16
Sales Promotion
McGraw-Hill/Irwin
Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed
Sales Promotion
“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.”
An extra
incentive to buy
A tool to
speed up sales
Targeted to
different parties
Key Aspects of Sales Promotion
• Extra incentive to buy
• Coupon / price reduction / contest
• Acceleration tool
•
•
•
•
Speed up selling process
Purchase larger quantity
Shorten purchase cycle
Provide short expiration date
• Targeted to different parties
• Consumer or Trade Oriented
16-3
Reese’s Promotion Offer
• Opportunity to win $2,500,000 instantly
• Influences consumers to buy
THIS candy versus competition
16-4
Sales Promotion Vehicles
Consumer-Oriented
Trade-Oriented
Samples
Contests, incentives
Coupons
Trade allowances
Premiums
POP displays
Contests/sweepstakes
Sales training programs
Refunds/rebates
Trade shows
Bonus Packs
Cooperative advertising
Price-off deals
Frequency programs
Event marketing
16-5
Delivery of a Promotional Message
• Promotions can be delivered
• Print ads
• On pack
• On line
16-6
Reasons for Sales Promotion Increases
Growing power of retailers
Declining brand loyalty
Increased promotional sensitivity
Brand proliferation
Fragmented consumer markets
Short-term focus of marketers
Like
promos
Local
promos
Increased accountability
Competition
ROI
Clutter
Growth of Digital Marketing
Stand out
16-7
Sale Promotion Concerns
• Negative impact of sales promotions
• Fewer dollars to build brand equity
• Encourages consumers to purchase on
the basis of price
• Detracts from the value of the brand
• Sales promotion increases come at the
expense of brand equity
16-8
Consumer Franchise-Building Promotions
Promotional Objectives
Communicate
distinctive
brand attributes
Develop and
reinforce brand
identity
Build long-term
brand
preference
Techniques and Practices
“Frequency”
programs
promote repeat
purchase
Sweepstakes &
contests build
equity, increase
involvement
Premium offers
that reinforce
brand image &
build equity
16-9
Example of Franchise-Building Promotion
• Marlboro Gear
• Reinforces brand image
• Loyalty program
• Builds brand equity
16-10
Nonfranchise-Building Promotions
Objectives
Accelerate the
purchase decision
process
Generate an
immediate sales
increase
Limitations
Do not identify
unique brand
features
Do not contribute
to brand identity
or image
16-11
Example of Non-Franchise Building Promotion
Does nothing to enhance
the image of the brand
16-12
Objectives of Consumer-Oriented Promotions
Increase
consumption of an
established brand
Sample
and
coupon
Recipe Books
Obtain trial
and purchase
Defend (maintain)
current customers
Enhance IMC
efforts and build
brand equity
Target a
specific segment
Load up
with
product
16-13
Targeting a Specific Segment
Kleenex targets
the Latino market
16-14
Criteria for Effective Sampling
Sampling Works
Best When
Products are of
relatively low
unit value, so
samples don’t
cost much
Products are
divisible and can
be broken into
small sizes that
reflect the
products features
and benefits
Purchase cycle
is relatively
short so the
consumer can
soon purchase
again
16-15
“Free Fryday” Promotion
An opportunity
to sample
new French fries
from
Jack in the Box
16-16
Benefits and Limitations of Sampling
Benefits
Limitations
• Provides consumers with a
• Brand must have some
risk-free way to try new
unique or superior benefits
products
for sampling to work
• Generates much higher
• Costs can be recovered
trial rates than other sales
only if consumers become
promotion techniques
regular users
• Consumers get to
• May require larger
experience the brand
amounts of the product to
directly
produce favorable results
Sampling Methods
Door-to-door
Methods
Direct mail
In-store
On package
Events
Newspaper/magazine insert
16-18
Samples are Often Distributed With Newspapers
16-19
Armor All Uses On-Package Samples
16-20
Couponing
The most effective sales promotion tool
The
oldest and
most widely
used
sales
promotion
tool
85% of
consumers
use
coupons;
21% use
them
regularly
Nearly
240 billion
distributed
each year
in the US
16-21
Pros and Cons of Coupons
Advantages
Disadvantages
Appeals to price
sensitive consumers
Hard to tell how many
consumers will use
