16
Sales Promotion
McGraw-Hill/Irwin
© 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Sales Promotion
“Adirect
directinducement
inducementthat
thatoffers
offersan
anextra
extravalue
valueor
or
“A
incentivefor
forthe
theproduct
productto
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thesales
salesforce,
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incentive
distributors,or
orthe
theultimate
ultimateconsumer
consumerwith
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objectiveof
ofcreating
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primary
¾ An extra incentive to buy
¾ An acceleration tool
¾ An inducement to intermediaries
¾ Targeted to different parties
Sales Promotion Vehicles
Consumer-Oriented
Trade-Oriented
Samples
Contests, dealer incentives
Coupons
Trade allowances
Premiums
Point-of-purchase displays
Contests/sweepstakes
Training programs
Refunds/rebates
Trade shows
Bonus packs
Cooperative advertising
Price-off deals
Frequency programs
Event marketing
Long-Term Allocations to Advertising, Trade Promotions
and Consumer Promotions
100%
Consumer Promotions
90%
80%
70%
Media Advertising
60%
50%
40%
30%
Trade Promotions
20%
10%
0%
'89
‘90
‘91
‘92
'93
'94
'95
'96
'97
'98
'99
Percent of total promotional dollars, 3-year moving average.
‘00
Reasons for Increase in Sales Promotion
¾ Growing Power of Retailers
¾ Declining Brand Loyalty
¾ Increased Promotional Sensitivity
¾ Brand Proliferation
¾ Fragmentation of Consumer Markets
¾ Short-Term Focus
¾ Increased Accountability
¾ Competition
¾ Clutter
Sales Promotion Uses
¾ Introduce new products by encouraging
trial and repurchase
¾ Get existing customers to buy more
¾ Attract new customers
¾ Defend current customers
¾ Maintain sales in off season
¾ Target a specific market segment
¾ Enhance IMC efforts and build brand equity
Arm & Hammer uses a promotion offer to
encourage new uses of its product
Source: Courtesy Church & Dwight Co., Inc.
Consumer Franchise-Building
(CFB) Promotions
Consumer Franchise Building Promotions –
Communicate distinctive brand attributes and
contribute to the development and reinforcement of
brand identity and image
CFB Promotional Objectives
¾ Communicate distinctive brand attributes
¾ Develop and reinforce brand identity that is
consistent with the image of the brand
¾ Build long-term brand preference
¾ Encourage repeat purchase and long-term
patronage
¾ Engage active consumer involvement
Nonfranchise-Building(non-FB)
Promotions
Nonfranchise-building promotions Accelerate the purchase decision process
and generate an immediate sales increase but do not
contribute to the building of brand identify and image
Non-FB Promotions May Include
Price-off deals
Bonus packs
Rebates or refunds
Non-FB Promotions shortcomings
Trade promotions benefits may not reach
customers
Customers may “buy on the basis of price rather
than brand equity
Do not encourage the development of brand
loyalty
Objectives of Consumer-Oriented Sales
Promotion
¾ To Obtain Trial and Repurchase
¾ To Increase Consumption of an
Established Brand
¾ To Defend (Maintain) Current
Customers
¾ To Target a Specific Segment
¾ Enhance IMC programs and build
brand equity
Contests can be used to build brand
equity
50%
25%
0%
Other
Prepricing on package
Contests
Internet promotions
Sweepstakes
Electronic retail promotions
Premium offers
Money back offers/other refunds
Sampling established products
Sampling new products
Couponing in store
Couponing in retailers' ads
Cents-off promotions
Couponing consumer direct
Percentage of Promotions Vehicles Used by Package
Goods Manufacturers
100%
75%
Sampling
Providing consumer with some quantity
of a product for no charge to induce trial
Sampling works best when:
¾ The products are of relatively low unit
value, so samples don’t cost much
¾ The products are divisible and can be
broken into small sizes that can reflect
the products features and benefits
¾ The purchase cycle is relatively short
so the consumer can purchase in a
relatively short time period
Sampling Methods
¾Door-to-door
¾Direct mail
¾In-store sampling
¾Cross-product sampling
¾With newspaper or magazine
¾Through the internet
Samples are often distributed with local
newspapers
Coupons
¾The oldest and most widely used
sales promotion tool
¾Nearly 240 billions distributed each
year in the United States
¾80 percent of consumers use
coupons and 25% use them
regularly
