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What is Sales Promotion?
Sales promotion consists of a collection
of incentive tools, mostly short term,
designed to stimulate quicker or greater
purchase of particular products or
services by consumers or the trade.
The Nature of Sales Promotion
o Sales Promotion
Is any incentive that is additional to the basic
benefits provided by the brand and temporarily
changes 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
Consumer-Directed Sales Promotion Tactics
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Samples
Coupons
Cash refund offers
Price offs
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Using Sales Promotions
o Establish objectives
o Select tools
o Develop program
o Pretest
o Implement and control
o Evaluate results
Brand-Level Promotion Targets
Premiums
Prizes
Patronage rewards
Free trials
Tie-in promotions
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Sampling
Major Consumer-Oriented Promotions
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
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 Media
High-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
Coupon Distribution Methods
Illustration of Cents-Off Coupon Offers
o Freestanding Inserts (FSIs)
o Handouts in stores
o Direct Mail
o Magazines
o Newspapers
o In- and On-Package
o Internet
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Premiums
Free-withPurchase
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
Premiums
“Buy X, Get 1
Free” Offers
Self Liquidating
Phone Cards
• 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
• Consumer mails in proof-of-purchase with
sufficient money to receive the premium item
• Premium should be appealing and represent
a value
• Repeat-purchasing objective
• Delayed reward
• Preset amount of calling time
Illustration of a Mail-in Premium
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
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 Tool
Are 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
Contests
Illustration of a Promotional Contest
o Contests
A 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 Contests
Are 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
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Continuity Promotions
Turkish Airlines-Miles & Smiles
o Continuity Promotions
 Reward consumers’ repeat purchasing behaviors
• Loyalty programs
• Point programs
Serve to cement a long-term relationship with the
consumer
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
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 longterm reason to continue purchasing a brand
•Permanently stop an established brand’s declining
sales trend or change the basic nonacceptance of
an undesired product
Trade-Directed Sales Promotion Tactics
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Price offs
Allowances
Free goods
Sales contests
• Spiffs
• Trade shows
• Specialty advertising
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
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 Allowances
Off-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
Nine Empirical Generalizations about Promotions
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.
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