them and when
Can offer discounts
without retailer
cooperation
Effective way to induce
trial of products
Defends market share
and encourages
repurchase
Often used by loyal
consumers who would
purchase anyway
Low redemption rates
and high costs
Misredemption
and fraud
16-22
Most Often Used Coupons
Disposable
Diapers
Cereal
Laundry
Soap
Consumers use coupons most often in these product categories
16-23
Coupon Misredemption and Fraud
• Customer redemption for a product or
size not specified on the coupon
• Salesclerk redemption of coupons for cash
• Store managers gathering and redeeming
coupons without the accompanying sale
• Criminals gather or print coupons and sell
them to unethical merchants
• Web-source fraud, whereby coupons are
produced and distributed online
16-24
Coupon Distribution
• In order of usage:
• Freestanding inserts (86%)
• In-store couponing (6%)
• Direct mail (2%)
• Magazines (2%)
• Newspapers (1%)
• Coupons inside/outside product (1%)
16-25
FSIs are the Most Popular Coupon Type
16-26
Types of Coupons
In/On-Pack
In-Store
Bounce-back
Tear-off pads
Cross-ruff
Handouts
Instant
Dispensers
Register printout
16-27
Bounce-back Coupons
Delivered either
on pack
or in pack:
“Good on your
next purchase
of the product”
16-28
Cross-Ruff Coupons
• Redeemable on the purchase of a different product
• Used as a tie-in with other manufacturers or
at a company that has a wide product line
16-29
Instant Coupon
• Rip off coupon
and
use immediately
• Provides
immediate
Point-of-Purchase
incentive
16-30
In Store Coupons
16-31
Coupons are Available Electronically
16-32
Couponing Trends
• Coupon usage remained high after the
recent recession
• Marketers are using them to compete
against:
• Lower-priced competitors
• Private label store brands
• Internet and mobile marketing are
used for coupon distribution
Premiums
An offer of an item, merchandise, or
service, free or at a low cost, that is
an extra incentive for customers
Types of Premiums
Free:
Only requires purchase
of the product
Self-liquidating:
consumer required to
pay some or all of the
cost of the premium
16-34
Example of Free Premium
• FREE cards inside
specially marked
boxes of cereal
16-35
Contests and Sweepstakes
Sweepstakes
Promotion where winners are
determined purely by chance
Cannot require proof of purchase
as a condition for entry
Winners chosen by random selection from
pool of entries or generation of a number
to match those held by game entrants
Consumers compete for prizes or money
on the basis of skills or ability
Contest
Winners determined by judging entries
or ascertaining which entry is closest
to predetermined criteria
16-36
More Consumer-Oriented Promotions
Price-off Deals
Refunds and
rebates
Bonus packs
Loyalty programs
Event marketing
16-37
Examples of Loyalty Programs
• The more you spend,
the more points you get
to redeem for
merchandise,
airline flights, etc.
16-38
Examples of Event Marketing
• Promotion where brand is
linked to an event …
… or where a themed activity
is developed for the purpose
of creating experiences
for consumers
16-39
Consumer-Oriented Sales Promotion Tools for
Various Marketing Objectives
Trade Oriented Promotions
Objectives
Obtain distribution for new
products
Maintain support for
established brands
Encourage display of
products
Build retail inventories
Before peak selling season
16-41
Types of Trade Oriented Promotions
Contests and incentives
Types
Co-op Advertising
Trade allowances
POP displays
Buying
Reduction
on merchandise
Sales training
Promotional
Put up display
Slotting
To handle
new product
Trade shows
16-42
Cooperative Advertising
• The cost of advertising is shared by more
than one party
16-43
Sales Promotion Abuse
• Over-use of sales promotions
• Looking for quick sales fixes
• Easier to drop prices than to differentiate
your product
• Negative impact
• A brand that is constantly promoted
may lose perceived value
• Purchases based on discounts, not a
favorable attitude
• Sales promotion trap or spiral
16-44
Sales Promotion Trap
• When all competitors use promotions
extensively
• Makes it difficult for any ONE company to
STOP using promotions
• Cosmetics industry: gift with purchase
• Fast food industry: $1 items
16-45