Advantages and Limitations of Coupons
Advantages:
• Appeal to price
sensitive consumer
• Can offer price break
without retailers coop
• Can be effective way
to induce trial of new
or existing products
• Can be way to defend
market share and
encourage repurchase
Disadvantages
• Difficult to determine
how many consumers
will use coupons and
when
• Coupons are often used
by loyal consumers who
may purchase anyway
• Declining redemption
rates and high costs of
couponing
• Misredemption and
fraud
Coupon Fraud
¾Consumers redeem without
purchase
¾Clerks and staff exchange for
cash
¾Managers/owners redeem
without sale
¾Criminals collect or counterfeit
and sell
Coupon Distribution
Other
Magazines
In / On Pack
Direct Mail
Newspaper Coop
Newspaper ROP
Freestanding
Inserts
Percent of sales made with coupons for
various products
43%
Disposable Diapers
35%
Ready-to-Eat Cereal
29%
Liquid Detergents
25%
Deodorants
24%
Sanitary Protection
20%
Coffee
12%
Pet Food
11%
Adult Cold Remedies
8%
Carbonated Beverages
7%
Candy
Gum
2%
Coupon Trends
¾ Major companies cutting back on
¾ use of coupons
¾ Searching for more effective coupon
¾ techniques
¾ More use of internet for distribution
Premiums
Premium – an offer of an item of merchandise
or service either free or at a low cost that
is an extra incentive for customers
Two types of premiums:
¾Free premiums only require purchase of the product
¾Self-liquidating premiums require consumer to pay some or all
of the cost of the premium
Airline miles are a very popular premium
incentive
Contests and Sweepstakes
Contest – a promotion where consumers compete for
prizes or money on the basis of skills or ability. Winners
are determined by judging entries or ascertaining which
entry comes closes to some predetermined criteria
Sweepstakes/games – a promotion where winners are
determined purely by chance and cannot require a proof of
purchase as a condition for entry. Winners are determined
by random selection from the pool of entries or generation
of a number to match those held by game entrants.
Other Popular Consumer Sales
Promotion Tools
¾ Refunds and Rebates
¾ Bonus Packs
¾ Price-off deals
¾ Frequency/loyalty programs
¾ Event marketing
Gerber developed a sweepstakes in
conjunction with a loyalty program
Source: Courtesy Gerber Products Company.
Trade-Oriented Sales Promotion Objectives
¾ Obtain Distribution of New Products
¾ Maintain Trade Support for Existing
Products
¾ Encourage Retailers to Display and
Promote Existing Brands
¾ Build Retail Inventories
Chicken of the Sea targets the trade with
this collateral piece
Types of Trade-Oriented Promotions
¾ Contests and Incentives
¾ Trade Allowances
• Buying Allowances
• Promotional Allowances
• Slotting Allowances
¾ Point-of-Purchase Displays
¾ Sales Training Programs
¾ Trade Shows
¾ Cooperative Advertising
Promotion Targeted to Reseller
Salespeople
¾Product or program sales
Selling a specific number of cases
Selling a specific number of units
Selling a specific number of promotional programs
¾New account placements
Number of new accounts opened
Number of new accounts ordering a minimum amount
Promotional programs placed in new accounts
¾Merchandising efforts
Establishing promotional programs
Placing display racks, counter and other p-o-p displays
Types of cooperative advertising
¾Horizontal cooperate advertising
¾Ingredient-sponsored cooperative
advertising
¾Vertical cooperative advertising
The “Intel Inside” campaign is an example of
ingredient-sponsored cooperative advertising
Coordinating Sales Promotion With Other
IMC Elements
Various IMC elements such as advertising,
direct marketing, Internet and personal selling
efforts need to be coordinated with sales promotion
to create a synergistic effect. Must consider:
¾ Budget allocation
¾ Coordination of ad and promotion
themes
¾ Media support and timing
¾ Measuring effectiveness
The Sales Promotion Dilemma
Our Firm
All Others
Cut Back
Promotions
Maintain
Promotions
Maintain
Promotions
We lose
market share
Same market
share, profits
stay low
Cut Back
Promotions
Higher profits
for everyone
We gain in
market share
Shifting Role of Sales Promotion Agencies
THEN
•
•
•
•
•
•
Created tactics
Single project basis
Hired for specialty
Single agency contact
Inferior to ad agency
Indirect
accountability
NOW
•
•
•
•
•
•
Create strategy
Continuing service
One full-service firm
Agency team contact
Equal to ad agency
Directly accountable
