ts (from experienced trade buyers)

Don’t: Leave it ‘till the last

minute and participate in an expo etc. without taking time to plan

Put untrained people on the stall !

Do: Ensure instant recognition

of what the display is for Make is easy for people to

see the detail without having to come too close

Inform regular clients of what will be at the display (no unexpected surprises)

Systematically identify / track real ‘prospects’ for sales

Emphasise ‘making a statement’ rather than having bundles of ‘stuff’ on view

Technical experts as well as reps

Trying to segment & customise for trade show attendees: illustration - an “industry conference”

Customizes its audience acquisition tactics:

Custom Offers (perks). – Every audience member

has perk, gift or discount to entice attendance

Segment Benefits Messaging– Tailor “why come”

according to uncovered needs

Different Highlights. – Tailor information about

speakers Personalized URLs.

– Web pages for show customised for each attendee group

Next lecture: I’ll tell you which lectures &

readings to focus a bit more on Some sample / check questions