4550:
Promotion Strategy II
Professor Campbell
2/24/05
Plan for the Day
• Consumer promotions
– Online promotions
– Testing
• Trade promotions
• Putting promotions in perspective
Online Promotions
• Advantages
+ Real-time tracking
+
Message execution
+
Product movement
+
Easily/fast modification
+ Data capture
+ Follow-up opportunities
+ Costs
+
Reach & Frequency
+
Redemption
+ Friendly target?
Online Promotions, continued...
• Disadvantages:
– Response rate prediction
– Lack of “real” consumer interest
– Often does not build equity
• Usage
Questions for Online Promotions
• Does this NEED to be online?
– (to meet objective)
• Is this something that will work better online
than in traditional media?
• What does this say about the brand?
Testing Promotions
• Is the promotion offer being processed by
target consumers as intended to meet
communication goals?
• How does the promotion affect brand
equity?
– Consumers’ attributions for the promotion
need to be understood
Trade Promotions
• Promotions (ie, short-term incentive)
targeted to some member of the channel of
distribution
– Should be based on well-defined, specific
objectives
– Should have measurable goals
Trade Promotions: Objectives
Trade Promotions
• Point-of purchase displays
• Trade deals/ Buying allowances
– Price-offs/ Off-invoice
– Free goods
– Slotting allowances
• Dealer loaders
• Comarketing
– Co-op Ads
– Account Specific Promotions
• Market Development Funds
• Dealer contests & incentives
– Push $$/Spiffs
Price-offs
• Advantages
+ Quick implementation
+ Evoke strong response and fast response
• Disadvantages
– Cost
– Short-term impact
– Does not help brand equity and can hurt it
• Usage
» Short-term competitive response
Tradeoffs among Promotions
Manufacturer Factors
Price Reductions Bonus Packs
Coupons
Trial Sizes
Pass Through
Unplanned
Costs
Ability to Forecast Costs
Lead Time
Source of Offer
Immediacy of Impact
Added Cost to Retailer
Effect on Brand Equity
Unsure
Incomplete Pass
Low
Short
Retailer
High
Shelf Talker
Negative
Yes
Residual Stock
Moderate
Long
Manufacturer
Moderate
Handling
Depends
Yes
Misredemption
High
Moderate
Manufacturer
Low
Checkout Time
Depends
Yes
Residual Stock
Moderate
Long
Manufacturer
Moderate
In-Store Handling
Depends-Neutral
Immediate
Low
Impulse
Yes
Moderate
Immediate
Low
Impulse
Yes
Moderate
Delayed
Moderate
Planned
No
High
Immediate
Low
Impulse
Yes
Low
Consumer Factors
Timing of Reward
Consumer Effort
Impulse of Planned?
# of Units can Purchase
% Regular Users
Generalizations about Promotion Types
Advertising
Consumer
Promotion
Trade Promotion
Franchise Building
Non-franchise Building
Brand Benefit Emphasis
Price Emphasis
High Marketer Control
Low Marketer Control
Pull Strategy
Push Strategy
Longer-Term Impact
Short-Term Impact
Investment Financing
Pay-as -You-Go Financing
Long Time Horizon
Shorter Time Horizon
Image oriented
Action oriented
Promotions
• Usage of promotions grew dramatically during the
‘80’s and early ‘90’s
– 60% of consumer goods firms were spending more
on promotions than ads
– 80% of consumers made use of promotions
• Trend then began reversing
– 1991 - average of 47% of budget went to promotions
– 1995 - average of 44% of budget went to promotions
• Now appears to be increasing again
– Retailer power & expectations
Limitations
Other “Promotions”
• Because of limitations, promotion
expenditures are increasingly going to nonsales promotions, e.g., event sponsorship
– Global trend
– Consistent with “micro-marketing,”
“relationship marketing”
Setting the
Marketing Communications Mix
• Decide on target market and marketing
communications objectives
– What effect do you want to have on the
consumer?
• Then decide which communications tools
appear to be the best for achieving the
desired effects
What can we do to Generate Trial?
What can we do to Generate Usage?
Think about Brand Building
• Non-Brand-Building Promos
– Accelerate purchase process and generate
an immediate increase in sales
• Brand-Building Promo
– Communicate brand attributes and
contribute to the development and
reinforcement of brand identity
Base the marketing
communications mix
on consideration of
the communications
objectives and how
best to achieve them
In Conclusion...
• Some promotions are likely to be necessary
– Consumer: may be the best route to
objectives
– Trade: may be best route to objective but
also may not have much latitude
• Interest should be in incremental sales
(versus short terms spikes in the sales
curve)
• Promotions (like everything else!) should be
considered in terms of likely effects on
brand equity
Conclusion, continued…
• Advertising and promotion work together
– Prior attitude-building advertising creates
higher perceived value from a brand’s
promotion
– Prior attitude-building advertising creates
resistance in the consumer to other brand’s
promotional activities
• Synergies among marketing
communications activities can make or
break the overall plan.